Spokesperson & Deputy SpokesmanƝ
Spokesman
Deputy Spokesman
Name
Liu, Tsao-Yang
Chen, I-Chieh
Title
Vice President, CORPORATE COMMUNICATIONS OFFICE
Vice President, FINANCE DIV.
Tel
886-3-399-8888
886-3-399-8888
Fax
886-3-399-8640
886-3-399-8313
Emailjason.liu@china-airlines.com
jeīrey@china-airlines.com
Headquarter, Branches and PlantƝ
OrganizaƟon Unit
Address
Headquarter
No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan
Taipei Branch
No.131, SecƟon 3, Nanjing East Road, Taipei City 104, Taiwan
Cargo Sales & Service, Taiwan
No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan
Kaohsiung Branch
6 Floor, Asia-PaciĮc Financial Plaza, No.38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan
Tainan OĸceRoom A, 6 Floor, No.358, SecƟon 1, Tungmen Road, Tainan, Taiwan
Taichung Branch
Room 2, 15th Floor, No.218, SecƟon 2, Taiwan Boulevard, West District, Taichung City 403, Taiwan
Maintenance Div.
No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan
Cargo Sales & Services Mainland
Suite 22i, No.726 Of West Yanan Road, Changning District, Shanghai, China
China
Beijing OĸceBright China Chang An Building, Tower 2, Unit 1025, No.7 Jianguomen Nei Avenue, Beijing, China
Shanghai OĸceSuite 22a, No.726 Of West Yanan Road, Changning District, Shanghai, China
Guangzhou OĸceRoom 1210, 12th Floor, Teem Tower, No.208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China
Room 4805, Oĸce Tower, Shun Hing Di Wang Commercial Center, No.5002 Of Shen Nan East Road, Luohu
Shenzhen OĸceDistrict, Shenzhen, Guangdong, China
Xian Oĸce
Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China
Chengdu OĸceRoom 1608, South Tower, Baoli Center Building, No.7, Consulate Rd. Chengdu, China
Zhengzhou OĸceRooms 1101-1102, Tower B, Yuhong InternaƟonal Building, No.59 Of Zijingshan Road, Zhengzhou, Henan, China
Changsha OĸceRoom 3404, Building 2, Block C, Kaifu Wanda Plaza, No.589 Of Zhongshan Road, Changsha , Hunan, China
Shenyang OĸceRoom 2009, Tower E, Fortune Center, No.59 Of North StaƟon Road, Shen He District, Shenyang, Liaoning, China
Xiamen Oĸce
Unit 3310, 33rd Floor, Bank Center, No.189 Of Xiahe Road , Xiamen, Fujian, China
Nanjing OĸceRoom B1-B2, Building 38, Nanjing Center Building, No.1 South Zhongshan Road, Qinhuai District, Nanjing, China
Ningbo OĸceRoom 1702, China CiƟc Building, No.36 Of Zhenming Road, Haishu District, Ningbo, Zhejiang, China
Hangzhou OĸceRoom 2307, Building 2, China Qian Tang AviaƟon Building, No.66, Shimin St., Jianggan District, Hangzhou, China
Fuzhou StaƟon
Room 2508, Zhonggeng Youth Plaza, No.83 Of East Road, Gulou District, Fuzhou, Fujian, China
Chongqing StaƟon
Room 2202, No.3 Building, Zhongyu Plaza, No.86 Of Hongjin Avenue, Yubei District, Chongqing, China
Haikou Oĸce18e, Huanhai Business Building, No.15, Jinmao W. Rd., Haukuo Hainan, China
Nanchang StaƟon
Rm 701, Unit A, Building 16, No.205 Guangchang S. Rd., Nanchang, Jiangxi Province, China
Sanya StaƟon
Room No.110, 5F, Block B, Sanya AviaƟon City, Sanya Phoenix Int'l Airport, Hainan
Wenzhou StaƟon
Room 2310, Huameng Business Palace, No.2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China
Wuxi StaƟon
Room A207, No.18 Airport Second Road, New District, Wuxi City, Jiangsu Province, China
Qingdao Oĸce
Unit 2801, Oĸce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China
Weihai StaƟon
Unit 2801, Oĸce Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China
Wuhan OĸceRoom 1315, 13F, New World InternaƟonal Trade Building, 568 Jianshe Avenue , Wuhan, China
Xuzhou StaƟon
Room 537, CUMT University Science Park, Jiefang S. Road, Xuzhou City, Jiangsu, China
Cargo Sales & Services, JapanNiƩochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, JapanTokyo BranchNiƩochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan
Osaka Branch
Nakanoshima Mitsui Bldg. 9F 3-3, 3-Chome Nakanoshima Kita-Ku Osaka-Shi, Osaka 530-0005, Japan
Sapporo Branch
Kita 1 Jo Mitsui Bldg. 3F, Kita 1, Jo Nishi 5, Chuo-ku, Sapporo-Shi, Hokkaido, 060-0001, Japan
Shizuoka StaƟon
Shizuoka Airport Terminal Bldg. 1F, 3336-4, Sakaguchi, Makinohara-Shi, Shizuoka, 421-0411, Japan
Toyama StaƟon
Toyama Airport InternaƟonal Terminal Building 3F, 191 Akigashima, Toyama-Shi, 939-8252, Japan
Kagoshima StaƟon
Kagoshima Airport InternaƟanl Terminal Bldg. 1355-4 Fumoto, Kirishima, Kagoshima 899-6404, Japan
Miyazaki StaƟon
Miyazaki Airport, Akae Miyazaki 880-0912, Japan
Nagoya Branch
NMF Nagoya-Fushimi Bldg. 3F, Nishiki 2-9-27, Naka-ku, Nagoya-Shi, Aichi, 460-0003, Japan
Fukuoka Branch
Daihakata Bldg. 8F, 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan
Hiroshima Branch
Hiroshima-Mitsui Bldg. 7F 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan
Takamatsu StaƟon
Takamatsu Airport Bldg. 1312-7, Oka, Konan-cho, Takamatsu-shi, Kagawa, 761-1401, Japan
Kumamoto Airport Int'l Terminal Bldg., 1802-2 Oyatsu, Mashiki-machi, Kamimashiki-gun, Kumamoto 861-2204,
Kumamoto StaƟon
Japan
Okinawa Branch
Gojinsha Naha Matsuyama Bldg. 3F, 2-1-12 Matsuyama, Naha-Shi, Okinawa 900-0032, Japan
Korea Branch
12F, Donghwa Bldg. Seosomun-Ro 106, Jung-Gu, Seoul, Korea 04513
Busan Branch
3F, Kyo-Won B/D, Jungang Daero 216, Dong-Gu, Busan, Korea, 48733
Hong Kong Branch
Suites 2701-2705, 27F Devon House, Taikoo Place, 979 King's Road, Hong Kong
Thailand Branch4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand
Chiang Mai Branch4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand
Bali Branch
Departure Int'l Terminal 2nd FL., No.A0-12B Ngurah Rai Airport, Tuban-Bali, Indonesia
Malaysia Branch
Unit 15.01-15.02, Level 15, AMODA Building, 22, Jalan Imbi, 55100 Kuala Lumpur, Malaysia
Penang Branch
Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia
Singapore Branch
302 Orchard Road, #14-01 Tong Building Singapore 238862
Cambodia Branch#10, St.596 Toul Kork, Sangkat Beoung Kok II, Khan Toul Kork, Phnom Penh, Cambodia
Myanmar Branch
No.353/355, Bo Aung Kyaw Street, Kyauktada Township, Yangon, Myanmar
Philippines Branch
G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines
Cebu Branch
G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines
Indonesia BranchInƟland Tower, M1 Floor, Jl. Jend. Sudirman Kav.32, Jakarta 10220, Indonesia
Vietnam Branch
1B, 7F Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam
Hanoi Branch
4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam
Palau Branch
P.O. BOX 10027 Koror, Republic of Palau 96940
Australia Branch
Suite 1, level 1, Nigel love Building, 10 Arrivals Crt. Sydney InternaƟonal Airport Mascot NSW 2020, Australia
Brisbane Branch
1G 35, Brisbane InternaƟonal Terminal, Airport Drive, Brisbane Airport QLD 4008, Australia
Melbourne Branch
Level 2, North End, Terminal 2, Melbourne Airport, Tullamarine 3045
New Zealand Branch
GM60, Level 1, Auckland InternaƟonal Airport, Auckland 2150, New Zealand
India Branch
Unit 023/025, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India
Los Angeles Branch
200 N. ConƟnental Blvd., Suite 100, El Segundo, CA 90245, U.S.A.
New York Branch
633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A.
San Francisco Branch
433 Airport Blvd., Suite 501 Burlingame, CA 94010, U.S.A.
Honolulu Branch
300 Rodgers Blvd., #14, Honolulu, HI 96819, U.S.A.
Anchorage Branch4600 Postmark Drive, Ste. NA 142, Anchorage, AK99502, U.S.A.
Canada Branch
Suite 240-10451 Shellbridge Way, Richmond, BriƟsh Columbia, V6X 2W8, Canada
Cargo Sales & Services The Americas 5651 West 96th Street, Los Angeles, CA 90045, U.S.A.
Guam Branch
518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, U.S.A.
Netherlands BranchOĸcia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands
Germany Branch
Gutleutstrasse 80, 60329 Frankfurt, Germany
Italy Branch
Viale Marco Polo, 71, 3F, 00154 Roma, Italy
Cargo Sales & Services, Europe
Room G2045-G2050, 2nd Floor, Cargo Center Luxair, L-1360 Luxembourg, Luxembourg
Austria Branch
Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria
The United Kingdom Branch
Minstrel House, 1F, 2 Chapel Place, Rivington Street, London, EC2A 3DQ
Stock Transfer Agent:
Name: CTBC Bank Co., Ltd.
Address: 5F., No.83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan
Website: hƩp://www.ctbcbank.com
Tel:886-2-6636-5566

Overseas Securities Exchange: N/A
Corporate Website: http://www.china-airlines.com

Tel886-3-399-8888
886-2-2715-2233
886-2-2715-5151
886-7-213-1200
886-6-235-8099
886-4-2325-9592
886-3-383-4251
86-21-2220-3292
86-10-6510-2671
86-21-2220-3333
86-20-8527-2950
86-755-8246-3560
86-29-895-81909
86-28-8602-7508
86-371-5562-9880
86-731-8224-0871
86-24-3128-7021
86-592-2388-388
86-25-8467-1050
86-574-8775-4090
86-571-8668-4214
86-591-8755-9705
86-023-8828-0118
86-898-6853-9677
86-0791-8378-0580
86-0898-8802-4956
86-0577-8605-2181
86-0510-8522-8710
86-532-6887-7106
86-532-6887-7106
86-27-8555-8172
86-516-8379-0550
81-3-6378-8860
81-3-6378-8855
81-6-6459-5783
81-11-218-6766
81-548-29-2668
81-76-461-7200
81-995-57-6151
81-985-64-9288
81-52-202-7253
81-92-471-7788
81-82-542-0883
81-87-815-8702
81-96-285-1814
81-98-863-1013
82-2-317-8888
82-51-462-8885
852-2843-9800
66-2-250-9898
66-2-250-9898
62-361-9357-298
60-3-2148-9417
60-4-228-9227
65-6-737-2144
855-23-222-058
95-1-8392-663
63-2-354-6700 to 09
63-2-354-6700 to 09
62-21-251-0788
84-28-5414-1008
84-24-3936-6364
680-488-8888
61-2-8339-9188
61-7-3860-5611
61-3-9907-0910
64-9-256-8088
91-124-711-5000
1-310-322-2888
1-917-368-2000
1-650-931-8000
1-808-955-0088
1-907-249-2300
1-604-242-1168
1-310-646-1260
1-671-649-0861
31-20-646-1001
49-69-297-0580
39-06-474-5045
352-348-363-9500
43-1-8130-156
44-208-587-3688

Auditors:
Name: DeloiƩe & Touche
Auditors: Huang, Jui-Chan ; Cheng, Shiuh-Ran
Address: 20F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan
Website: hƩp://www.deloiƩe.com.tw
Tel:886-2-2725-9988

Contents

I. Letter to Shareholders............................................................................................................................................. 1
II. Company Profile....................................................................................................................................................... 7
2.1 Date of Incorporation.............................................................................................................................................. 8
2.2 Company History..................................................................................................................................................... 8III. Corporate Governance Report ......................................................................................................................... 12
3.1 Organization .......................................................................................................................................................... 13
3.2 Directors, and Management Team........................................................................................................................ 17
3.3 Implementation of Corporate Governance........................................................................................................... 35
3.4 Information Regarding the Company’s Audit Fee and Independence ...................................................................76
3.5 Replacement of CPA .............................................................................................................................................. 77
3.6 Audit Independence.............................................................................................................................................. 77
3.7 Changes in Shareholding of Directors, Managers and Major Shareholders.......................................................... 78
3.8 Relationships among the Top Ten Shareholders ................................................................................................... 81
3.9 Ownership of Shares in Affiliated Enterprises ....................................................................................................... 82

IV. Capital Overview ................................................................................................................................................... 83
4.1 Capital and Shares................................................................................................................................................. 84
4.2 Bonds .................................................................................................................................................................... 88
4.3 Other Securities‐Related Issues ............................................................................................................................ 90
4.4 Financing Plans and Implementation ................................................................................................................... 90

V. Operational Highlights ......................................................................................................................................... 91
5.1 Business Activities................................................................................................................................................. 92
5.2 Market and Sales Overview ................................................................................................................................ 100
5.3 Human Resources ............................................................................................................................................... 105
5.4 Environmental Protection Expenditure............................................................................................................... 105
5.5 Labor Relations ................................................................................................................................................... 110
5.6 Major Contracts .................................................................................................................................................. 113

VI. Financial Information........................................................................................................................................ 116
6.1 Five‐Year Financial Summary .............................................................................................................................. 117
6.2 Five‐Year Financial Analysis................................................................................................................................. 121
6.3 Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018, and Independent
Auditors’ Report.................................................................................................................................................. 123
6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2019 and 2018 andIndependent Auditors’ Report............................................................................................................................ 123
6.5 Audit Committee’s Report .................................................................................................................................. 124

VII. Review of Financial Conditions, Financial Performance, and Risk Management ........................ 125
7.1 Analysis of Financial Status ................................................................................................................................. 126
7.2 Analysis of Financial Performance .......................................................................................................................127
7.3 Analysis of Cash Flow ...........................................................................................................................................127
7.4 Major Capital Expenditure Items ........................................................................................................................ 128
7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans andInvestment Plans for the Coming Year................................................................................................................ 128
7.6 Analysis of Risk Management ............................................................................................................................. 128
7.7 Other important Matters .................................................................................................................................... 132

VIII. Special Disclosure ............................................................................................................................................ 133
8.1 Summary of Affiliated Companies....................................................................................................................... 134
8.2 Private Placement Securities in the Most Recent Years ...................................................................................... 140
8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years...................................... 140
8.4 Special Notes....................................................................................................................................................... 140
8.5 Situations with Major Impacts on Shareholder Equity or Share Prices............................................................... 140(Appendix 1) Consolidated Financial Statements for the Years Ended December 31, 2019and 2018 and Independent Auditors’ Report ........................................................................ 142(Appendix 2) Parent Company Only Financial Statements for the Years Ended December 31,
2019 and 2018 and Independent Auditors’ Report ..............................................................197(Summary Translation)
This document is prepared in accordance with the Chinese version and is for reference only. In theevent of any discrepancy between the English version and the Chinese version, the Chinese version
shall prevail.

Letter to Shareholders
1.1 Operating Performance in 2019
1.2 Business Plan for 2020
1.3 Development Strategies

Letter to Shareholders

1

I. Letter to Shareholders
China Airlines develops its sustainable businessstrategies in six major directions: “safety,
governance, fleet and flight network, products andservices, group cooperation, and brand perception,”and adopts a quality policy of “discipline and safety,
customer-orientation, green energy andenvironmental protection, and pursuit ofexcellence” to implement its strategic objectives.
China Airlines is committed to providing a gratifying
flight experience for every passenger. It is also
devoted to making China Airlines a sustainable,
eco-friendly enterprise that promotes the economic
development of society.
Looking back on air transportation businesspromotion in 2019, we note that passenger flights
have been increased on the existing
Taoyuan-Nagoya, Taoyuan-Takamatsu,
Taoyuan-Fukuoka, Taoyuan-Palau, and other routes
in regional markets;On long-haul routes,
next-generation fleets have been used to continually
increase flights on routes such as Taoyuan-Los
Angeles, Taoyuan-Honolulu, andTaoyuan-Melbourne, and inter-airline cooperation
has been strengthened to deepen market layout. As
for cargo transport, potential markets have beenthoroughly developed, as in the multi-leg route for
US west coast return flights to Nagoya, which waslaunched at the end of March, and the
Mumbai-Amsterdam route, which was launched in
November, to increase revenue;at the end of
October, a second cargo flight to Chongqing wasadded to work with the shipping schedules of major
customers; the loading performance was quite
good;and to respond to the needs of postal
customers, Zhengzhou customized charter service
was implemented in Q4 to maximize the utilization
efficiency of cargo aircraft.
In 2019, China Airlines’ sustainable operations
continued to win important domestic and foreign
awards: we were selected for the “Global Corporate
Sustainability Awards” for the first time;selected forthe “Top 5% in Corporate Governance Evaluation”
and the “TW ESG Index” for the second
time;selected for the “TWSE RAFI® Taiwan High
Compensation 100 Index” and the “TWSE RA Taiwan
Employment Creation 99 Index” for the thirdtime;selected for the Dow Jones Sustainability Index(DJSI) and the FTSE4Good Index Series for the fourth
time;winning the Taiwan Corporate SustainabilityAwards (TCSA) for the sixth consecutive year. Other
important awards include winning the 2020 APEX

2 Letter to Shareholders

Five Star Global Airline and the Top Service Awards
held by Next Magazine for three consecutive years.
In recent years, to actively respond to global
warming and to reduce the impact of climate changeon the industry, China Airlines continues toformulate sound extreme climate response
mechanisms and operating procedures, andimplements greenhouse gas reduction through theestablishment of short, medium and long-term
carbon reduction targets for air and ground
operations. In 2019, China Airlines was again ranked
by the Carbon Disclosure Project (CDP) with an
A-/Leadership level, a grade above that of global
airlines.
With the concerted efforts of the management teamand all of its employees, China Airlines continues tobe recognized by the public for the results of its
overall operations and various policies. In the future,
China Airlines will continue to move towards
sustainable development with proactive, stable,
prudent, and flexible strategies.

1.1 Operating Performance in
2019
Operating revenue in NT dollars (same hereafter)
was NT$146.372 billion, a 2.59% decrease over the
past year, and after-tax net loss was NT$1.20 billion,
for a basic after-tax net loss of NT$0.22 per share.

1.1.1 Results of the business strategy
A. Fleet:
China Airlines completed the selection of cargo
aircraft 777F and regional narrow-body passenger
aircraft A321neo in 2019, which are expected to be
introduced successively starting from 2020 and 2021,
respectively. China Airlines actively optimized its
fleet structure, completed the A330-300
sale-leaseback operation to reduce book losses andresidual value risk, and was successful in leasing the747-400F sealed cargo aircraft to activate asset
utilization. As of the end of December, our fleet size
was 91 vessels, including 70 passenger aircraft(including leased aircraft) and 21 cargo aircraft.
China Airlines is committed to improving our fleet’s
operating fitness. In the future, with theintroduction of new aircraft and phasing out of oldaircraft, our operating efficiency will morecomprehensive and more fully improved.

B. Passenger flights:
Revenue from passenger business was NT$96.177
billion, a 2.05% increase over the past year andaccounting for 65.71% of total operating revenue. Asof the end of 2019, the China Airlines Group flew to
23 countries and 72 passenger destinations,spanning Asia, Europe, the Americas, and Oceania.
On average, there are 712 round-trip flights per
week.

C. Cargo flights:
Revenue from cargo business was NT$43.406 billion,
a 12.17% decrease over the past year andaccounting for 29.65% of total operating revenue. Asof the end of 2019, the China Airlines Group flew 18
cargo planes in cargo operations to 15 countries and
37 destinations. On average, there were an averageof 90 cargo flights per week.

D. Other operating income:
Other operating revenue included in-flight duty-freesales revenue, the total from which was NT$6.789
billion, a 2.96% increase over the past year andaccounting for 4.64% of total operating revenue.

E. Investments and earnings:
As of the end of 2019, the Company had investment
in a total of 32 companies, in areas of business suchas air business, ground services, logistics, aircraft
maintenance, air cargo station business, etc., which
contributed NT$1.812 billion in revenue over theyear.

1.1.2 Business cash-flow budget andprofitability analysis
A. Cash flow:
Operating revenue was NT$146.372 billion, which isa reduction of 3.892 billion from last year.
Operating costs and expenses were NT$146.292
billion, which is a reduction of NT$2.125 billion fromlast year.
Pre-tax net loss was NT$1.187 billion, which is areduction of NT$3.502 billion from the past year.
After-tax net profit was NT$1.20 billion, which is areduction of NT$2.990 billion from last year.

B. Budget execution:
Projected operating revenue was NT$154.121 billion,
and actual operating revenue was NT$146.372
billion, for a 94.97% attainment; projected operating
costs and fees were NT$151.887 billion, and actual
operating costs were NT$146.292 billion, for a spend

rate of 96.32%. Projected losses from non-operating
activities totalled NT$1.384 billion, with actual losses
from non-operating activities at NT$1.267 billion.
Projected annual pre-tax net profit was NT$0.85
billion, and actual pre-tax net loss was NT$1.187
billion.

C. Profitability:

Return on assets
0.51%
Return on equity -2.11%
After-tax profit margin -0.82%
After-tax earnings per share-NT$0.22

1.1.3 Research and development
In 2019, China Airlines’ information strategy
development focused on enhancing the operational
competitiveness and industrial technology of theCompany and the airlines group. Following theseven main themes of artificial intelligence, smart
technology/vehicles, big data, mobile applications,cloud computing/edge computing, virtual
reality/augmented reality, and information security,
China Airlines continued to perceive the pulse of theindustry, utilize technology to understand customer
value, understand profit-earing trends, findopportunities for innovation, strengthen information
security risk management, and enhance thecompany’s operational competitiveness.
In addition, China Airlines is committed to improving
its website experience quality; expanding thedevelopment of website functions to optimize theticket purchasing process; introducing 3Dverification functions for credit card transactions toensure the security of customer transactions andprevent credit card fraud; and building multiple
payment tools and supporting multi-currency
payments. To better service our passengers, newfare products were launched in September 2019.
Passengers can choose additional products
according to their travel needs, such as baggage
allowance, preferred seats, and mileage
accumulation standards, for them to select a la carteor package fares.

1.2 Business Plan for 2020
Benefiting from the government’s continued
promotion of tourism policy in Taiwan and therelatively stable price of oil, the passenger loadfactor in 2019 was slightly higher by about 1% thanthat in 2018. However, the overall operation
performance has been affected by the anti-China
extradition movement in Hong Kong, restriction on
Chinese tourists, and the rise of low-cost carriers,
which have caused fierce industrial competition anda drop in rate of return. Cargo transport has been

Letter to Shareholders3affected by international trade protectionism andthe US-China tariff dispute, and market growth has
slowed down.

arranged to meet seasonal demand, whichstrengthen China Airlines’ leading position in themarket.

In order to respond to changes in the externalbusiness environment, China Airlines has been
optimizing the aviation network for passenger
transport through aircraft model adjustment andflexible capacity allocation, based on market
conditions and to meet travel and transportationneeds. For cargo transport, shifts were flexibly
adjusted, and the shipping space allocation of eachzone was flexibly used to increase revenue. For thedelivery of special cargoes, such as precision
machinery, cold chain products, and aviationmaterials, continuous development and shipping
price segmentation were carried out to enhance theoverall revenue.

B. Southeast Asian Routes:

1.2.1 Passenger Service
China Airlines actively cooperates with thegovernment’s new southbound and foreign policies,and continuously evaluates the development ofpotential markets and increase of flights forSoutheast Asian routes. At the same time, weconcentrate our layout in Japanese and Koreanmarkets in response to market demand. For the
long-haul route markets of New Zealand, Australia,
Europe, and America, we have adjusted thestructure of the aviation network and strengthened
the transit hub position of Taoyuan Airport; as forcross‐strait routes, China Airlines will closely follow
market dynamics and adjust transport capacity in atimely manner.

A. Northeast Asian Routes:
In response to the high demand of the Taiwanesepeople for travel in Japan and South Korean, China
Airlines continues to expand routes in Japan andSouth Korea every year. Since the end of March
2019, Taoyuan-Nagoya flights were increased from
12 per week to 14 per week, Taoyuan-Takamatsu
flights were increased from 4 per week to 5 per
week, and Taoyuan-Fukuoka flights were increased
from 17 per week to 18 per week. In addition, inorder to meet the demand for people in central andsouthern Taiwan wanting to travel to Japan,
Taichung-Okinawa flights were increased from 5 per
week to 6 per week since the end of March 2019. To
take the initiative in securing the increasing market
demand, we further plan to increase
Taoyuan-Takamatsu flights to 7 flights per week
beginning March 2020, and increase
Taoyuan-Fukuoka flights to 19 flights per week
beginning April 2020. Seasonal, holiday/festival, andthematic charter flights have been continuously

4 Letter to Shareholders

In line with the government’s new southbound andforeign policy, China Airlines continued its increaseof flights to Bangkok, Penang, Hanoi, Phnom Penh,and other routes in 2018, and increased the
Taoyuan-Palau flights from 2 to 3 per week since
February 2019, and further increased such number
to 4 flights per week since June 2019. In addition, inorder to actively expand the Southeast Asian
aviation network layout and to strengthen theaviation network transfer market, we haveannounced plans in 2020 to launch the
Taoyuan-Cebu and Taoyuan-Chiang Mai routes.

C. Cross-Strait Routes:
Due to the impact of China’s policy of restricting
Chinese tourists coming to Taiwan and theanti-China extradition movement in Hong Kong,cross-strait travel demand is not as robust as inprevious years;China Airlines takes the initiative to
respond to market movements according to market
demand and passenger composition through aircraftmodel adjustment and flexible regulation oftransportation capacity, which maintains profit
margins for the routes. In the future, China Airlines
will continue to flexibly adjust transportation
capacity depending on the cross-strait policy
development and market conditions.

D. Long-Haul Routes:
In order to actively increase the benefits of China
Airlines’ Californian (North America) destinations
and aviation network and to expand customer
sources, beginning at the end of October 2019, we
resumed having three CI006/CI005 Taoyuan-Los
Angeles flights per week, increasing Taoyuan-Los
Angeles flights to 10 per week, with the addition of 7
flights on the Taoyuan-Ontario route per week,
totaling to 17 flights per week to and from theGreater Los Angeles area, making it easier for
travelers to reach major inland cities in the UnitedStates. In addition, the aircraft model on the
Taoyuan-Ontario route was adjusted from Airbus
A350-900 to Boeing 777-300ER, providing more
Premium Economy Class seats for passengers. Also,in order to continue to stimulate the North
American tourism market, flights on the
Taoyuan-Honolulu route were increased from 2
flights per week to 3 flights per week in the summer
schedule, providing a variety of choices for visitors
to the United States.

E. European Routes:
To stabilize China Airlines’ leading position in
Taiwan’s Continental Europe flight market,
beginning in 2018, flights on the Taoyuan-Vienna
route have been increased from 3 flights per week
to 5 flights per week, and we have maintained 5
flights per week throughout the year of 2019;
meanwhile, during peak season from September to
October, flights were increased to 6 per week. In
addition, the enlarged aircraft model on
Taoyuan-Amsterdam was changed to 777-300ER
during the summer schedule in 2019 to increase thesupply of seats. In the future, a more dense andconvenient European aviation network will be
provided to enhance the efficiency of China Airlines’
extension of the European aviation network.

F. Australia and New Zealand Routes:
In order to continuously improve the New Zealandand Australian aviation networks, China Airlines has
increased the flights on the Taoyuan-Melbourne
route to 4 flights per week from the end of October
2019. During the winter season, in addition toincreasing flights to New Zealand and Australia to 22
flights per week, it has also expanded its seat supply
to meet market demand. In addition to securing its
market share, China Airlines will also actively expand
bidirectional connections market among New
Zealand, Australia, Europe and Northeast Asia,
strengthening China Airlines’ travel services.

1.2.2 Cargo Service
In 2019, due to the disturbance of US-China trade
war and the slowdown in the growth of global trade,the overall air cargo transport market was full ofchallenges. The Company continues to cultivate
potential cargo transport markets, and launched the
Nagoya, Japan route at the end of March to provide
direct import and export services for the
manufacturing industries in Nagoya and Central
Japan; also, taking advantage of the rapid growth ofIndia’s emerging markets, the Mumbai-Amsterdam
route was launched in mid-November and achieved
impressive results. Fighting for cross-strait cargo
aircraft traffic rights, the second cargo aircraft flight
to Chongqing has been added since the end of
October, and the flight loading performance wasquite good.
To meet the needs of postal business clients, China
Airlines plans to implement 15 customized charter
flights to Zhengzhou in Q4, and continue the regularcharter flights on Taoyuan-Columbus, Hong
Kong-Chicago, and other routes from Asian cities tomajor U.S. cities.

Recently, in response to the impact of the pandemic
situation and the uncertainty of US-China trade on
cargo aircraft operations, short-term flight reduction
measures have been adopted for cross-strait andHong Kong routes; also, European and Americanflights were combined accordingly. The overallbusiness plan is described as follows:

A. Long-Haul Routes
China Airlines plans 34 flights per week and strives
for regular annual cargo charter flights to Columbus,
USA. Through inter-airline cooperation, expanding
the import and export sources of goods in Central
and South America, extending aviation network
services, and increasing loading capacity. After the
introduction of the new 777F cargo aircraft at theend of 2020, China Airlines will prioritize flights to
US West Coast destinations to improve flight
payload and optimize economic efficiency.

B. European Routes:
China Airlines will maintain the operation of 6 flights
per week in cooperation with the Indian market
development plan, and continue to promote thepotential markets of Delhi and Mumbai in India, so
as to achieve two-stage revenue benefits.

C. Regional routes:
China Airlines will optimize the transportation
capacity of Singapore, Penang, Ho Chi Minh City,
Hanoi, and other Southeast Asian routes. Weekly
flights will be gradually increased to 55 flights in thesummer schedule of 2020. Through the increase in
the proportion of regional cargo sources, we look to
improve the profitability of Southeast Asian cargo
aircraft.
China Airlines will continue to evaluate the flightincrease plan for potential destinations on the
cross-strait cargo aircraft route (including
Guangzhou, Chongqing, and Zhengzhou) tostrengthen the cross-strait profitable route layout.
For Hong Kong and Northeast Asia, in addition tomaintaining the operation of 16 and 5 flights per
week, respectively, China Airlines will strive tosecure non-regular charter flight business anddevelop high-priced sources of goods.

D. Improving revenue management andextending chartered flight business andhigh-growth source of goods:(1)Improving revenue management:
In order to meet the demand for machine driven
by the emerging 5G industry, China Airlines will

Letter to Shareholders

5

take advantage of using Boeing 747-400F
cargo-only aircraft to load large cargoes for thetransport of large machinery, which will increase
revenue by providing differentiated services.
(2)Customized charter flights business:
China Airlines will deeply cultivate emerging
markets such as Southeast Asia, and promotecustomized charter flight business on aregular/irregular basis.
(3)Deepening cooperation with inter-airline expressdelivery companies:
Maintaining cooperation with UPS, DHL, FedEx,
SF Express, and other international expressdelivery companies to strengthen partnerships
with Japanese and American airlines in the Asian
region.
(4)Promoting cold chain cargoes:
China Airlines obtained CEIV Pharma certificationfrom the International Air Transport Association(IATA CEIV Pharma) in April 2019. It is the firstairline in Taiwan to receive this honor, and thecertification can effectively increase the growthrate of the high-value cargo market.

1.3 Development Strategies
As the aviation industry provides international
passenger and cargo transportation services, its
operations are susceptible to global economic
growth and political and economic conditions.
According to the economic forecast published by IHS
Markit in February 2020, the estimated global
economic growth rate is 2.5%, slightly lower thanthe 2.6% of 2019; the growth rate in Taiwan is 2.1%.
The International Air Transport Association (IATA)
originally estimated in December 2019 that in 2020,
the growth rate of demand for the air passenger
transport market would be 4.1% globally, 4.8% in
the Asia-Pacific region, and that air cargo transportvolume would increase by 2.0%. However, as the
COVID-19 pandemic has increased in severity, theIATA estimates that the growth rate of demand forthe air passenger transport market in 2020 will
become negative, and the passenger transport
revenue will be reduced by about 63 billion to 113
billion USD due to the implementation of tourism
restrictions on the grounds of epidemic prevention
in various countries.

6 Letter to Shareholders

Faced with such a highly competitive external
environment, political and economic ripple effects,
climate change and environmental protection issues,geopolitical risks, changes in exchange rates and oil
prices, various uncertainties with the added
uncertainty of the epidemic that is currently
affecting the air transport market, this year (2020)
will be a very difficult year for airlines.
The Company will take a proactive and rigorous
attitude to carry out risk management and control,and establish corresponding response strategies. For
pandemic prevention operations, we will follow theguidance of the World Health Organization (WHO)and other public health authorities and implement
disease prevention work to ensure passenger safety.
For passenger transport, we will continue to flexibly
adjust transport capacity to respond to changes in
the market. Through the solid establishment of theaviation network and the deepening of inter-airline
cooperation, we aim to expand benefits, increase
revenue, optimize cabin products, and strengthenbrand marketing, so as to optimize passenger
experience and enhance customer loyalty. For cargotransport, we aim to increase the overall revenue
through introducing next-generation aircraft,strengthening operational efficiency, implementing
revenue management improvement, and promoting
customized charter business and cold chaintransportation services. In addition, toaccommodate to digital technology trends, we will
expand online sales to improve the efficiency ofmobile business applications, and promoteelectronic services to improve the convenience ofpassenger and cargo transport.
Through professional operation and management,
we will focus on businesses with niche anddevelopment potential, integrate group resources tostrengthen our overall competitiveness, and expand
economic scale and scope, so as to effect businesssynergy and thus reach business sustainability.

Chairman: Hsieh, Su-Chien
President: Hsieh, Su-Chien
Vice President, Finance Div.:
Chen, I-Chieh

Company Profile
2.1 Date of Incorporation
2.2 Company History

Company Profile

7

II. Company Profile
2.1 Date of Incorporation
September 7, 1959

2.2 Company History
1959: China Airlines (CAL) was founded by 26 retired
members of the Air Force with TWD 400,000 incapital. The Company flew charter flights using two
rented PBY seaplanes.
1961: Provided military supply transport to Laos.
1962: Flew special cargo missions for the Vietnamese
government and USARV. Inaugurated the first
domestic route from Taipei to Hualien.
1966: Inaugurated the first international route from Taipei
to Saigon (now Ho Chi Minh City), marking ourofficial start in international aviation.
1967: Inaugurated Northeast Asia routes.
1970: Developed trans‐Pacific routes to explore the US
market.
1976: Inaugurated Middle East and Saudi Arabia Routes.
1978: Invested in Taoyuan International Airport Services
Co., Ltd.
1980: Invested in Dynasty Holidays, Inc.
1983: Expanded European routes.
1986: Divided the Operations Division into Passenger
Division and Cargo Division to expand operations.
1988: Twenty‐seven shareholders donated shares toestablish the China Aviation Development
Foundation, transferring the rights of supervisionand management to society.
1989: Invested in Hwa Hsia Co., Ltd. and Tai Kong Ju
Investment Co., Ltd.
1990: Added Phuket and Bali destinations. Invested in
Abacus Distribution Systems (Taiwan) Ltd.
1991: Established Hua Mei Investment Company and
Mandarin Airlines. The Ministry of Finance approved
the public offering of China Airlines shares.
1992: Resumed flights to Ho Chi Minh City. The Taiwan
Stock Exchange approved the listing of China
Airlines shares. The Company gained 100% equity
interest in Mandarin Airlines.
1993: First flight to Frankfurt, Germany. Established
German Branch Office. Officially listed on the
Taiwan Stock Exchange.

8 Company Profile

1994: New engine repair plant became operational andSongshan Training Minquan Building opened. Set up
China Pacific Catering Services as a joint venturewith the Swire Group.
1995: First flights to Switzerland and Italy. Entered into a
joint venture with Pratt & Whitney and SIA
Engineering Company Limited to establish AsianCompressor Technology Services Co. in Taiwan.
Invested in CAL‐Asia Investments Inc. Launched our“plum blossom” logo.
1996: Inaugurated the Taoyuan‐Penang cargo route.
1997: Inaugurated the Kaohsiung‐Hong Kong‐Jakarta route.
Established the first cargo‐only flights between Asia
and Miami. Established code share flights with
Continental Airlines and American Airlines. Invested
in Huasheng Investment Company and China Pacific
Laundry Services Ltd.
1998: Set up our Penang Branch Office and Hanoi Branch.
Began using the Third Maintenance Hangar.
1999: Inaugurated cargo flight routes to Sydney, Delhi,
and Colombo. Set up Kaohsiung Airport Catering
Services as a joint venture with TransAsia Airlines
and Far Eastern Air Transport. Established Chung
Hwa Express Corp. as a joint venture with Chunghwa
Post. Established TACT Logistics through investment
transfer.
2000: Launched Canada, Australia, and New Zealandroutes; Taoyuan‐Guam, Taoyuan‐Manila,
Kaohsiung‐Manila, Hakodate charter, andTaoyuan‐Penang passenger flights; Frankfurt cargoflights. Established Shanghai office in Mainland
China and new branch offices in Canada, Australia,
New Zealand and Guam. Established YesTrip Travel
Internet Technology Co.
2001: Inaugurated cargo flight routes to Seattle andNashville. Made indirect investment in Xiamen
International Airport Co., Ltd. Set up code‐share
flights with Delta Airlines. Introduced A340-300
passenger jets.
2002: Inaugurated passenger flight routes to Delhi andcargo routes to Manchester. Received approval toinvest in China Cargo Airlines. Ordered 18 Airbus
A330 passenger aircraft and 10 Boeing 747-400
cargo and passenger aircraft. Rejoined theInternational Air Transport Association (IATA).
2003: Inaugurated the first cross‐strait Spring Festival
charter flight. Inaugurated charter flights to Seoul
and passenger routes to Brisbane and Hanoi andnon‐stop flights to Hawaii. Inaugurated cargo flightroutes to Ho Chi Minh City and Delhi. Created theParagon Card, the highest Dynasty Flyer
membership tier. Received the Outstanding Service
Award from the R.O.C. President.

2004: Launched sea‐air transport charter flights.
Inaugurated Hiroshima passenger flights and cargoroutes to Milan and Prague. Introduced three
A330-300 passenger jets, two Boeing 747-400
passenger jets and two Boeing 747-400 freighters.
2005: Flew the first direct charter flights to Beijing, andSpring Festival charters to Guangzhou and Shanghai.
Inaugurated Vienna passenger flight route andNagoya and Vienna cargo flight routes. Invested in
China Aircraft Services Limited.
2006: Inaugurated cargo flight routes to Osaka, Hanoi,
Houston and Stockholm. Flew the first cargo charter
flight to Shanghai. Invested in Yangtze River Express
Airlines Company. Began construction on the
Taoyuan International Airport Airline Business
Operation Center.
2007: Signed a letter of intent to purchase with Airbus.
Announced contract with AccorHotels for a new
airport hotel. Inaugurated regularly‐scheduled
passenger flights between Kaohsiung and Chiang
Mai.
2008: Launched cross‐strait humanitarian charter flights
direct to Chengdu to deliver disaster relief supplies
at no charge. Inaugurated cross ‐ strait holiday
charter flights, weekend charter flights to Shanghai,
Beijing, Xiamen, and Guangzhou, and cross ‐ strait
direct cargo charter flights.
2009: Inaugurated the Taoyuan‐Osaka‐Los Angeles cargoflight route. Inaugurated scheduled cross‐strait
flights to Zhengzhou, Xiamen, Xi'an, Ningbo,
Shenyang, and Changsha. Became an official
member of IATA's e‐Freight program. Inaugurated
Taiwan's largest 120,000-pound power plant testing
platform.
2010: New routes: Passenger routes between Taoyuan
and the cities of Miyazaki, London, and Qingdao,
Songshan Airport to Hongqiao and Haneda, andKaohsiung to Xiamen and Narita, direct cargo flights
to Xiamen, Nanjing and Fuzhou as well as the special
cargo charter flight direct to Xi'an. EstablishedCompany headquarters in China Airlines Park andwon the National Building Golden Award andNational First Award.
2011: New routes: Taoyuan ‐ Brisbane ‐ Auckland;
Taoyuan ‐ Osaka ‐ New York; flights to and from
Taoyuan and Wuhan, Sanya, Yancheng, Haikou,
Nanchang and Dalian; Taicheng to Chongqing andNanchang; Kaohsiung to Changsha, Chongqing,
Beijing, and Kuala Lumpur. Officially joined SkyTeam,
becoming the first Taiwanese airline member of aninternational airline alliance.
2012: New routes: Songshan to Wenzhou and Gimpo
Airport, Taoyuan to Kagoshima, Shizuoka andToyama, added Auckland leg to the Taoyuan‐Sydneyroute, and Taoyuan to Seoul and Yangon. Joined
SkyTeam Cargo, becoming the first Taiwanese

airline to join an international air cargo alliance.
Renovated the cabins of nine Boeing 747-400
passenger jets to install new cabin seats and video
systems. Signed a Memorandum of Strategic
Cooperation with Chunghwa Telecom. Signed an
OnPoint Fuel & Carbon Solutions Agreement with
GE Aviation. Awarded Business Next magazine’s
Super Green Jury Award and First Place in the Green
Brand Awards 2012 Transportation Category, Gold
Award in Reader's Digest Trusted Brands 2012, theSports Activists Award from Sports Affairs Council,
First Place in Management magazine’s Consumer
Brand Survey, and the 2012 Energy Conservation
and Carbon Reduction Action Label ExcellenceAward. The China Airlines Maintenance Facility
received ISO 14001 Environment Management
System Certification. Launched the world's firsttrans‐Pacific climate observation aircraft. Became
the world's first airline to display our carbon
footprint and calories for in‐flight meals.
2013: Formed Greater China Connection Partnership with
China Southern, China Eastern and Xiamen Airlines.
Launched code-sharing services with Russia's
Transaero Airlines and Hawaiian Airlines andexpanded code-sharing services with China
Southern Airlines. Launched Taoyuan‐Takamatsu
route, Chiayi‐Shizuoka charter flights,
Taoyuan‐Hawaii direct flights, Taoyuan‐Urumqi and
Lijiang routes. Launched Taoyuan‐Ishigaki,
Tainan‐Hong Kong, and Taoyuan‐Busan routes aswell as Songshan‐Matsuyama charter flights.
Launched the Taoyuan‐Nanjing‐Zhengzhou cargoroute and Taoyuan‐Weihai flights. Launchedtemperature-controlled product cargo services.
Once again awarded Business Next magazine’s
Super Green Jury Award and First Place in the Green
Brand Awards 2013 Transportation Category.
Awarded Top Aviation Brand in Manager Today‘s
Power Brands Survey 2013 and Reader's Digest
Trusted Brands Gold Award. Won the National
Standardization Awards’ Corporate Standardization
Award, 3rd Taiwan Green Classics Award, Global
Views Service Excellence Award 2013, and EPA’s
22nd Business Environmental Award.
2014: Awarded the EPA’s 23rd Business Environmental
Award and the International Green Classics Award
2014; earned ISO 14001 Environment Management
System Expansion Certification and ISO 50001
Energy Management System Setup Certification.
Once again awarded Business Next magazine’s
Super Green Jury Award and earned First Place in
the Green Brand Awards Transportation Category
for the third time. Inaugurated theSongshan‐Fuzhou and Taoyuan to Changchun, Hefei,
Yantai, and Xuzhou routes. Won the Annual Best of
Design Awards in the 2014 Golden Pin Design Awardfor our NextGen 777 aircraft cabin design andnamed the Best Airline in North Asia by Global
Traveler.
2015: Launched Taoyuan‐Wuxi; Kaohsiung to Changzhou,
Kumamoto, and Fukuoka; Taoyuan‐Melbourne with

Company Profile9

an extension to Christchurch; and Tainan‐Osakaflights. Launched social media customer services, afirst for Taiwan. Established an airplane
maintenance training center. Received the following
awards: Brand Service:
CAA 2014 Golden Wing Awards, second place in
TheDesignAir Global Passenger Choice Top 10
Airlines Awards 2015, Reader's Digest Trusted
Brands Gold Award, three top awards in the
Global Traveler reader survey.
 Corporate Social Responsibility:
TCSA Taiwan Corporate Sustainability Award,
EPA’s Business Environmental Awards.
 Product Design:
The NextGen 777-300ER passenger cabin design
was awarded the Red Dot Design Award 2015,
Family Couch design received the Global Traveler
Leisure Travel Innovation Excellence Award, won
National Industry Innovation Award for NexGen
Aesthetics.
 Other:
Centers for Disease Control Epidemic Prevention
Award 2015.
2016: Launched Taoyuan‐Yangzhou route andTaoyuan‐Shenzhen cargo route. Inaugurated
Chinese passenger transit through Taiwan foroutbound China Airlines flights. Increased freebaggage allowance by 10 kg and reduced regional
excess baggage charges. Took delivery of the first
A350 airliner for any Taiwanese carrier. Completed
the Air Passenger Transport Service-Product Carbon
Footprint Category Regulations together with the
Civil Aeronautics Administration. Received thefollowing awards:
 Brand Service:
PAX International magazine reader survey's 2016
Outstanding Food Service by a Carrier, Best
Premium Economy and Best Airline by Global
Traveler; China Airlines Dynasty In-flight Magazine
won the APEX Award of Excellence; the CAL
website was named 2016 Best Airline Website by
WebAward.
 Corporate Social Responsibility:
Passed third-party audits for ISO 14001 and ISO
50001 Environmental Management Systems.
Received IOSA flight safety certification and the
TCSA Taiwan Corporate Sustainability Award.
Selected as a Dow Jones Sustainability Indicesconstituent stock, the first such honor for a
Taiwanese company and emerging market airline.
 Product Design:
Received 5 iF Design Awards for the Boeing
777-300ER passenger cabin, software userinterface, tableware design, Sky Lounge design
packaging, and Taiwan Taoyuan Airport Terminal
1 Lounge. A double win in TheDesignAir Awards
2016.

10 Company Profile

2017: Inaugurated the Taoyuan‐London route, becoming
the only airline in Taiwan to offer nonstop service toLondon. Partnered with Air France on a codeshare
nonstop flight from Taoyuan to Paris. Added
codeshares on Taiwan‐Japan routes with Air Japan.
Signed a memorandum of cooperation with KLM.
Signed an agreement to enhance cooperation with
American Airlines. Signed a letter of intent with
Airbus, comprehensively strengthening cooperation
on maintenance. Established a joint venture in
Taoyuan with NORDAM Aerospace (USA) as“NORDAM Asia Ltd.” with both parties cooperating
to drive business investment and training ofaerospace maintenance personnel. Signed amemorandum of cooperation with Changgeng
Hospital of Linkou for air medical treatment.
Obtained AS 9110 Airbus certification formaintenance facility. Transported Taiwanesesatellites to the US on four occasions. Hosted the2017 AAPA annual conference to empower
development in the Asia-Pacific airline industry.
Provided the second A330-300 to work on plans forgreenhouse gas observation and testing in the
Pacific. Signed the Buckingham Palace Declaration
against illegal wildlife shipments. Used sustainable
alternative fuels and setting a milestone in carbon
reduction among Taiwanese airlines. Received many
awards: Brand Service:
Excellence in Global Airline Cargo Service award.
Cheers magazine's 2017 TOP 20 Most Influential
Enterprises of the New Era. Awarded a Gold
Medal for reputation by Reader’s Digest for the
19th consecutive year. Awarded a 2017 Global
Vision magazine five-star service rating.
Remained on top as Global Traveler's Best Airline
in Northeast Asia.
 Corporate Social Responsibility:
Won the Taiwan Top 50 Enterprises Sustainability
Report Gold Medal for Cargo Division, Climate
Leader Award, and Harmony with Society award.
Selected for the Dow Jones Sustainability Index
for the second consecutive year.
2018: The new US destination Taoyuan-Ontario,
California, route formally went into operation.
Served as one of the ten major members in the
IATA Nominating Committee in 2018. Launched
Kaohsiung-Hong Kong-Jakarta andTaoyuan-Chongqing passenger transportationroutes. Developed the cargo transport destinationin Columbus, Ohio, United States. Joined handswith Japan Airlines in developing the newdestinations of Japan inland routes, including
Sapporo-Niigata, Sapporo- Hanamaki,
Fukuoka-Miyazaki, Fukuoka-Hanamaki,
Fukuoka-Amami, Kagoshima-Amami andKagoshima-Tokunoshima.
 Brand Service:
Selected as Cheers magazine's “2018 Top 20
Employers of the New Generation.” China Airlines’in-flight magazine Dynasty received the 2018
APEX Awards for Publication Excellence in the US.
 Corporate Governance:
Ranked among top 5% in the 4th Corporate
Governance Review.
 Corporate Social Responsibility:
China Airlines Group donated NT$10 million indisaster relief for the Hualien earthquake. The
second airline worldwide to be certified by dual
systems, ISO 14001 and ISO 50001, maintaining
the highest standards for environmental risk
management. AL Park was awarded the Diamond
Level of Green Building Label, with an annual
electricity savings of 23,000 kWh. Cooperated
with ClimateCare, a British professional
environmental facility, to launch the “ECO Travel”
carbon exchange program. Selected as aconstituent stock in the Dow Jones Sustainability
Index (DJSI). Awarded the Taiwan Corporate
Sustainability Award.
 Product Design:Awarded the “Best Premium Economy Class
Amenities Kit” of the Onboard Hospitality Award
by OBH Magazine.
2019: Flight addition to Taoyuan-Palau route. Developed
cargo transport destination in Nagoya, Japan.
Signed a letter of intent with Chung Yuan Christian
University to jointly cultivate aviation talent.
Approved by the US Transportation Security
Administration to join the precheck program. Moreevolution in digital services: non-stop, 24-hourautomated customer service.
 Brand Service:
Won the APEX 5-Star Award. The first cold chaintransportation of pharmaceuticals in Taiwan toachieve international certification.
 Corporate Governance:
Placed in Top 5% of the Corporate GovernanceRanking once again.
 Corporate Social Responsibility:
Evaluated as role-model company for the global
airlines by the International Carbon Disclosure
Project. Selected as a constituent stock in the “TW
ESG Index” for the first time. Selected as aconstituent stock in the DJSI for the fourthconsecutive year. Selected for the Global
Corporate Sustainability Awards for the first timeand presented with TCSA for the sixth consecutive
year.

Company Profile

11

Corporate Governance Report
3.1 Organization
3.2 Directors and Management Team
3.3 Implementation of Corporate Governance
3.4 Information Regarding the Company’s Audit Fee andIndependence
3.5 Replacement of CPA
3.6 Audit Independence
3.7 Changes in Shareholding of Directors, Managers, andMajor Shareholders
3.8 Relationships among the Top Ten Shareholders
3.9 Ownership of Shares in Affiliated Enterprises

12 Corporate Governance ReportIII. Corporate Governance Report
3.1 Organization
3.1.1 Organizational Chart (APR 25, 2020)ިύ๮ૐ‫ޜ‬Ϧљಔᙃܿ཮ቩी‫ہ‬঩཮SHAREHOLDERS MEETINGORGANIZATION CHART OF CHINA AIRLINES
2020 / 02 / 19

AUDIT COMMITTEEᖒၗൔၿ‫ہ‬঩཮ဠ ٣ ཮BOARD OF DIRECTORSREMUNERATION COMMITTEEဠ ٣ ߏ

RISK COMMITTEE॥ᓀ‫ہ‬঩཮CHAIRMAN OF THE BOARD

ဠ٣཮཰୍λಔ

SECRETARIAL OFFICE,
BOARD OF DIRECTORSᕴዽਡ࠻GENERAL AUDIT OFFICEᕴ ࿶ ౛
PRESIDENT

Ҿ཰ว৖࠻

Ҿ཰Ӽӄ࠻

CORPORATEDEVELOPMENT OFFICE

ၗుୋᕴ࿶౛

ၗుୋᕴ࿶౛

ၗుୋᕴ࿶౛଄ ୍ ೀ‫ ܺ ޜ‬ೀ

FINANCE DIV.

Ӧ༇୍ܺೀADMINISTRATION DIV.

PASSENGER SALES& MARKETING DIV.

Չ ࡹ ೀ

INFORMATIONMANAGEMENT DIV.

‫ޜ‬ύ୘Ҕࠔ‫ٮ‬ᔈᔼᎍೀ
INFLIGHT SUPPLY CHAIN& MARKETING DIV.

(VE)
SENIOR VP

ૐ ୍ ೀ

অៈπቷ

FLIGHTOPERATIONS DIV.

MAINTENANCE
DIV.

ᖄӝᆅ‫ڋ‬ೀ೤ၮೀCARGO SALESǵ MARKETING& SERVICES DIV.

ၗૻᆅ౛ೀၗుୋᕴ࿶౛(VO)
SENIOR VP࠼ၮೀCABIN CREW DIV.
GROUND SERVICES DIV.

ၗుୋᕴ࿶౛(VV)
SENIOR VP(VF)SENIOR VP(VW)SENIOR VPᙍ཰Ӽӄፁғ೽
OCCUPATIONAL
SAFETY & HEALTH DEPT.

ϦӅᜢ߯࠻

CORPORATECOMMUNICATIONS OFFICECORPORATESAFETY OFFICEᐒ୍πำೀ

SYSTEM OPERATIONCONTROL DIV.

ENGINEERING
DIV.

ᐒ୍ࠔߥೀ

QUALITY
ASSURANCE DIV.

‫ߥࡓݤ‬ᓀೀLEGAL & INSURANCE DIV.

०ᐒঅៈ૽ግύЈΓΚၗྍೀ

TECHNICALTRAINING CENTER

HUMAN RESOURCES DIV.

ߕ೛௲‫૽ػ‬ግύЈEDUCATION TRAINING CENTER

ঁၗᄤࠔ፦ᆅ౛࠻

DATA PROTECTION &QUALITY MANAGEMENT OFFICE

಻ើϩϦљ
ቺ୯ϩϦљ
GERMANYBRANCHကεճϩϦљITALY BRANCH

༫ӦճϩϦљ

AUSTRIA BRANCH

ኻࢪ೤ၮύЈCARGO SALES &SERVICES, EUROPEम୯ϩϦљU.K. Branchεഌ೤ၮύЈCARGO SALES &SERVICES
MAINLAND CHINAቶԀᒤ٣ೀGUANGZHOUOFFICE‫ݓ‬ᅇᒤ٣ೀ

WUHAN OFFICEᎄԀᒤ٣ೀɉ

๮ч୔२ৢж߄
ASSISTANT VP,NORTH CHINAుӥᒤ٣ೀSHENZHEN
OFFICEBEIJING OFFICEԋ೿ᒤ٣ೀᘟ໚ᒤ٣ೀɉ

CHENGDU OFFICEख़ቼઠZHENGZHOUOFFICECHONGQINGSTATIONੇαᒤ٣ೀߏ؅ᒤ٣ೀɉHAIKOU OFFICEΟ٥ઠ

SANYA STATIONч٧ᒤ٣ೀCHANGSHAOFFICEࠄܱઠ

NANCHANGSTATIONSHENYANG
OFFICE๮ܿ୔२ৢж߄
ASSISTANT VP,
EAST CHINA΢ੇᒤ٣ೀSHANGHAI OFFICEคᒴઠWUXI STATION

ɉ

ՋӼᒤ٣ೀ
XIAN OFFICE

VICE PRESIDENT,OCEANIA

VICE PRESIDENT,TAIWANSENIOR VICE PRESIDENT,
MAINLAND CHINA

๮ࠄ୔२ৢж߄
ASSISTANT VP,
SOUTH CHINA

NETHERLANDSBRANCHεࢩࢪӦ୔ೀߏ

Ѡ᡼Ӧ୔ೀߏ

εഌӦ୔२ৢж߄ኻࢪӦ୔२ৢж߄

SENIOR VICE PRESIDENT,EUROPE༺ߐᒤ٣ೀɉXIAMEN OFFICEᅽ Ԁ ઠɉ

ࠄ٧ᒤ٣ೀɉ

NANJING OFFICEѠࠄᔼ཰‫܌‬TAINANSALES OFFICEѠύϩϦљɉߙ৞ᒤ٣ೀ

QINGDAO OFFICE࠶ੇઠჱ‫ݢ‬ᒤ٣ೀɉ

ܼԀᒤ٣ೀɉྕ Ԁ ઠɉKAOHSIUNGBRANCHTAICHUNG BRANCHWEIHAI STATIONWENZHOUSTATION

ଯ໢ϩϦљ

৪Ԁઠ

XUZHOU STATIONFUZHOUSTATIONNINGBO OFFICEѠчϩϦљ

TAIPEI BRANCHHANGZHOU
OFFICEѠ᡼೤ၮύЈCARGO SALES &SERVICE, TAIWAN३ෝϩϦљ
HONG KONG
BRANCHੀ୯ϩϦљ
THAILAND
BRANCHమᗌϩϦљ

CHIANG MAI BRANCHຫࠄϩϦљ

VIETNAM BRANCH‫ݞ‬ϣϩϦљ

HANOI BRANCH

ଭٰՋ٥ϩϦљMALAYSIA BRANCHᘓࠤϩϦљPENANG
BRANCHཥу‫ڵ‬ϩϦљ

AUSTRALIA
BRANCHѲٚථҁϩϦљ

LOS ANGELESBRANCHᅽ‫۝‬ϩϦљᙑߎξϩϦљFUKUOKA BRANCHSAN FRANCISCO
BRANCHᏀᅟҁϩϦљ

൤ξઠ

ᅜҁઠ

ફऊϩϦљ

MELBOURNE
BRANCHTOYAMASTATIONફՋើϩϦљᓉ‫۝‬ઠ

NEW ZEALAND
BRANCHᗬ୯ϩϦљSHIZUOKA
STATIONቶ৞ϩϦљ

KOREA BRANCHHIROSHIMA
BRANCHଠξϩϦљଯ݊ઠ

BUSAN BRANCH

๷ࡓᇯϩϦљ
PHILIPPINESBRANCHCEBU BRANCH጑‫ث‬ϩϦљӑѭϩϦљࢍ঵ჵϩϦљ

᯷ٚϩϦљ

ۧ੥ϩϦљ

BALI BRANCH

ӜђࡂϩϦљεٞϩϦљࢶ‫׼‬ᕚϩϦљ

OSAKA BRANCHNAGOYA BRANCHӑࡋϩϦљINDIA BRANCHܿ٧ϩϦљTOKYO BRANCH

ऍࢪӦ୔ೀߏ

VICE PRESIDENT,THE AMERICASBRISBANEBRANCHSINGAPORE
BRANCHINDONESIABRANCHɉǺ๮ߞૐ‫ޜ‬੤ဦ०ૐᐞࢪϩϦљВҁӦ୔ೀߏ

VICE PRESIDENT,
JAPAN

எᜦϩϦљ

TAKAMATSU
STATIONВҁ೤ၮύЈCARGO SALES &SERVICES, JAPANKUMAMOTOSTATIONNEW YORK
BRANCHജ‫ٽ‬৞ઠ

ᔝ३ξϩϦљKAGOSHIMA
STATION

HONOLULU
BRANCH৐஘ઠӼ਱܎‫ݯ‬ϩϦљ

MIYAZAKISTATION༷҄ϩϦљ

SAPPORO BRANCH੥ౚϩϦљOKINAWA BRANCHANCHORAGE
BRANCHу৾εϩϦљ

CANADA BRANCH

ऍࢪ೤ၮύЈCARGO SALES &SERVICES
THE AMERICASMYANMAR
BRANCHCAMBODIABRANCHPALAU BRANCHᜢ৞ϩϦљGUAM BRANCH

Corporate Governance Report133.1.2 Major Corporate Functions
Department
General Audit Office

Functions
Responsible for auditing the internal control system, results of implementation of
the annual business plan.

Secretarial Office,Responsible for holding Board of Directors meetings, collating and sending meeting

Board of Directors

proceedings and overseeing matters relating to resolutions, coordination channels
with general public stockholders, matters relating to juridical person shareholder
representatives, director communications and services, and budgeting and controls
for the Board and all functional committees.

Corporate

Responsible for drafting the Company’s medium- and long-term strategic operating

Development Officeplan, fleet plan, and annual business plan; seeking flying rights and building
relationships between the Company and civil aviation authorities in various
countries; establishing brand position and development strategies; planningmedium- and long-term design and development of passenger cabins andentertainment systems; purchasing, selling, and leasing of aircraft.

Corporate Safety Office Drafts Company safety, security, quality assurance, environmental, and emergency
response policies and systems; establishes related management systems and carries
out educational training; implements related investigations, analysis, andexaminations; coordinates with government agencies and civil aviation authorities,
manufacturers, and groups to deal with Company safety, security, quality assurance,
environmental, and emergency response-related issues.
Corporate

Responsible for external Company communications, communication links with theCommunications Office legislature and the media, planning social welfare activities, sponsoring charitable
activities, organizing inaugural flights and other holiday or celebratory activities,
publishing CAL Park Magazine, supervising and coordinating publication of Dynasty
magazine, organizing employee recreational activities, and setting the Company’s
brand image and advertising strategy.
Legal & Insurance Div.

Responsible for reviewing all outside agreements and contracts, handling litigation,and management of insurance matters for Company assets, such as the fleet andaeronautical parts, personnel, and passenger and cargo transportation.

Finance Div.

Responsible for planning financing sources, managing use of funds, controlling thebudget, auditing accounts receivable and payable items, preparing financial
statements, managing tax-related issues, fuel purchasing, and providing accounting
and cost analysis information. Supervising the operational performance andmanagement of invested enterprises.

Administration Div.

Responsible for procurement of general goods, managing renovation projects andland/real estate, land transport management and vehicle maintenance, handlingcompany licenses, monitoring and safekeeping of Company seals, sending andreceipt of prospectuses and official documents, and document management.

Cabin Crew Div.

Responsible for establishing cabin crew operating standards, managing training of
cabin crew, planning for cabin crew manpower needs, and implementing assignmentof cabin crew personnel.

14 Corporate Governance ReportDepartment
Ground Services Div.

Functions
Responsible for establishing ground services operating standards, development of
the ground services operating system, planning and implementation of a full range ofground services training, supervising ground services operations at each station,
providing ground services at Taiwan Taoyuan and Songshan Airports, and overallmanagement of ground service provider contracts.

In-Flight Service Supply Responsible for the research and development, marketing and planning of various
Chain & Marketing Div. in-flight service supplies and products for sale; planning and supply management ofmeals and beverages in all flights of the entire route; supervising and controlling thelogistics and supply management such as the purchasing, warehousing, preparationand loading of various in-flight service supplies; working on improving the quality of
in-flight service products based on customer feedbacks and market trends.
Data Protection &Quality Management
OfficeImplements personal information and quality management system, and reports theimplementation results and improvement measures to the top management;masters
the content of laws and regulations related to the protection of personal informationin various countries to ensure compliance with the laws and the regulation
enforcement process in each country;establishes and implements the Company’s ISO
9001 quality management system, and implements service quality education,internal quality auditor training and encourages further understanding of measures
regarding quality-related issues.

Passenger Sales &Marketing Div.

Responsible for supervising the passenger transport network planning and route
management of the entire route, seat control, business promotion, digital marketing,customer relationship maintenance, membership marketing and inter-airline
cooperation, cross-industry collaboration, determination of passenger transport
rates and various quotas, performance evaluation, and developing and maintaining
revenue management systems and passenger transport business training at all levels.

Information
Management Div.
Human Resources Div.

Combines information technology with business knowledge to promotecomputerization within the Company to upgrade operational competitiveness.
Responsible for planning the Company organization and human resources,
establishment of a personnel management system, and setting pay standards.
Provides recruitment services, supervises personnel management, established theemployee training system and oversees future updates, provides employee healthmanagement, and manages personnel assignments to affiliated enterprises.

Occupational Safety &Health Dept.

Writes the Company’s Occupational Health and Safety Manual and regulations;drafts, plans, supervises, and promotes health and safety matters and guides
implementation in relevant departments in order to prevent occupational hazards
and ensure employee health and safety. Received ISO45001:2018 and TOSHMS
occupational health and safety certification following SGS audit to effectively control
occupational incident risk and improve occupational health and safety performance.

Corporate Governance Report15

Department

Functions

Cargo Sales, Marketing Establishes the cargo development strategy, supervises cargo operations on all& Services Div.

routes, plans the cargo flight timetable and controls allocation of hold space, sets
cargo shipping rates and sales quotas, evaluates operating performance, drafts andoversees cargo services and operating standards, and is responsible for passenger
and cargo plane loading control operations, cargo equipment controls andreplenishment, Taipei cargo terminal operations, and accounting for the Cargo Sales,
Marketing & Services Division and Taiwan Cargo Center.

Flight Operations Div.

Responsible for cabin crew manpower requirement planning, training andmanagement of cabin crew, developing flight operating standards, controlling fuelconsumption, planning and implementation of crew and flight assignments, andmaintaining airplane flight manuals and flight simulators.

System Operation

Manages coordination of all airports in the system, oversees flight status,

Control Div.

coordinates and manages adjustment of flights in response to anomalies, guarantees
on-time performance rates, provides real-time information to aircraft in flight,
ensures flight safety, investigates reasons for major delays to flights, establishes
comprehensive aircraft and statistical analysis data; operates and guides crew
allocation, plans and manages flight permits; responsible for safety management andliability related to business.

Maintenance Div.

Responsible for implementation of airplane maintenance, client aircraft maintenanceservices, support and supervision of station maintenance, and development ofmaintenance capabilities.

Engineering Div.

Responsible for the planning and control of airplane maintenance, materials supply
management, controlling maintenance costs, and planning the information systemdevelopment strategy.

Quality Assurance Div.

Responsible for coordination and communication with other countries’ civil aviation
authorities; maintaining the validity of operating standards, repair facility licenses,
and aircraft airworthiness certificates; authorization and management ofmaintenance personnel training and task assignments; formulation andimplementation of the quality audit system. Established and implements the aircraft
quality management and on-site inspection systems, implements introduction of
new aircraft and sale or return of aircraft as stipulated in the fleet plan, and assists inaircraft incident investigations.

Technical Training

Develops type training and license conversion training that comply with CAA 05-02A

Centerrequirements. Compose training plan and execute training in accordance with EMO(Engineering & Maintenance Organization) demands and customer requests.

Branch offices

Responsible for each branch’s development and promotion of passenger andfreight-related operations.

16 Corporate Governance Report3.2 Directors and Management Team3.2.1 Directors
Title

Name

China Aviation
Development
Foundation

Nationality/
Country of Gender
OriginDate FirstElectedR.O.C.

07/07/1988 06/27/2018

Hsieh, Su-Chien

Representative:

China Aviation
Development
Foundation

Chairman

R.O.C.

R.O.C.

Representative:

Chen, Charles C.Y.

R.O.C.

-

Date
ElectedTerm(Years)SharesMale 07/06/2016 06/27/2018-

APR 25, 2020

Shareholding when
Elected07/07/1988 06/27/2018

Male 07/01/2000 06/27/2018

3

3

3

3

%

Spouse &Current Shareholding
Minor
Shareholding
Shares%Shares %

1,867,341,935 34.13% 1,867,341,935 34.45%

48,5170.00%

48,517 0.00%

1,867,341,935 34.13% 1,867,341,935 34.45%

190,166 0.00%--

Shareholding
by Nominee
Arrangement
Shares%--

190,166 0.00% 155,849 0.00%

Other Position--

Director
Representative:

Ting, Kwang-Hung

Male 01/28/2008 06/27/2018

3

0 0.00%0 0.00%0 0.00%

-

-

-

-

None

Note 1

-

-

None

None

None

None

Corporate Governance Report

17-

Director, Wan Hai
Lines Ltd.
Chairman, UTACGroup, Singapore
Chairman, Epistar
Corp.
Director, Formosa
International Hotels
Ltd.
Director, Ascendas
Ltd.
0 0.00% Pte.
Director, Ichia
Technologies, Inc.
Adjunct Associate
Professor, National
Tsing Hua University
MBA, New York
University, U.S.A.

0 0.00%Remark-Chairman, Central
Trading &Development Corp.
BA in Finance,
Boston University,
U.S.A.

R.O.C.

-

Chairman, Taiwan Air President, China None None
Cargo Terminal Ltd. Airlines Ltd.
Senior Vice President Chairman,of Marketing, China Mandarin
Airlines Ltd.
Airlines, Ltd.
Director, Taiwan
Chairman, CAL
Region and General Park Co., Ltd.
Manager of Taipei
Chairman, CAL
Branch Office, China Hotel Co., Ltd..
Airlines Ltd.
Chairman,
General Manager,
CAL-Asia
Australia Branch
Investment Inc.
Office, China Airlines Chairman,Ltd.
CAL-Dynasty
International, Inc.
General Manager,
0 0.00% Indonesia Branch
Director, Dynasty
Office, China Airlines Properties Co.,
Ltd.
Ltd.
Director,
General Manager,
TaoyuanKaohsiung Branch
Office, China Airlines International
Airport Services
Ltd.
Co., Ltd.
Vice President,
Passenger Sales Div.
Chairman, Abacus
Distribution Systems
Taiwan Ltd.
Bachelor’s Degree,
Department of
Economics, Soochow
University

0 0.00%--Experience(Education)

Executives, Directors
or Supervisors who are
Spouses or within Two
Degrees of Kinship
Title Name Relation

-

-

-

Chairman, Eyon None None
Holding Group
Vice Chairman,
Taiwan Air Cargo
Terminal Ltd.
Vice Chairman,
Taian InsuranceCo., Ltd.
Chairman, Wan
Hai International
Pte. Ltd.
President,
Chen-YungFoundation
Vice Chairman,
Wan Hai Lines(Singapore) Pte.
Ltd.
Director, Epistar
Corp.
Director, Shihlin
Paper Co., Ltd.
Member, Risk
None None
Committee,
China Airlines
Ltd.
Group Chairman,
Phu My Hung
Holdings Group
Chairman, Phu
Yung An Corp.
Chairman, Hiep
Phuoc Power Co.,
Ltd.
Chairman, Macro
Technologies Inc.
(Vietnam) Ltd.
Chairman, Phu
My Hung Asia
Holdings Corp.
Vice Chairman,
TVBS Media Inc.
Director, Phu My
Hung
Development
Corp.

TitleName

Nationality/
Country of Gender
OriginRepresentative:

Chen, Han-Ming

R.O.C.

Ko, Sun-Ta

Representative:

R.O.C.

Date FirstElected

Date
ElectedTerm(Years)Shareholding when
ElectedSharesMale 07/26/2016 06/27/2018

Male 06/27/2018 06/27/2018

3%

0 0.00%3

0 0.00%Current Shareholding
Shares%Spouse &Minor
Shareholding
Shares %0 0.00%0 0.00%Shareholding
by Nominee
Arrangement
Shares%Experience(Education)

Wei, Yung-Yeh

Representative:

National
Development
Fund, Executive
Yuan

R.O.C.

Lin, Su-Ming

Representative:

R.O.C.

Male 06/27/2018 06/27/2018-

06/15/2012 06/27/2018

Male 06/15/2012 06/27/2018

3

3

3,737 0.00%

519,750,519

3

9.50%

0 0.00%3,737 0.00%

519,750,519 9.59%

0 0.00%0 0.00%PT Lecturer, National Chairman, K
None None
Open University
Hotels GroupPT Lecturer, National Chairman, The
Open College
Tango Group
Chairman, Kodak
0 0.00% President, Keelung
Fund for Children & Trading Co., Ltd.
Families
Chairman, Kota
MBA, KeioEnterprise Co.,
University, Japan
Ltd.

0 0.00%0 0.00%--0 0.00%

Director
Representative:

Wang, Shih-Szu

R.O.C

Female 06/27/2018 06/27/2018

3

18 Corporate Governance Report

0 0.00%0 0.00%Executives, Directors
or Supervisors who are
Spouses or within Two
Degrees of Kinship
Title Name Relation
None None
None

Director, Yuan-Chin Chairman,
Development Co.,
Tigerair Taiwan
Ltd.
Co., Ltd.
Member, Rotary Club Chairman, Primeof Taipei Tunhua
Development
Co., Ltd.
0 0.00% BA (Hons)
Architecture,
Director,
University of
Chyn-Tay Bearing
Plymouth, UK
Co., Ltd.
MSc, Birmingham
City University, UK

Jet Airplane
Maintenance Group,
Air Force Technical
SchoolR.O.C.

Other Position

0 0.00%0 0.00%---Member ofNone None
Council, China
Airlines
Employees Union
Foreman, Line
Maintenance
Department,
Engineering &Maintenance
Division, China
Airlines Ltd.

-

-

-

Remark

None

None

None

None

None

-

-

Member, Tax Reform Member, Risk
Commission,Committee,
Executive Yuan
China Airlines
Member,Ltd.
Administration
Public Director,
Appeals Commission, Taipei Exchange,
Taipei City
R.O.C.
Government
Independent
Deputy Dean, College Director, Nanof Management,
Shan Life
Insurance Co.,
National Taiwan
0 0.00% University
Ltd.
Chairman,
Director, iPASS
Department andCorp.
Graduate Institute of Professor,
Accounting, National Department &Taiwan University
Graduate
Ph.D. in Accounting, Institute of
Arizona State
Accounting,
University, U.S.A.
National Taiwan
University

None None

None

None

Director General,
Deputy Mayor,
Tourism Bureau of
Tainan City
Tainan City
Government
Government
Chairperson,
Research,
Development and
Evaluation
Commission of
Tainan City
Government
Director General,
KetagalanFoundation
Director General,
0 0.00%Information
Department ofKaohsiung City
Government
Director General,
Judicial Reform
Foundation
Director General,
Taiwan Associationfor Human Rights
Master’s Degree,International
Development Policy,
Duke University,
U.S.A.

None None

None

None

TitleName

Nationality/
Country of Gender
OriginChung, Lo-Min

Independent Director

R.O.C.

Chang, Hsieh
Gen-SenIndependent Director

R.O.C.

Shen, Hui-Ya

Independent Director

R.O.C.

Date FirstElected

Date
ElectedMale 06/15/2012 06/27/2018

Female 06/27/2018 06/27/2018

Female 06/27/2018 06/27/2018

Term(Years)Shareholding when
ElectedShares33

3%

0 0.00%0 0.00%0 0.00%Current Shareholding
Shares

%0 0.00%0 0.00%0 0.00%Spouse &Minor
Shareholding
Shares %0 0.00%0 0.00%0 0.00%Shareholding
by Nominee
Arrangement
Shares%Experience(Education)

Chairman, China
Steel Chemical Corp.
Chairman, Universal
exchange Inc.
Executive Vice
President, China
0 0.00% Steel Corp.
Vice President of
Finance, China Steel
Corp.
MBA, Arizona State
University, U.S.A.
Consultant,Legislative Council
OfficeDirector, Shian CPA
Firm
Adjunct Associate
Professor, Chinese
Culture University
Controller, Amagic
Holographics, Inc.
Senior Associated0 0.00% CPA, Wu, Liang, and
Huang CPAs
Staff Accountant,
AAA (Auto Club of S.
California)
MBA, University ofCalifornia, Irvine,
U.S.A.

Other Position
Chairman, Risk
Committee,
China Airlines
Ltd.
Member, Audit
Committee,
China Airlines
Ltd.

Executives, Directors
or Supervisors who are
Spouses or within Two
Degrees of Kinship
Title Name Relation
None None
None

Chairman, Audit None None
Committee,
China Airlines
Ltd.
Member,Remuneration
Committee,
China Airlines
Ltd.
Member, Risk
Committee,
China Airlines
Ltd.
Member,Foundation
Management
Committee,
Environmental
Protection
Administration
Independent
Director, K Laser
Technology Inc.
Independent
Chairman,None None
Director of First
Remuneration
Financial Holding Co., Committee,
Ltd.
China Airlines
Independent
Ltd.
Director of Taiwan
Member, Audit
Fertilizer Co., Ltd.
Committee,
Committee ofChina Airlines
Securities andLtd.
Member, Risk
Futures Investors
Committee,
Protection Center
China Airlines
Master of Laws,
National Chung Hsing Ltd.
Consultant of
University
Public Service
Pension FundManagement
0 0.00%Board, Ministryof Civil Service,
Examination
Yuan
Lawyer, Lian
Yung Law Office
Independent
Director,
Formosa
Advanced
Technologies Co.,Ltd.
Independent
Director, Hua
Nan Securities
Co., Ltd.

Remark

None

None

None

None

None

Note 1: In recent years, the industry competition in the aviation industry is fierce. In order to increase the operating efficiency and streamline the decision-making and implementation, Chairman Hsieh, Su-Chien is
temporarily appointed as the President of the Company. However, the manager remains responsible for the implementation of all important proposals after the approval of the Board of Directors. In order toprevent the concurrent appointment from influencing the objectivity and supervision of the Board of Directors, except for Chairman Hsieh, Su-Chien and Director Wei, Yung-Yeh, who are concurrently Directors
and employees, none of the other members of the 21st Board of Directors are concurrently employees of the Company.
Note 2: The average term of the members of the 21st Board of Directors as Directors of the Company was 6 years.
Note 3: The three Independent Directors of the 21st Board of Directors have not been appointed for more than 3 terms.

Corporate Governance Report19Major shareholders among institutional shareholders
Name of Institutional Shareholders

Major Shareholders

China Aviation Development Foundation

A non-corporate organization. In February 1988, all 27 shareholders of
the Company (Note) donated the shares held and 100% of theshareholders’ equity to set up the foundation, which was reported to the
Ministry of Transportation and Communications on March 2 of the same
year. Its establishment was approved on July 6 of the same year.

National Development Fund, Executive Yuan

Government

Note: The source is “Charter for Donations to the China Aviation Development Foundation”.

Professional qualifications and independence analysis of directors

Name

Meets One of the Following Professional Qualification
Requirements, Together with at Least Five Years Work
Experience
Criteria
A Judge, Public
Prosecutor,
An Instructor or
Attorney, Certified
Higher Position in a
Public Accountant, Has Work
Department ofor Other
Experience in
Commerce, Law,
Professional or
the Areas ofFinance, Accounting,Technical Specialist Commerce,or Other Academic
Who has Passed a Law, Finance,
Department Related
Nationalor Accounting,to the BusinessExamination andor Otherwise
Needs of the
been Awarded a
Necessary for
Company in a PublicCertificate in a
the Business ofor Private Junior
Profession
the Company
College, College or
Necessary for the
University
Business of theCompany

Independence Criteria (Note)

1

2

3

4

5

6

7

8

9

Number of
Other PublicCompanies inWhich theIndividual is
Concurrently
10 11 12Serving as an
Independent
Director

Hsieh, Su-Chien

-

-





-





-





-







-

-

Chen, Charles C.Y.



-





-



















-

-

Ting, Kwang-Hung

-

-





-



















-

-

Chen, Han-Ming

-

-





-











-







-

-

Ko, Sun-Ta

-

-





-



















-

-

Wei, Yung-Yeh

-





-

-



















-

-

Lin, Su-Ming









-



















-

1

Wang, Shih-Szu

-

-





-



















-

-

Chung, Lo-Min

-

-



























-

Chang, Hsieh Gen-Sen

-





























1

Shen, Hui-Ya           
2
Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during
their term in office.
1. Not an employee of the Company or any of its affiliates.
2. Not a director or supervisor of the Company or its affiliated enterprise (except for independent directors appointed in accordancewith the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent
company, its subsidiary, or a subsidiary of the same parent).
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by
the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company
or ranking in the top 10 in holdings.
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the
managers listed in (1) or the personnel listed in (2) or (3).
5. Not a director, supervisor, or employee of a corporate shareholder who directly holds more than 5% of the total shares issued by
the Company, is within the top five shareholders, or appointed a representative to be a director or supervisor of the Company inaccordance with Article 27, Paragraph 1 or 2 of the Company Act (except for independent directors appointed in accordance with
the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent
company, its subsidiary, or a subsidiary of the same parent).
6. Not a director, supervisor, or employee of another company controlled by the same person who holds more than half of theCompany's director seats or voting shares (except for independent directors appointed in accordance with the Act or the laws andregulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary, or asubsidiary of the same parent).

20 Corporate Governance Report7. Not a director, supervisor or employee of another company or institution with the same person or spouse as the chairman,
general manager or equivalent of the company (except for independent directors appointed in accordance with the Act or the laws
and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary ora subsidiary of the same parent).
8. Not a director, supervisor, manager or shareholder holding more than 5% of shares of a specific company or institution that has
financial or business dealings with the Company (except for independent directors appointed in accordance with the Act or thelaws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its
subsidiary or a subsidiary of the same parent and if the specific company or institution holds more than 20% but less than 50% of
the total issued shares of the Company).
9. Not a professional who provides auditing related services to the Company or its affiliates and who does not provide commercial,legal, financial, or accounting related services to the Company or its affiliates with a cumulative amount of remuneration obtainedin the last two years exceeding NT$500,000; and is not an owner, partner, director, supervisor, or manager, or the spouse of any of
the above, of a sole proprietorship, partnership, company, or organization that provides such services to the Company or its
affiliates. However, this does not apply to the members of the Remuneration Committee, the Special Committee forMerger/consolidation and Acquisition who perform their functions and powers in accordance with the relevant laws andregulations of the Securities and Exchange Act or the Business Mergers and Acquisitions Act.
10. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
11. Not been a person of any conditions defined in Article 30 of the Company Act.
12. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.

Corporate Governance Report213.2.2 Management Team
Title

Chairman &President

Auditor General,
General Audit
OfficeDeputy Auditor
General, General
Audit OfficeName

Hsieh, Su-Chien

Fang, Juo-Ling

Ho, Hui-Fen

Nationality/
Country of Gender
OriginR.O.C.

R.O.C.

R.O.C.

Male

Date
Effective

06/24/2016

Female 05/11/2018

Female 02/01/2018

APR 25, 2020
Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares％

48,517 0.00%

8,000 0.00%

0 0.00%％Experience (Education)

Other Positions

％

Title

Name Relation

None

None

Remark

0 0.00%Senior Vice President ofChairman, Mandarin
Marketing, China Airlines Airlines, Ltd.
Ltd.
Chairman, CAL Park Co.,
General Manager,
Ltd.
Australia Branch Office,
Chairman, CAL Hotel Co.,
China Airlines Ltd.
Ltd..
Chairman, Taiwan Air
Chairman, CAL-Asia
Cargo
Terminal
Ltd.
Investment Inc.
0 0.00%Bachelor’s Degree,
Chairman, CAL-Dynasty
Department of Economics, International, Inc.
Soochow University
Director, Dynasty
Properties Co., Ltd.
Director, Taoyuan
International Airport
Services Co., Ltd.

None

Note 10 0.00%Supervisor, Taiwan Airport
Service Co., Ltd.
Supervisor, China PacificVice President,
Catering Services Ltd.
AssistantAdministration Div.
Vice
Supervisor, CAL Park Co.,Fang,
Deputy Auditor General,
President,
0 0.00%Ltd.
Siblings
General Audit Office
Supervisor, Taiwan Aircraft
Cabin Yuan-Hua
Master’s Degree, Georgia
Crew Div.
Maintenance And
State University, U.S.A.
Engineering Co., Ltd.
Supervisor, CAL Hotel Co.,
Ltd..

None

0 0.00%Assistant Vice President,
Finance Div.
Supervisor, Sabre Travel
General Manager, General
Network (Taiwan) Ltd.
0 0.00% Accounting Department,
Supervisor, Taiwan Air
Finance Div.
Cargo Terminal Ltd.
Master’s Degree, Soochow
University

Senior Vice
President(VF)

Chang, Young

R.O.C.

Male

06/24/2016

0 0.00%0 0.00%Senior Vice
President
(VV)

Wang,
Chen-Min

R.O.C.

Male

01/01/2019

35,621 0.00%

0 0.00%22 Corporate Governance Report

SharesManagers Who Are
Spouses or Within Two
Degrees of Kinship

Chairman, Kaohsiung
Airport Catering Services
Ltd.
Chairman, Taiwan Airport
Service Co., Ltd.
Chairman, Taiwan Airport
Service (Samoa) Co., Ltd.
Director, Taoyuan
International Airport
Chairman & President,
Services Co., Ltd.
Taiwan Airport Services
Director, Tigerair Taiwan
Co., Ltd.
Co., Ltd.
President, Taoyuan
Director, Mandarin Airlines,
0 0.00%International Airport
Ltd.
Services Co., Ltd.
Vice Chairman, Arport Air
Bachelor’s Degree, Fu Jen Terminal (Xiamen) Co., Ltd.
University
Vice Chairman, Arport Air
Cargo Service (Xiamen) Co.,Ltd.
Director, Taiwan Aircraft
Maintenance And
Engineering Co., Ltd.
Director & President, CAL
Park Co., Ltd.
Director, CAL-Asia
Investment Inc.
Director, CAL Hotel Co.,Ltd..
Director, Mandarin Airlines,
Ltd.
Vice President, Passenger Chairman, Taiwan Air Cargo
Sales Div. & Passenger
Terminal Ltd.
Marketing Div.
Director, Tigerair Taiwan
0 0.00% General Manager, Korea Co., Ltd.
BranchDirector, Taiwan Aircraft
Bachelor’s Degree, Feng Maintenance And
Chia University
Engineering Co., Ltd.
Director, CAL-Dynasty
International, Inc.
Director & President,
CAL-Asia Investment Inc.

None

None

None

None

None

None

None

None

None

None

None

None

TitleSenior Vice
President(VO)

Senior Vice
President(VE)

Data Protection
Officer, Data
Protection &Quality
Management
OfficeVice President,
Human
Resources Div.

Name

Kao,
Shing-Hwang

Wang, Houng

Wu, Hsiao-Sui

Yeah,
Shao-Ting

Nationality/
Country of Gender
OriginR.O.C.

R.O.C.

R.O.C.

R.O.C.

Male

Male

Male

Male

Date
Effective

05/01/2012

08/16/2017

07/21/2018

04/01/2019

Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares％62,809 0.00%

12,069 0.00%

0 0.00%868 0.00%％

None

0 0.00%Vice President,
Maintenance Div.
Vice President,
0 0.00%Engineering Div.
Bachelor’s Degree, Feng
Chia University

Chairman, Taiwan Aircraft
Maintenance And
Engineering Co., Ltd.
Director, Mandarin Airlines,
Ltd.
Director, Taoyuan
International Airport
Services Co., Ltd.
Vice Chairman, NORDAM
Asia Ltd.
Director, CAL Hotel Co.,
Ltd..

None

None

None

None

52 0.00%

General Manager, Korea
BranchGeneral Manager,
0 0.00%None
Honolulu Branch
Master’s Degree, Cranfield
University, UK

None

None

None

None

0 0.00%Assistant Vice President,
Human Resources Div.
General Manager, Human
Resources &0 0.00% Administration
None
Department, MaintenanceDiv.
Bachelor’s Degree,
Chinese Culture University

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

General Manager, Flight
Operations Training Dept.,
Flight Operations Div.
General Manager,
0 0.00% Planning & Development None
Dept., Flight
Operations Div.
Master’s Degree, National
Cheng Chi University

None

None

None

None

Assistant Vice President,
Corporate Safety OfficeVice President, Taiwan
0 0.00%
Airport Services Co., Ltd.
Master’s Degree, RMIT
University, AU

None

None

None

None

7,144 0.00%

Vice President,
Flight Operations
Div.

Lai, Ming-Hui

R.O.C.

Male

03/01/2016

19,127 0.00%

0 0.00%Assistant Vice
President, Flight
Operations Div.

Tung,
Hsing-Hua

R.O.C.

Male

03/16/2018

587 0.00%

0 0.00%Vice President,
SystemOperation
Control Div.

Chou,
Jyh-Shyan

R.O.C.

Male

12/01/2017

19,299 0.00%

9,171 0.00%

RemarkNone

58,430 0.00%

08/01/2018

Name Relation

None

Female 04/01/2019

Male

Title

None

R.O.C.

R.O.C.

Other Positions

Director, Mandarin Airlines,
Ltd.
Director, CAL Hotel Co.,Ltd..

0 0.00%

Lee, Pei-Chen

Chen,
Chwen-DerExperience (Education)％

Vice President, Flight
Operations Div.
Assistant Vice President,
0 0.00% Flight Operations Div.
Bachelor’s Degree,
National Cheng Kung
University

Assistant Vice
President,
Human
Resources Div.

Assistant Vice
President, Flight
Operations Div.

SharesManagers Who Are
Spouses or Within Two
Degrees of Kinship0 0.00%7,382 0.00%

General Manager, Human
Resources Development
Dept., Human ResourcesDiv.
0 0.00% General Manager,
None
Administration Dept.,
Ground Services Div.
Master’s Degree, National
Taiwan Normal University
Vice President, Corporate
Safety Office
Assistant Vice President,
0 0.00% Flight Operations Div.
None
Bachelor’s Degree,
National Cheng Kung
University
General Manager, Legal
Affairs Department, Legal& Insurance Div.
General Manager,
0 0.00% Business Management
None
Department, Business
Development Office
Master’s Degree, Tunghai
University

None

Corporate Governance Report23TitleAssistant Vice
President,
SystemOperation
Control Div.

Assistant Vice
President,
SystemOperation
Control Div.

Vice President,
Passenger
Sales &
Passenger
Marketing Div.

Assistant Vice
President,
Passenger
Sales &
Passenger
Marketing Div.

Vice President,
Finance Div.
(concurrently
finance andaccounting
manager)

Assistant Vice
President,
Finance Div.

Assistant Vice
President,
Finance Div.

Vice President,
Corporate Safety
OfficeName

He, Cheng

Huang,
Hsiang-Piao

Peng, Pao Chu

Chen, Pei-Ti

Chen, I-Chieh

Yen, Yang

Huang, Hui Na

Chen, I-Ko

Nationality/
Country of Gender
OriginR.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Date
Effective

Male 11/01/2019

Male

08/01/2017

Female 01/01/2019

Female 11/01/2018

Male

02/16/2017

Female 05/01/2018

Female 09/01/2017

Male

03/01/2016

24 Corporate Governance Report

Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares％251 0.00%

1,000 0.00%

8,434 0.00%

926 0.00%

6,161 0.00%

0 0.00%16,661 0.00%

23,541 0.00%

Experience (Education)

Other Positions

RemarkTitle

Name Relation

0 0.00%Control Manager ,Flight Control Dept.,
System Operation Control
Div.
0 0.00% General Manager, Bali
None
Branch, Indonesia Branch
Master’s Degree,
Assumption University,
Thailand

None

None

None

None

0 0.00%General Manager, Safety
Assurance Department,
Corporate Safety Office
General Manager,
Administration
0 0.00%Department, Ground
Services Div.
Bachelor’s Degree,
National Sun Yat-Sen
University

None

None

None

None

None

0 0.00%Vice President, Corporate
Development Office
Assistant Vice President,
0 0.00% Passenger Sales Div.
Bachelor’s Degree,
National Taiwan
University

Director, Sabre Travel
Network (Taiwan) Ltd.
Director, Everest
Investment Holdings Ltd.
Director, Yestrip Co., Ltd.
Director, Mandarin Airlines,
Ltd.

None

None

None

None

0 0.00%Assistant Vice President,
Passenger Sales &Marketing Div.
General Manager, Sales
0 0.00%
None
Management Department
Bachelor’s Degree,
National Taiwan
University

None

None

None

None

0 0.00%Vice President,
Investment Development& Management Div.
General Manager,
0 0.00% Vietnam Branch
Concurrently, General
Manager, Hanoi Branch
Master’s Degree, National
Taipei University

Supervisor, Dynasty
Aerotech International
Corp.
Supervisor, CAL Hotel Co.,
Ltd..
Supervisor, Mandarin
Airlines, Ltd.
Supervisor, China Pacific
Laundry Services Ltd.
Director, Tigerair Taiwan
Co., Ltd.

None

None

None

None

0 0.00%General Manager, Finance& Treasury Department,
Supervisor, Taiwan Aircraft
Finance Div.
Maintenance And
General Manager,
Engineering Co., Ltd.
0 0.00% Economics Analysis
Supervisor, Kaohsiung
Department, Finance Div.
Airport Catering Services
Master’s Degree, The City
Ltd.
University of New York,U.S.A.

None

None

None

None

0 0.00%General Manager,
Passenger Sales Revenue
Audit & Control
Department, Finance Div.
General Manager,
Supervisor, Global Sky
0 0.00% Accounting And
Express Ltd.
Administration
Supervisor, Yestrip Co., Ltd.
Department, Taipei
BranchMaster’s Degree, Soochow
University

None

None

None

None

0 0.00%Assistant Vice President,
Corporate Safety OfficeVice President, Safety
0 0.00% Office, Mandarin Airlines, NoneLtd.
Associate’s Degree, United
College of Engineering

None

None

None

None

％

SharesManagers Who Are
Spouses or Within Two
Degrees of Kinship％TitleAssistant Vice
President,
Corporate Safety
OfficeVice President,
Legal & Insurance
Div.

Vice President,
Corporate
Communications
OfficeName

Yu, Yueh Han

Chien,
Feng-Nien

Liu, Tsao-Yang

Assistant Vice
President,
Corporate
Lin, Herng-Shan
Communications
OfficeVice President,
Administration
Div.

Vice President,
Information
Management Div.
(concurrently
research anddevelopment
manager)

Chen, Wei-Tau

Chung,
Ming-Jyh

Assistant Vice
President,
Liu, Duan-Shiuh
Information
Management Div.

Vice President,
Cabin Crew Div.

Hong,
Tsu-Kuang

Nationality/
Country of Gender
OriginR.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Male

Male

Male

Male

Male

Male

Male

Male

Date
Effective

12/06/2018

01/03/2017

11/05/2018

04/16/2019

11/18/2019

11/18/2019

04/20/2017

05/04/2017

Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares

％0 0.00%0 0.00%60,488 0.00%

0 0.00%36,165 0.00%

638 0.00%

92,608 0.00%

11,816 0.00%

Experience (Education)

Other Positions

RemarkTitle

Name Relation

0 0.00%General Manager, Safety
Department Corporate
Safety OfficeVice President of Safety,
0 0.00% Security, Quality &None
Environment, Tigerair
Taiwan Co., Ltd.
Master’s Degree, National
Sun Yat-sen University

None

None

None

None

0 0.00%

Director of Legal Office,Taiwan Financial Asset
Service Corporation
Head Prosecutor,
0 0.00%None
Taichung Prosecutors
OfficeMaster’s Degree, National
Taiwan Ocean University

None

None

None

None

0 0.00%Vice President, Ground
Services Div.
Chief Representative,
South China, Concurrently
0 0.00%
None
General Manager,
Guangzhou Office
Bachelor’s Degree,
Chinese Culture University

None

None

None

None

0 0.00%General Manager,
Corporate Affairs
Department, Corporate
Communications Office
General Manager,
0 0.00%
Employee Relations
Department, Human
Resources Div.
Master’s Degree, RMIT
University, AU

None

None

None

None

Vice President, Ground
Services Division
Director, Dynasty Aerotech
President, Taiwan Airport
0 0.00%International Corp.
Services Co. Ltd.
Director, CAL Park Co., Ltd.
Bachelor’s Degree, Fu Jen
Catholic University

None

None

None

None

0 0.00%Vice President,
Administration Div.
Deputy Auditor General, Director, Sabre Travel
0 0.00%General Audit Office
Network (Taiwan) Ltd.
Master’s Degree, National
Taiwan University

None

None

None

None

0 0.00%Assistant Vice President,
Ground Services Div.
General Manager,
Information Planning
0 0.00% Department, Information None
Management Div.
Master’s Degree, National
Taipei University ofTechnology

None

None

None

None

0 0.00%Assistant Vice President,
Flight Operations Div.
General Manager, Food &Beverage Services
0 0.00%Department, In-Flight
Service Supply Div.
Bachelor’s Degree,
Soochow University

None

None

None

None

％

2,196 0.00%

SharesManagers Who Are
Spouses or Within Two
Degrees of Kinship

％

None

Director, China Pacific
Laundry Services Ltd.
Director, China Pacific
Catering Services Ltd
Director, CAL Hotel Co.,Ltd..

Corporate Governance Report25TitleAssistant Vice
President, Cabin
Crew Div.

Name

Fang, Yuan-Hua

Nationality/
Country of Gender
OriginR.O.C.

Male

Date
Effective

08/04/2018

Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares％30,348 0.00%％

0 0.00%SharesPresident, Dynasty Hotelof Hawaii, Inc.
General Manager,
0 0.00%
Qingdao Office
Master’s Degree, RMIT
University, AU

Vice President,
Corporate
Development
OfficeChang,
Cheng-Hao

R.O.C.

Male

01/21/2019

11,803 0.00%

0 0.00%0Assistant Vice
President,
Corporate
Development
OfficeWang, Wei

R.O.C.

Female 02/02/2017

54,297 0.00%

0 0.00%0Assistant Vice
President,
Corporate
Development
OfficeLiu, Shou-Shu

R.O.C.

Female 12/01/2018

0 0.00%0 0.00%0Vice President,
In-Flight Service
Supply Chain &Marketing Div.

Chung,
Wan-Chun

R.O.C.

Female 11/23/2019

27,687 0.00%

0 0.00%0

Other Positions

None

Director, Tigerair Taiwan
Co., Ltd.
Director, Taiwan Airport
Service Co., Ltd.
Vice President, Cargo
Director, Global Sky
Sales & Marketing Div.
Express Ltd.
President, Taiwan Air
Director, Dynasty Hotel of
0.00%
Cargo Terminal Ltd.
Hawaii, Inc.
Master’s Degree, Cranfield Director, Dynasty
University, UK
Properties Co., Ltd.
Director, China Aircraft
Services Ltd.
Director, Taiwan Air Cargo
Terminal Ltd.
General Manager, Austria
BranchSupervisor, NORDAM Asia
Assistant Vice President,
Ltd.
0.00% Finance Div.
Director, Kaohsiung Airport
Master’s Degree, George
Catering Services Ltd.
Washington University,
U.S.A.
Special Assistant of
President Office,Mandarin Airlines
None
0.00%
Bachelor’s Degree,
National Taiwan
University
General Manager, Hong
Chairman, China PacificKong Branch
Laundry Services Ltd.
Vice President, FinanceDirector, China Pacific0.00% Div.
Catering Services Ltd.
Master's Degree,
Director, Kaohsiung Airport
University of Illinois At
Catering Services Ltd.
Urbana-Champaign, U.S.A.

RemarkTitle

Name Relation

Auditor
General,General
Audit
OfficeFang,
Juo-Ling

Siblings

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

President, China Pacific

Assistant Vice

Catering Services Ltd.

President,
In-Flight Service

Experience (Education)％

Managers Who Are
Spouses or Within Two
Degrees of KinshipAn, Long Chi

R.O.C.

Male 04/01/2020

77,308 0.00%

0 0.00%0 0.00%

Supply Chain &General Manager, Xiamen
OfficeNone

Bachelor’s Degree,Marketing Div.

Vice President,
Ground Services
Div.

Chu, Te-Hsiu

R.O.C.

Male 11/18/2019

43,382 0.00%

8,277 0.00%

0Assistant Vice
President,
Ground Services
Div.

Huang,
Chin-Feng

R.O.C.

Male 10/16/2019 139,659 0.00%

589 0.00%

0

Assistant Vice
President,
Ground ServicesDiv.

Hsu, Hsueh
Wen

R.O.C.

Male 02/01/2020

13,149 0.00%

0 0.00%0Vice President,
Cargo Sales,
Marketing &Services Div.

Liu, Der-Chuan

R.O.C.

Male

172 0.00%

0 0.00%007/17/2010

26 Corporate Governance Report

Chinese Culture University
Chief Representative, East
China, and Concurrently
Director, China Pacific
General Manager,
Laundry Services Ltd.
Shanghai Office
0.00%
Director, Taoyuan
Assistant Vice President,International Airport
Flight Operations Div.
Services Co., Ltd.
Bachelor’s Degree,
Chinese Culture University
President, Taoyuan
International Airport
Services Company Ltd.
0.00% Senior Auditor, General
None
Audit Office
Bachelor’s Degree,
Soochow University
Station Manager,
Customer Service,
Taoyuan International
Airport, Ground Services
Div.
Station Manager,
0.00%
None
Customer Service,
Songshan International
Airport, Ground Services
Div.
Bachelor’s Degree, Fengjia
University
Director, Taiwan Air Cargo
Terminal Ltd.
Vice President, Cargo
Director, Dynasty Aerotech
Sales & Marketing Div.
International Corp.
Vice President, Cargo
0.00%
Director, Global Sky
Services & Logistics Div.
Express Ltd.
Bachelor’s Degree, Fu Jen
Director, Eastern United
University
International Logistics(Holdings) Ltd.

TitleName

Nationality/
Country of Gender
OriginDate
Effective

Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares％％Assistant Vice
President, Cargo
Sales, Marketing& Services Div.

Sheu, Yuh-Shy

R.O.C.

Male

01/22/2019

24,648 0.00%

Assistant Vice
President, Cargo
Sales, Marketing& Services Div.

Shann, Da-Sin

R.O.C.

Male

01/01/2018

29,818 0.00% 17,982 0.00%

Assistant Vice
President, Cargo
Sales, Marketing& Services Div.

Mao, Li-Chung

R.O.C.

Male 12/20/2019

Vice President,
Maintenance Div.

Sun, Jia-Min

R.O.C.

Male

Assistant Vice
President,
Maintenance Div.

Hsiao, Jui-Fu

R.O.C.

Vice President
Quality,
Assurance Div.

Li, Chih-Wei

Vice President,
Engineering Div.

Vice President,
TaiwanVice President,
EuropeVice President,
Mainland China

0 0.00%SharesExperience (Education)

Other Positions％

General Manager, Cargo
Sales & Services, Mainland
China
General Manager, Cargo0 0.00% Sales Management
None
Department, Cargo Sales,
Marketing & Services Div.
Bachelor’s Degree, Feng
Chia University
General Manager, Cargo
Sales Management
Department, Cargo Sales,
Marketing & Services Div.
Director, Global Sky
General Manager, Cargo
Express Ltd.
0 0.00% Revenue & Route
Director, Chung-Hwa
Management
Express Co., Ltd.
Department, Cargo Sales,

Marketing & Services Div.
Master’s Degree, National
Taipei University
Chief Representative,
South China Concurrently,
General Manager,
Guangzhou Office
0.00%
None
General Manager,
Nanking Office
Master’s Degree, Chung
Yuan Christian University
Chairmanr, Dynasty
Vice President,
Aerotech International
Engineering Div.
Corp.
Vice President, Corporate Director, Taiwan Aircraft
0.00%
Safety Office
Maintenance And
Master’s Degree, National Engineering Co., Ltd.
Taiwan University
Director, China Aircraft
Services Ltd.
General Manager, Line
Maintenance Department,
Maintenance Div.
General Manager, Line
0.00%
None
Operation Department,
Maintenance Div.
Master’s Degree, Kainan
University
Assistant Vice President,
Maintenance Div.
General Manager, Line
Director, NORDAM Asia
0.00% Operation Department,
Ltd.
Maintenance Div.
Master’s Degree, Kainan
University
Director, Taiwan Aircraft
Maintenance And
Vice President Quality,
Engineering Co., Ltd.
Assurance Div.
Director, Taikoo (Xiamen)
Assistant Vice President,
0.00%
Landing Gear Services Co.,
Maintenance Div.
Ltd.
Master’s Degree, Tatung
Director, Haeco Composite
University
Structures (Jinjiang) Co.,
Ltd.
Assistant Vice President,
Passenger Sales &Marketing Div.
Director, Sabre Travel
General Manager, Osaka
0.00%
Network (Taiwan) Ltd.
BranchDirector, Yestrip Co., Ltd.
Bachelor’s Degree,
National Chung Hsing
University

Managers Who Are
Spouses or Within Two
Degrees of Kinship

RemarkTitle

Name Relation

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

0 0.00%0 0.00%0

09/16/2017

62,602 0.00%

0 0.00%0Male

09/16/2017

0 0.00%0 0.00%0

R.O.C.

Male

09/16/2017

10,295 0.00%

0 0.00%0Lee, Jung-Hui

R.O.C.

Male

09/16/2017

10,298 0.00%

0 0.00%0Chiu, Wei-Tuan

R.O.C.

Male 03/19/2020

4,901 0.00%

0 0.00%0

0 0.00%Senior Vice President
President, Mandarin
Airlines Co., Ltd.
0 0.00% Master’s Degree, Business Noneof Administration,
University of Pittsburgh,
U.S.A.

None

None

None

None

0 0.00%Senior Vice President,
President OfficeVice President, Passenger
0 0.00%
None
Sales Div.
Bachelor’s Degree,
Tunghai University

None

None

None

None

Han, Liang
Chung

Chang,
Chih-Chieh

R.O.C.

R.O.C.

Male

Male

06/12/2017

10/08/2018

11,498 0.00%

96,553 0.00%

Corporate Governance Report27TitleVice President,
Oceania

Name

Chen,
Chung-Ming

Nationality/
Country of Gender
OriginR.O.C.

Male

Date
Effective

05/10/2017

Shareholding

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement

SharesShares％32,779 0.00%％

0 0.00%SharesExperience (Education)％

General Manager,
Fukuoka Branch
Assistant Vice President,
Passenger Sales Div.
0 0.00% Bachelor’s Degree,
None
Department ofTransportation & Logistics
Management of National
Chiao Tung University

Other Positions

Managers Who Are
Spouses or Within Two
Degrees of Kinship
Title

Name Relation

None

None

None

RemarkNone

Note1: In recent years, competition in the aviation industry has been fierce. In order to increase our operating efficiency and streamline our decision-making and implementation, Chairman Hsieh,
Su-Chien has been temporarily appointed as the President of the Company. However, the manager remains responsible for the implementation of all important proposals after approval by
the Board of Directors. In order to prevent concurrent appointment from influencing the objectivity and supervision of the Board of Directors, except for Chairman Hsieh, Su-Chien and
Director Wei, Yung-Yeh, who are concurrently directors and employees, none of the other members of the 21st Board of Directors are concurrently employees of the company.
Note2: Company presidents, senior vice presidents, vice presidents, data protection officer, assistant vice presidents, and department and branch general managers have not worked for theCompany's currently designated accounting firm or affiliated enterprises within the specified period and do not hold Company stock under the name of a different person.

28 Corporate Governance Report3.2.3 Remuneration of Directors, President, and Vice President
Remuneration of Directors

Remuneration

Title

Name
(Note 1)

Base Compensation (A)(Note 2)
Consolidated
Subsidiaries of
CAL(Note 7)CAL

Bonus to Directors (C)(Note 3)Severance Pay (B)Consolidated
Subsidiaries of
CAL
CAL(Note 7)

Consolidated
Subsidiaries of
CAL(Note 7)

CAL

Ratio of Total
Remuneration(A+B+C+D) to Net Loss(%) (Note 10)

Allowances (D)(Note 4)

CAL

Consolidated
Subsidiaries
of CAL(Note 7)

CAL

Consolidated
Subsidiaries
of CAL(Note 7)Chairman

Hsieh, Su-Chien

4,574

4,574

0

0

0

0

468

1,556 -0.42%-0.51%

ChairmanHo, Nuan-Hsuan

1,676

1,676 2,866

2,866

0

0

241

608 -0.40%-0.43%

Director

Chen, Charles C.Y.

40

40

0

0

0

0

530

770 -0.05%-0.07%

Director

Ting, Kwang-Hung

40

40

0

0

0

0

540

540 -0.05%-0.05%

Director

Chen, Han-Ming

40

40

0

0

0

0

530

530 -0.05%-0.05%

Director

Ko, Sun-Ta

40

40

0

0

0

0

530

530 -0.05%-0.05%

DirectorWei, Yung-Yeh

40

40

0

0

0

0

530

530 -0.05%-0.05%

Director

Lin, Su-Ming

40

40

0

0

0

0

545

545 -0.05%-0.05%

Director

Wang, Shih-Szu

0

0

0

0

0

0

102

102 -0.01%-0.01%

Independent
Director

Chung, Lo-Min

60

60

0

0

0

0

880

880 -0.08%-0.08%

Independent
Director

Chang, Hsieh
Gen-Sen

60

60

0

0

0

0

900

900 -0.08%-0.08%

Independent
Director

Shen, Hui-Ya

60

60

0

0

0

0

900

900 -0.08%-0.08%

1.State the policy, system, standard and structure of independent directors’ remuneration, and the relationship between the remuneration amount andfactors such as responsibilities, risks, and contributed time: The remuneration of the independent directors of the Company shall be handled inaccordance with the Articles of Association and shall be determined by the Board of Directors with reference to the standards of relevant industries andlisted companies, and shall be paid as fixed remuneration, transportation fees, and attendance fees.
Note 1: Aside from independent directors, all other directors are representatives of the Company’s juridical person shareholders China Aviation Development
Foundation, National Development Fund (Executive Yuan). Mr. Ho, Nuan-Hsuan was dismissed as Chairman on April 2, 2019; Mr. Hsieh, Su-Chien has
been elected as Chairman on April 2, 2019.
Note 2: Refers to director remuneration over the past year (includes director salary, additional compensation, severance pay, various bonuses, incentive pay).
Note 3: As stipulated in the Company’s Articles of Incorporation, directors are not awarded bonuses.
Note 4: Refers to relevant business expenses incurred by directors (including travel expenses, special disbursements, various allowances, living quarters,company car). If provided with housing, a car or other transportation, or exclusive personal expenses, the type and cost, rent (actual or fair market
calculation), fuel cost, and other costs of the assets provided must be disclosed. The above figures do not include remuneration paid to drivers, which
totaled NT$970,000.
Note 5: Refers to salary, bonuses, and allowances received by directors who are also employed by the Company (including as president, vice president, othermanagement, or regular employee) over the past year and includes salary, additional compensation, severance pay, various bonuses, incentive pay,travel expenses, special disbursements, various allowances, living quarters, and company car. If provided with housing, a car or other transportation,
or exclusive personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be
disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$196,000. As stipulated in IFRS 2 Share Based Payments
including obtaining employee stock options and employee restricted stock awards and participation in a cash capital increase shall be calculated asremuneration.
* The content is provided for information disclosure, not tax purposes.

Corporate Governance Report29Unit: NT$ thousands
Relevant Remuneration Received by Directors Who are Also Employees
Salary, Bonuses, and Allowances(E)(Note 5)

Severance Pay (F)Consolidated
Subsidiaries

CAL

of CAL

Ratio of Total Compensation

Compensation Paid to

Employees’ Compensation (G)(A+B+C+D+E+F+G) to Net Loss (%)

Directors from an(Note 6)(Note 10)

Consolidated

Consolidated
CAL

Subsidiaries

CAL

Subsidiaries of CAL(Note 7)of CAL(Note 7)(Note 7)

Dec 31,2019

Cash

Stock

Cash

CAL

Stock

Invested Company or

Consolidated

Parent Company Other

Subsidiaries ofthan the Company’s

CAL

Subsidiary(Note 7)(Note 11)

1,579

1,942

0

0

0

0

0

0

-0.55%-0.67%

None

0

0

0

0

0

0

0

0

-0.40%-0.43%

None

0

0

0

0

0

0

0

0

-0.05%-0.07%

None

0

0

0

0

0

0

0

0

-0.05%-0.05%

None

0

0

0

0

0

0

0

0

-0.05%-0.05%

None

0

0

0

0

0

0

0

0

-0.05%-0.05%

None

1,589

1,589

0

0

0

0

0

0

-0.18%-0.18%

None

0

0

0

0

0

0

0

0

-0.05%-0.05%

None

0

0

0

0

0

0

0

0

-0.01%-0.01%

None

0

0

0

0

0

0

0

0

-0.08%-0.08%

None

0

0

0

0

0

0

0

0

-0.08%-0.08%

None

0

0

0

0

0

0

0

0

-0.08%-0.08%

None

2.Except as disclosed in the above table, the remuneration received by the Directors of the Company for the services provided for all companies in thefinancial report (such as serving as a consultant who is not an employee) in the most recent year: None

Note 6: Refers to employee compensation (including stock or cash) received by directors who are also employed by the Company (including as president, vicepresident, other management, or regular employee) over the past year, and the amount of employee compensation approved for distribution by the
Board for the most recent year must be disclosed. The Company has no distributable earnings in 2019, so it does not plan to distribute employeecompensation.
Note 7: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement.
Note 8: The remuneration distributed to each member of the Company’s Board is disclosed as a range and the names of directors are disclosed by range ofcompensation received.
Note 9: The total remuneration provided by the Company and subsidiaries to directors is disclosed per the consolidated financial statement and names of
directors are disclosed by range of compensation received.
Note 10: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax) reported
on the individual financial statement for the most recent year. The Company’s 2019 individual financial statement net loss (after tax) totaled
NT$1,199,798,000.
Note 11: (1) The directors of the Company do not receive any remuneration related to the reinvestment of enterprises other than subsidiaries.
(2) Compensation refers to pay, bonuses (including bonuses to employees, directors, or supervisors), or expenses paid in the execution of business toCompany directors who serve as director, supervisor, or manager of an invested company other than a Company subsidiary.
(3) Compensation paid to directors from an invested company other than a Company subsidiary is included in Column I (Consolidated Subsidiaries of CAL)of the Director Remuneration by Compensation Level Table.
Note 12: (1) Aside from Chairman Ho, Nuan-Hsuan, and Chairman Hsieh, Su-Chien, all other directors received a travel allowance.
(2) Transportation subsidies for Director Ting, Kwang-Hung, and Director Wei, Yung-Yeh were partially donated to the China Airlines Employee Union.
(3) Directors who also serve as employees of the Company are Chairman Hsieh, Su-Chien and Director Wei, Yung-Yeh.

30 Corporate Governance ReportDirector Remuneration by Compensation Level
Total of (A+B+C+D)
Range of Remuneration

CAL(Note 8)

Total of (A+B+C+D+E+F+G)

Consolidated Subsidiaries of
CAL (H)(Note 9)CAL
(Note 8)

Consolidated Subsidiaries of
CAL (I)(Note 9)Under NT$1,000,000

Chen, Charles C.Y.;
Ting, Kwang-Hung;
Chen, Han-Ming; Ko, Sun-Ta;
Wei, Yung-Yeh; Lin, Su-Ming;
Wang, Shih-Szu;
Chung, Lo-Min;
Chang, Hsieh Gen-Sen;
Shen, Hui-Ya

Chen, Charles C.Y.;
Chen, Charles C.Y.;
Chen, Charles C.Y.;
Ting, Kwang-Hung;
Ting, Kwang-Hung;
Ting, Kwang-Hung;
Chen, Han-Ming; Ko, Sun-Ta;
Chen, Han-Ming; Ko, Sun-Ta; Chen, Han-Ming; Ko, Sun-Ta;
Wei, Yung-Yeh; Lin, Su-Ming;
Lin, Su-Ming; Wang, Shih-Szu; Lin, Su-Ming; Wang, Shih-Szu;
Wang, Shih-Szu;
Chung, Lo-Min;
Chung, Lo-Min;
Chung, Lo-Min;
Chang, Hsieh Gen-Sen;
Chang, Hsieh Gen-Sen;
Chang, Hsieh Gen-Sen;
Shen, Hui-Ya
Shen, Hui-Ya
Shen, Hui-Ya

NT$1,000,000 - NT$1,999,999

-

-

-

-

NT$2,000,000 - NT$3,499,999--

Wei, Yung-Yeh

Wei, Yung-Yeh

NT$3,500,000 - NT$4,999,999

Ho, Nuan-Hsuan-

Ho, Nuan-Hsuan-

NT$5,000,000 - NT$9,999,999

Hsieh, Su-Chien

Hsieh, Su-Chien;
Ho, Nuan-Hsuan

Hsieh, Su-Chien

Hsieh, Su-Chien;
Ho, Nuan-Hsuan

Total

12

12

12

12

Corporate Governance Report

31President and Senior Vice President Remuneration
Salary (A)(Note 2)Name
(Note 1)

Title

Consolidated
Subsidiaries of

CAL

CAL

(Note 3)

Consolidated

Consolidated

Subsidiaries of

CAL

Subsidiaries of

CAL

CAL

(Note 5)President

Bonuses and Allowances (C)Severance Pay (B)CAL(Note 5)(Note 5)

Hsieh, Su-Chien

1,403

1,403

0

0

176

539

Senior Vice President

Lo, Ya-Mei(Note 10)

1,779

1,779

0

0

540

990

Senior Vice President

Kao, Shing-Hwang

3,103

3,103

0

0

5,492

5,852

Senior Vice President

Wang, Chen-Min(Note 11)

3,157

3,157

0

0

765

1,516

Senior Vice President

Wang, Houng

3,314

3,314

0

0

841

1,358

Senior Vice President

Chang, Young

3,363

3,363

0

0

791

2,107

President and Senior Vice President Remuneration by Compensation Level
Range of Remuneration

Name of President and Senior Vice President
CAL (Note 6)
Consolidated Subsidiaries of CAL (E)(Note 7)

Under NT$1,000,000--

NT$1,000,000 - NT$1,999,999

Hsieh, Su-Chien

Hsieh, Su-Chien

NT$2,000,000 - NT$3,499,999

Lo, Ya-Mei

Lo, Ya-Mei

NT$3,500,000 - NT$4,999,999

Wang, Chen-Min; Wang, Houng; Chang, Young

Wang, Chen-Min; Wang, Houng

NT$5,000,000 - NT$9,999,999

Kao, Shing-Hwang

Kao, Shing-Hwang; Chang, Young

Total

6

6

Note 1: President Hsieh, Su-Chien concurrently serves as director. Their remuneration is listed above and also in the Remuneration of Directors table.
Note 2: Refers to president and senior vice president salaries, additional compensation, and severance pay over the past year.
Note 3: Refers to various bonuses, incentive pay, travel expenses, special disbursements, various allowances, living quarters, and company car
distributed to presidents and senior vice presidents over the past year. If provided with housing, a car or other transportation, or exclusive
personal expenses, the type and cost, rent (actual or fair market calculation), fuel cost, and other costs of the assets provided must be
disclosed. The above figures do not include remuneration paid to drivers, which totaled NT$4,165,000. As stipulated in IFRS 2, Share Based
Payments including obtaining employee stock options and employee restricted stock awards and participation in a cash capital increase shallbe calculated as remuneration.
Note 4: Refers to employee compensation (including stock or cash) approved for distribution by the Board to presidents and senior vice presidents
over the past year. Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net
income (after tax) reported on the individual financial statement for the most recent year. The Company has no distributable earnings in 2019,
so it does not plan to distribute employee compensation.
* The content is provided for information disclosure, not tax purposes.

32 Corporate Governance ReportUnit: NT$ thousands
Ratio of Total Compensation(A+B+C+D) to Net Loss (%)(Note 8)

Employees’ Compensation (D)(Note 4)
Consolidated
Subsidiaries of CAL(Note 5)
Cash
Stock

CAL
Cash

Stock

CAL

Consolidated
Subsidiaries of
CAL (Note 5)

December 31, 2019

Compensation paid to the Presidents and Senior Vice
Presidents from an Invested Company or Parent
Company Other Than the Company’s Subsidiary(Note 9)

0

0

0

0

-0.13%-0.16%

None

0

0

0

0

-0.19%-0.23%

None

0

0

0

0

-0.72%-0.75%

None

0

0

0

0

-0.33%-0.39%

None

0

0

0

0

-0.35%-0.39%

None

0

0

0

0

-0.35%-0.46%

None

Note 5: The total remuneration provided by the Company and subsidiaries to Company presidents and senior vice presidents is disclosed per the
consolidated financial statement.
Note 6: The remuneration distributed to each president and senior vice president is disclosed as a range and the names of the presidents and senior
vice presidents are disclosed by range of compensation received.
Note 7: The total remuneration provided by the Company and subsidiaries to presidents and senior vice presidents is disclosed per the consolidated
financial statement and names of the presidents and senior vice presidents are disclosed by range of compensation received.
Note 8: Net income refers to net income (after tax) for the most recent year. For those already using IFRS, net income refers to net income (after tax)
reported on the individual financial statement for the most recent year. The Company’s 2019 individual financial statement net loss (after tax)
totaled NT$1,199,798,000.
Note 9: The President and Senior Vice President of the Company do not receive any remuneration related to the reinvestment of enterprises otherthan subsidiaries.
Note 10: Miss Lo, Ya-Mei was dismissed from the position of Senior Vice President on August 1, 2019.
Note 11: Mr. Wang, Chen-Min assumed the position of Senior Vice President on January 1, 2019.

Corporate Governance Report333.2.4 Comparison of Remuneration for Directors, Presidents, and Vice
Presidents in the Most Recent Two Fiscal Years and Remuneration Policy
for Directors, Presidents, and Vice Presidents
A. The ratio of total remuneration paid by the Company and by all companies included in the

consolidated financial statements for the two most recent fiscal years to directors, presidents, andvice presidents of the Company, to their net income (loss).
CAL

2018
Consolidated Subsidiaries of CAL

CAL

2019
Consolidated Subsidiaries of CAL

Directors

1.18%

1.33%

-1.62%-1.79%

Presidents and SeniorVice Presidents

1.58%

1.82%

-2.06%-2.37%Title

B. The policies, standards, and portfolios for the payment of remuneration, the procedures fordetermining remuneration, and the correlation with business performance.

As stipulated in the Articles of Incorporation, the Board of Directors is authorized to set thechairman’s remuneration in accordance with the Company’s policies regarding manager
compensation and based on the extent of his or her participation in Company operations. The travel
allowances and remuneration of other directors are determined by the Board in reference to thecompensation levels provided by related-industries and public companies. In accordance with
Article 29 of the Company Act, president and senior vice president remuneration is set by Board of
Directors resolution based on Company employee salary related regulations. Bonuses and employeecompensation are calculated based on the Company’s overall operating performance and theemployee’s individual performance achievement rate.

C. Procedure for establishing remuneration

In the case of remuneration for board members and managers, as per regulation, the Company's
Salary and Remuneration Committee meets regularly to assess and set salaries and remuneration,
which decisions are implemented after being submitted to the Board of Directors.

D. Linkage to business outcomes
The remuneration of the president has already taken into account his professional capability and theCompany's operations and financial situation; the experienced senior vice presidents handle mattersbased on the Company's employee achievement provisions, using a linkage of individual
performance on goals management and work evaluations, and assessing performance after overall
consideration.

E. Linkage to future risk
Major decision making for operational levels of this company always balances various risk factors;
major decision-making performance will be reflected in the Company's profits, and thereby is related
to salaries and remuneration to management levels; specifically, the salaries and remuneration of
the chairman of the board, the president, and senior vice presidents are related to the results ofcontrolling and managing future risk.

34 Corporate Governance Report3.3 Implementation of Corporate Governance3.3.1 Board of Directors

A. From January 1, 2019, through April 25, 2020, a total of eleven meetings of the Board of
Directors were held. Average attendance rate was 89%. Director attendance is detailed
below:

Title
Chairman

Name(Note 1)
Hsieh, Su-Chien

Attendancein Person
11

By Proxy0Attendance Rate (%)(Note 2)

Juridical Person Shareholder
Represented
China Aviation Development
100%
Foundation

Director

Chen, Charles C.Y.

8

3

73%

China Aviation Development
Foundation

Director

Ting, Kwang-Hung

8

3

73%

China Aviation Development
Foundation

Director

Chen, Han-Ming

11

0

100%

Director

Ko, Sun-Ta

101

DirectorWei, Yung-Yeh

110

Director

Lin, Su-Ming

10

1

Director

Wang, Shih-Szu

7

4

64%

Independent Director Chung, Lo-Min

10

1

91% -

Independent Director Chang, Hsieh Gen-Sen

110100% -

Independent Director Shen, Hui-Ya

10

1

91% -

Chairman

2

0

100%

Ho, Nuan-Hsuan

China Aviation Development
Foundation
China Aviation Development
91%
Foundation
China Aviation Development
100%
Foundation
National Development Fund
91%
(Executive Yuan)

National Development Fund
(Executive Yuan)

China Aviation Development
Foundation

Remarks
Elected as Chairman on April 2, 2019.
On May 8, 2019, Hsieh, Su-Chien was
entrusted to attend as a proxy;
On July 3, 2019, Chen, Han-Ming was
entrusted to attend as a proxy;
On October 8, 2019, Hsieh, Su-Chien was
entrusted to attend as a proxy.
On April 2, 2019, Hsieh, Su-Chien was
entrusted to attend as a proxy;
On June 25, 2019, Hsieh, Su-Chien was
entrusted to attend as a proxy;
On November 7, 2019, Hsieh, Su-Chien
was entrusted to attend as a proxy.
None
On October 8, 2019, Chen, Han-Ming
was entrusted to attend as a proxy.
None
On November 7, 2019, Wang, Shih-Szu
was entrusted to attend as a proxy.
On January 21, 2019, Hsieh, Su-Chien
was entrusted to attend as a proxy;
On April 2, 2019, Lin, Su-Ming was
entrusted to attend as a proxy;
On June 25, 2019, Lin, Su-Ming was
entrusted to attend as a proxy;
On July 3, 2019, Lin, Su-Ming was
entrusted to attend as a proxy.
On March 18, 2020, Chang, Hsieh
Gen-Sen was entrusted to attend as aproxy.
None
On April 2, 2019, Chang, Hsieh Gen-Sen
was entrusted to attend as a proxy.
Dismissed as Chairman on April 2, 2019.
Obligated to attend twice.
Actual attendance was twice.
Attendance rate is 100%.

Other mentionable items:
1. In the operation of the Board of Directors, should one of the below situations occur, the Board Meeting date, session, content of the resolution, opinions of all independent
directors, and the Company’s response to said opinions shall be properly recorded:(1) Matters listed in Article 14-3 of the Securities and Exchange Act.: The Company has set up an Audit Committee, thus this does not apply.
(2) Other matters up for decision by the Board not listed in Article 14-3 of the Securities and Exchange Act but that were opposed by independent directors or about which
said directors have reservations and their opinion has been recorded or submitted in a written statement: None.
2. Should a director recuse him or herself from a decision about which he or she has a conflict of interest, the name of the director, contents of the resolution, reasons forrecusal, and the results of the vote should be noted:
Directors recused for
Meeting Dates
Agenda content
Reason for recusal
Participation in voteconflicting interest
Proposal on salary and remuneration
Except for Chairman Hsieh, Su-Chien, who recused
May 8, 2019:
of Chairman Hsieh, Su-Chien
Personal interest inaccording to the law due to interests involved and did not
6th meeting of the 21st
Proposal to release the
Chairman Hsieh, Su-Chien
this matterparticipate in discussion or voting, the remaining 10
Board of Directors
non-competition restriction on
attending Directors approved the matter.
Chairman Hsieh, Su-Chien
Except for Chairman Hsieh, Su-Chien, who recusedJanuary 13, 2020:
Chairman and Managers' 2020 Lunar
Personal interest inaccording to the law due to interests involved and did not
Chairman Hsieh, Su-Chien
9th meeting of the 21st
New Year Incentive
this matterparticipate in discussion or voting, the remaining 10
Board of Directors
attending Directors approved the matter.
3. Board of Director functional improvement goals for the last year and the current year (such as establishing an audit committee and improving information transparency)
and implementation assessment:(1) In order to strengthen management mechanisms and oversight, three functional committees, namely the Remuneration Committee, Audit Committee, and Risk
Committee, were set up under the Board of Directors. Each is convened based on its charter, and the charters were approved by the Board. The committees meetto review and discuss relevant issues and report their conclusions and suggestions to the Board for resolution. The committees have been a success. The regulations
governing functional committees passed by the Board specify the number of committee members, term of office, committee powers, rules of procedure, andresources to be provided by the Company when the committees exercise their powers.

Corporate Governance Report35

(2) In order to implement corporate governance and enhance the functions of the Board of Directors of the Company, and establish performance objectives toenhance the efficiency of the Board of Directors, the Company has formulated the "Regulations Governing the Board Performance Evaluation," which is
implemented once at the end of each year. The evaluation method is divided into the performance evaluation of the entire Board of Directors, individual Board
members, and the functional committees. The Company has conducted performance evaluation in 2019. The self-evaluation results by the entire Board of
Directors, individual Board members, and the functional committees are all excellent.
(3) The Company regularly arranges advanced courses for directors every year which cover corporate governance related topics, such as finance, risk management, sales,business, legal affairs, accounting, internal control system, financial reporting responsibility, corporate social responsibility, etc., and encourages members of the Board
to continue to participate in courses related to corporate governance topics in their new or existing term of office in order to enable the members of the Board to havedifferent professional functions, and to implement the diversification policy of directors.
(4) For more information regarding China Airlines Corporate Governance, please refer to our website (http://www.china-airlines.com): Corporate Social Responsibility,“Stakeholders' Area” and “Investor Information”.
4. Independent director attendance record for 2019 through April 25, 2020:
Dates
01/21/2019 03/20/2019 04/02/2019 05/08/2019 06/25/2019 07/03/2019 08/07/2019 10/08/2019 11/07/2019 01/13/2020 03/18/2020
Name
Chung, Lo-Min





















○

Chang, Hsieh Gen-Sen























Shen, Hui-Ya





○

















Note:

Indicates attendance in person. ○ indicates attendance by proxy.  indicates the director did not attend.

Note 1: For directors that are juridical persons, the name of the juridical person shareholder and its representatives must be disclosed.
Note 2: (1) When a director resigns before the year’s end, the remark column shall note the date of resignation and actual attendance rate (%) calculated based on the numberof meetings held during the period prior to resignation and the director’s actual number of meetings attended.
(2) If there is a change of directors prior to the end of the year, both the new and old directors shall be included in the table and the remark column shall note whether
the director has been reelected or newly elected and the date of the (re)election. Actual attendance rate (%) is calculated based on the number of meetings held
during the period of service and the director’s actual number of meetings attended.

B. Evaluation of the Board of Directors
Evaluation cycle(1)Engage in one
internal
evaluation per
year.

Evaluation
periodJanuary 1 to
December 31,2019(2)An external
evaluation shallbe carried out
every three years
by an external
professional
independent
organization or ateam of experts
and scholars.

Scope ofevaluation
Covers theevaluation of theboard as a whole,
the individual
directors, andfunctional
committees

Evaluation method

Evaluation content

Evaluation by the business (1)Board of Directors performance evaluation:team of the Board of
11 metrics in total, including 5 measurement
Directors, self-evaluation
items, i.e., the degree of participation in theby the Board members,Company's operations, the Board of Directors’
and performance
decision-making quality, the composition andevaluation by the
structure of the Board of Directors, thefunctional committee
selection and continuing education ofmembers
Directors, and internal control.
(2)Individual Board members:
18 metrics in total, including 6 measurement
items, i.e., mastery of Company’s goals andtasks, recognition of Directors' responsibilities,
participation in Company’s operations, internal
relationship management and communication,
Director's expertise and continuing education,and internal control.
(3)Evaluating Functional Committee
Performance:10 metrics in total, including 5
measurement items, i.e., the degree ofparticipation in the Company's operations,functional committee responsibility awareness,decision-making quality of functional
committee, composition and member
selection of functional committee, and internal
control.

36 Corporate Governance Report3.3.2 Audit Committee

The Audit Committee convened night meetings from January 1, 2019, through April 25, 2020. Committee member
attendance is detailed below:
Title
Independent Director(Chairman)

Name

Attendance in Person

By ProxyAttendance Rate (%)

Remarks

Chang, Hsieh Gen-Sen

9

0

100%

None

Independent Director

Chung, Lo-Min

9

0

100%

None

Independent Director

Shen, Hui-Ya

9

0

100%

None

Other mentionable items:
1. Key functions of the Audit Committee:
The Committee consists of three Independent Directors. The key functions of the year is to assist the Board of Directors in supervising the Company on
the fair presentation of the relevant financial statements, the appointment (dismissal) of a CPA and its independence and performance, the auditing of
the Company's internal control system, the compliance with related laws, regulations and rules of the Company (such as: internal control system,
acquisition or disposal of assets, derivative commodity transactions, loaning funds to others, providing endorsements or guarantees for others), and othermatters included in its statutory functions (appointment and dismissal of financial supervisors or internal audit executive, mergers and acquisitions
related matters).
2. In the operation of the Audit Committee, should one of the below situations occur, the Board Meeting date, session, content of the resolution, result of
the Audit Committee resolution, and the Company’s response to said opinions shall be properly recorded:(1) Matters listed in Article 14-5 of the Securities and Exchange Act:
Results of the vote by
the Board of Auditors
Results of Board of Directors
Meeting Dates
Agenda content
and company's
decision
handling of theBoard's opinion
January 21, 2019
Approved by all attending
3rd Extraordinary Meeting of the
Directors in the 4th meeting ofListing Application Plan of Tigerair Taiwan
Audit Committee of the 21st
the 21st Board of Directors on
Board of Directors
January 21, 2019.
2018 Financial Report and Consolidated
Financial Report2018 Surplus Earnings Distribution
2019 CPA Appointment and Remuneration
March 20, 2019
Approved by all attending
Revision of “Procedures for the Acquisition
3rd Meeting of the Audit
Directors in the 5th meeting ofor Disposal of Assets”
Committee of the 21st Board of
the 21st Board of Directors on
Revision of “Procedures Governing
Directors
March 20, 2019.
Derivatives Trading”
2018 Internal Control System Effectiveness
Audit and Statement
Amendment to the “Operational
Procedures for Lending Funds to Others”
and the “Operational Procedures for
May 8, 2019
Approved by all attending
Endorsements/Guarantees”
4th Meeting of the Audit
Directors in the 6th meeting of
Disposal of 5 A330-300 aircraft
Committee of the 21st Board of
the 21st Board of Directors on
through sale and leaseback transaction
Directors
May 8, 2019.
Evaluation and selection of new narrow
body passenger aircraft and introduction of
new aircraft
Passed to the Board
June 25, 2019
Approved by all attending
777F new cargo aircraft introduction caseof Directors upon
4th Extraordinary Meeting of the
Directors in the 6th Extraordinary
Introduction of A321neo new narrow bodyunanimous approval
Audit Committee of the 21st
meeting of the 21st Board ofpassenger aircraftby all members in
Board of Directors
Directors on June 25, 2019.
attendance.
July 3, 2019
Approved by all attending
5th Extraordinary Meeting of thePlan to handle the matters relevant to
Directors in the 7th Extraordinary
Audit Committee of the 21st
releasing shares of Tigerair Taiwan
meeting of the 21st Board of
Board of Directors
Directors on July 3, 2019.
Issuing NT $3 billion in total face value ofAugust 7, 2019
Approved by all attending
domestic unsecured convertible corporate
5th Meeting of the Audit
Directors in the 7th meeting ofbonds
Committee of the 21st Board of
the 21st Board of Directors on
Carry out three 777F aircraft purchases to
Directors
August 7, 2019.
order
October 8, 2019
Approved by all attending
6th Extraordinary Meeting of theEngine selection of A321neo new narrow
Directors in the 8th Extraordinary
Audit Committee of the 21stbody passenger aircraft
meeting of the 21st Board of
Board of Directors
Directors on October 8, 2019.
November 7, 2019
Approved by all attending
6th Meeting of the Audit
Directors in the 8th meeting of2020 audit plan
Committee of the 21st Board of
the 21st Board of Directors on
Directors
November 7, 2019.
2019 Financial Report and Consolidated
March 18, 2020
Financial Report
Approved by all attending
7th Meeting of the Audit
Directors in the 10th meeting of2019 Deficit Compensation
Committee of the 21st Board of
the 21st Board of Directors on2020 CPA Appointment and Remuneration
Directors
March 18, 2020.
2019 Internal Control System Effectiveness
Audit and Statement

Corporate Governance Report37(2) Other matters up for decision by the Board not listed in Article 14-5 of the Securities and Exchange Act that were not passed by the Audit Committee
but approved by a two-thirds majority of the entire Board: None.
3. In situations where independent directors recuse themselves due to conflict of interest, the independent director's name, content of the resolution,
reason for recusal, and his or her voting participation should be properly recorded: None.
4. Communication between independent directors and internal audit managers and auditors (regarding issues such as Company financial and operational
status, procedures, and results):(1) In addition to the independent directors of the Company receiving the audit report on a monthly basis, the audit officer submits the annual audit planand the implementation of the semi-annual audit work to independent directors through the Audit Committee and the Board of Directors. The audit
officer replies to the independent director's questions, provides necessary information, strengthens the audit work in accordance with his instructions,and ensures the effectiveness of internal controls. In addition, in non-routine communication, the audit value shall be continuously improved. In caseof any major violation, the independent director shall be informed immediately.
(2) Before the audit committee meeting held in each quarter, the certified public accountant and the independent directors shall convene a
communication meeting to report to the independent director and explain the audit plan, implementation situation, or review results of the financial
statements; the certified public accountant shall provide the financial statements and relevant necessary information to the audit committee and theBoard of Directors in each quarter, and attend the meeting in a nonvoting capacity.
(3) Directors shall contact the audit supervisor or accountants when needed for full communication.
 Communication between independent directors and accountants:
Communication matters
Communication results
Means of
Proposal bycommunication
Primary matter
Results
Company’s processing statusindependent director
To pay attention to theimpact of rising oil
prices on the
1.The managerial department provided theoperational aspect andAccountant to explain
explanation and response forthwith during
the reasons for changes
audit results of the 2017
Approved by
the meeting.
in operating expenses
March 20, 2019financial report, and takeall attending
2.Continued to submit for the Board offor two quarters; it was
Audit Committee
questions from the
Independent
Directors’ approval, and completed thealso recommended toattendees of the meeting
Directors.
2018 financial report announcement andadjust the expression offor discussion.
declaration on April 1, 2019.
some financial
statements according
to the principle ofconsistency.

May 8, 2019
Audit Committee

Before the meeting, theaccountant shallseparately report andexplain the review
situation to the
independent director. At
the meeting, the financial
director of the Company
shall explain the review
results of the financial
report in the first quarterof 2019 and theamendment of laws andregulations, and discussand communicate theissues raised by theparticipants.

For the expression of
the impact of the
IFRS16 Leases bulletinon the balance sheet, it
is suggested to describe
in the notes.

Noted by all
attendingIndependent
Directors.

1. The managerial department has provided
the explanation and response forthwith
during the meeting.
2. Continued to report to the Board of
Directors, and completed the Q1 2019financial report was completed on May 15,
2019.

August 7, 2019
Audit Committee

Before the meeting, theaccountant separately
reported and explained
the review situation to
the independent director.
At the meeting, thefinancial director of theCompany explained thereview results of thefinancial report in thesecond quarter of 2019
and the impact of the
new bulletin on financial
statements, anddiscussed andcommunicated the issues
raised by the participants.

After discussing theimplementation of the
new IFRS16 Leases
bulletin, discussed theincrease in operating
expenses in the firsthalf of the year, andinquired about thereasons for thedifference between
financial results andbudget in the first halfof the year.

Approved by
all attending
Independent
Directors.

1. The managerial department has provided
the explanation and response forthwith
during the meeting.
2. Continued to report to the Board of
Directors, and completed the Q2 2019financial report announcement anddeclaration on August 14, 2019.

November 7, 2019
Audit Committee

Before the meeting, theaccountant separately
reported and explained
the review situation to
the independent director.
At the meeting, thefinancial director of thecompany explained thereview results of thefinancial report for thethird quarter of 2019, theamendment of laws andregulations and the 2019

Discussed the impact offalling revenue fromcargo transport on thecompany's overallbusiness operations
and asked the
managerial department
to explain the reasonsand benefits of therecent cargo aircraft
procurement plan.
Also the management
authorities are

Noted by all
attendingIndependent
Directors.

1. The managerial department has replied in
the meeting immediately. The purchase ofcargo aircraft is a strategy for phasing-out
of old with new aircraft, which caneffectively save costs and improve theoverall fleet efficiency.
2. Continued to report to the Board of
Directors, and completed the Q3 2019financial report announcement anddeclaration on November 14, 2019.

38 Corporate Governance Reportfinancial report audit plan
and key audit matters,
and discussed andcommunicated the issues
raised by the participants.

March 18, 2020
Audit Committee

Before the meeting, theaccountant separately
reported and explained
the audit situation to the
independent director. At
the meeting, the financial
director of the company
explained the audit
results of the financial
report in 2019, anddiscussed andcommunicated the issues
raised by the participants.

reminded to prepare
countermeasures assoon as possible andadjust the operation
mode of passenger andcargo transportation intime for the overall
global economic
situation, such as the
China-US trade war.

The impact of the
COVID-19 pandemic on
the Company's
passenger revenue wasaddressed, and theadjustment to items ofloss allocation werediscussed.

Approved by
all attending
Independent
Directors.

1. The managerial department provided the
explanation and response forthwith during
the meeting.
2. Continued to submit for the Board of
Directors’ approval, and completed the2019 financial report announcement anddeclaration on March 31, 2020.

 Communication between independent directors and internal audit supervisor:
Communication matters
Communication results
Means of
Proposal bycommunication
Primary matter
independent
Results
Company’s processing status
director
January 21,
To pay attention to
Internal audit
Approved by all attending
Reported to the Board of Directors on
2019
whether there is abusiness report
members and reported to theJanuary 21, 2019.
control mechanism
Audit
for Q4 2018
Board of Directors.
Committee
for online sales.
Resolved by the Board of Directors on
2018 Internal
March 20, 2019, and the 2018
Approved by all attending
Control System
Statement of Internal Control wasNonemembers and reported to the
Effectivenessannounced and declared on March 22,
Board of Directors.
Audit andMarch 22, 20192019 and disclosed in the 2018 annualStatement
Audit
report.
Committee
Internal audit
Approved by all attending
Reported to the Board of Directors on
business reportNone
members and reported to the
March 20, 2019.
for January andBoard of Directors.
February 2019
May 8, 2019
Audit
Committee

Internal audit
business reportfor March 2019

None

Approved by all attending
members and reported to theBoard of Directors.

Reported to the Board of Directors on
May 8, 2019.

August 7, 2019
Audit
Committee

Internal audit
business reportfor Q2 2019

None

Approved by all attending
members and reported to theBoard of Directors.

Reported to the Board of Directors on
August 7, 2019.

Internal audit
business reportfor Q3 2019None2020 Audit plan

Sample the rationalityof the passenger andfreight pricing system.

Internal audit
business reportfor Q4 2019

None

Approved by all attending
members and reported to theBoard of Directors.

Reported to the Board of Directors on
March 18, 2020.

2019 Internal
Control System
Effectiveness
Audit andStatement

None

Approved by all attending
members and reported to theBoard of Directors.

Resolved by the Board of Directors on
March 18, 2020, and the 2019
Statement of Internal Control System
was announced and declared on March
23 and disclosed in the 2019 annual
report.

Amendment to2020 Audit Plan

None

Approved by all attending
members and reported to theBoard of Directors.

Resolved by the Board of Directors on
March 18, 2020, and completed theannouncement and declaration of 2020
internal audit plan on March 24.

November 7,
2019
Audit
Committee

March 18, 2020
Audit
Committee

Approved by all attending
members and reported to theBoard of Directors.
1. As for the items inquired bycommittee member Chung,the audit officer replied
on-site: after being included in
the annual audit and spot
check items, the financedivision also has a complete
audit mechanism for the
expression of accounting rights
and responsibilities.
2. Approved by all attending
members and reported to theBoard of Directors fordiscussion.

Reported to the Board of Directors on
November 7, 2019.

Resolved by the Board of Directors on
November 7, 2019, and completed theannouncement and declaration of 2020
internal audit plan on December 6.

Corporate Governance Report39

3.3.3 Risk Committee

The Risk Committee convened five meetings from January 1, 2019, through April 25, 2020. Committee member
attendance is detailed below:
Title

Name

Attendance in
PersonBy ProxyAttendance Rate (%)

Remarks

Independent Director(Chairman)

Chung, Lo-Min

5

0

100%

None

Independent Director

Chang, Hsieh Gen-Sen

5

0

100%

None

Independent Director

Shen, Hui-Ya

5

0

100%

None

Director

Lin, Su-Ming

4

1

80%

On November 7, 2019, Chung, Lo-Min was
entrusted to attend as a proxy.

60%

On May 9, 2019, Lin, Su-Ming was
entrusted to attend as a proxy;
On November 7, 2019, Chang, Hsieh
Gen-Sen was entrusted to attend as aproxy.

Director

Ting, Kwang-Hung3

2

Other mentionable items:
1. Key functions of the Risk Committee:
The Committee assists the Board of Directors in reviewing the establishment, implementation results, and response measures of Company's management
strategies for overall finance, economy, flight safety, and other risks, and submits its conclusions and recommendations to be resolved by the Board of
Directors.
2. Professional competence of risk management committee members:
Independent director Shen, Hui-Ya has the professional ability of legal affairs; Independent directors Chang, Hsieh Gen-Sen, Chung, Lo-Min, and director
Lin, Su-Ming all have the professional ability of financial accounting and practical practice and management experience; Director Ting, Kwang-Hung has theability to perform business judgments, leadership and decision making, operation and management, crisis handling, and has outlook on international
markets.
2. The operation of the Risk Committee:
Agenda content

Risk Committee
resolution results andcompany action on Risk
Committee opinions

Results of Board of Directors
decision

Safety management report
2019Q1-Q2 Operations risk management analysis
Financial status report
Operations outlook and financing, crude oil market
analysis
Financial risk hedging strategy
Oil risk hedging strategy
Safety management report
2019Q2-Q3 Operations risk management analysis
Financial status report
Operations outlook and financing, crude oil market
analysis
Financial risk hedging strategy
Oil risk hedging strategy
Safety management report
2019Q3 Operations risk management analysis
Financial status report
Operations outlook and financing, crude oil market
analysis
Financial risk hedging strategy
Oil risk hedging strategy
Safety management report
2019Q4 Operations risk management analysis
Financial status report
Operations outlook and financing, crude oil market
analysis
Financial risk hedging strategy
Oil risk hedging strategy
Safety management report
2020Q1 Operations risk management analysis
Financial status report
Operations outlook and financing, crude oil market
analysis
Financial risk hedging strategy
Oil risk hedging strategy

Passed to the Board of
Directors upon
unanimous approval by
all members inattendance.

Unanimously passed by all
members of the Board of
Directors in attendance.

Meeting Dates

March 20, 2019
3rd Meeting of the Risk
Management Committee of the
21st Board of Directors

May 9, 2019
4th Meeting of the Risk
Management Committee of the
21st Board of Directors

August 8, 2019
5th Meeting of the Risk
Management Committee of the
21st Board of Directors

November 7, 2019
6th Meeting of the Risk
Management Committee of the
21st Board of Directors

March 18, 2020
7th Meeting of the Risk
Management Committee of the
21st Board of Directors

40 Corporate Governance Report3.3.4 Corporate Governance Implementation Status and Deviations from the
Corporate Governance Best-Practice Principles for TWSE/TPEx Listed
Companies
Status of Implementation

Evaluation ItemYes NoBrief Explanation

Deviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No Difference

1. Did the Company
establish its
Corporate
GovernanceBest-PracticePrinciples inaccordance with
Corporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx Listed
Companies anddisclose those
Principles?



The Corporate Governance Principles of the Company has been established in compliance with the Corporate Governance Best-PracticePrinciples for TSEC/TPEx Listed Companies; its amendment has been approved in the 6th meeting of the 21st Board of Directors on May 8,
2019 and disclosed under the “Important Company Regulations” on the Company’s website.

2. Company ownership
structure andshareholder rights(1)Did the Company
establish internal
operational
procedures for
dealing withshareholder
suggestions,questions,disputes, andlawsuits and put
these procedures
into practice?

(1) The Company's website has a portal for shareholder services and a “Method for Handling Investor Relations” has been set so thatinvestor suggestions and concerns are dealt with by shareholder service personnel and shareholder service agents using relevant
procedures. This ensures a smooth channel of communication between the Company and its shareholders and the quality of disclosed
information.

No Difference(2)Does China Airlines keep maintain alist of the major
Company
shareholders andthe ultimate
owners of theseshareholders?

(2) The China Aviation Development Foundation is China Airlines’ largest shareholder and maintains full communication and contact with
the Company.

No Difference(3)Did China Airlines
establish andimplement risk
controlmechanisms andfirewalls at theCompany andaffiliatedenterprises?

(3) The Company has established Operational Procedures for Endorsements/Guarantees, Operational Procedures for Lending Funds to
No Difference
Others, and Regulations Governing Management of Invested Enterprises. All capital loans and funding, endorsements/guarantees, andoperational supervision and management of Company subsidiaries shall proceed in accordance with these procedures and regulations.
Audit units perform quarterly audits of Company endorsements/guarantees and capital loans/funding, which are provided to
management and independent directors. The Finance Div. is responsible for overseeing implementation at invested enterprises andshould any faults be discovered, an improvement deadline is set and the progress is tracked.

(4)Did the Company
establish internal
standards toprevent insider
trading on
undisclosed
information?

(4) The Company established the Directors Code of Conduct, Procedures for Handling Material Inside Information, and High-Level Manager No Difference
Code of Conduct to specify insider trading prevention and processing of secret stock trading and operating information as required of
employees by law. Those with undisclosed material inside information are prohibited from engaging in securities trading.

3. Structure and
responsibilities of theBoard of Directors(1)Has the Company
establishedpolicies calling fordiversity among
members of the(1) China Airlines advocates and respects the director diversity policy, and is convinced that diversity can improve the overall performance No Differenceof the Company. Members of the Board of Directors shall be based on personal capability and the diversification from different aspects
shall also be taken into consideration, including basic characteristics (e.g., age, gender and nationality, etc.), experience and skills (e.g.,
aviation, sea freight, transportation, finance and accounting, law and insurance, electricity, technology, and public utilities, etc.),
operation and management, leadership and decision-making, and crisis management ability. In order to strengthen the Board'sfunctions to achieve the ideal goals of corporate governance, the Company has established the Corporate Governance Principles,
Article 20 of which specifies the overall abilities the Board of Directors shall be equipped with, which are as follows:
A. The ability to make operational judgment.

Corporate Governance Report41

Status of Implementation

Evaluation Item

Board of Directors
and put said
policies into
practice?

Yes NoDeviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

Brief Explanation

B. The ability to perform accounting and financial analysis.
C. The ability to conduct management administration.
D. The ability to conduct crisis management.
E. Industrial knowledge.
F. Perspective of the international market.
G. The ability to lead.
H. The ability to make decisions.
The diversification policies of the current executives of the Company and its progress are as follows:

Information and technology

Metal and machinery

Law

Accounting

Risk management

FemaleBusiness and supply

FemaleR.O.C

Banking, insurance and realestate

Male

R.O.C

Shen, Hui-Ya-

Construction and engineering

FemaleR.O.C

Chang,
Hsieh
Gen-Sen-Financial and Finance

Male

R.O.C

Chung,
Lo-Min

-

-



-

-

 



○

-

-



○

-

-

○



-



-

-

-

-





○

-





○

-

-

-





-

-

-

-

-

-











-

-

-

○





-

-

-

-



-



○







-



-

-



-



-

-

-

-

-



○

-

-



-

-

-

-



-



-

-

-



-

-

-

-

-

-

-



-

-

○

-

-



-

-

-

-

-



-

○

-

-

-

○



○

-



-

-

-

-

-



-

-

-

-

-

-

○

-



-

-



-



-

-

○



-

-

○

○

○

-





-

-





-

-

-

-



-

-

-

-

-

-



○

-



-



-

-

-

-

-

-

-

-

-

-



-

○

Transport

Male

R.O.C

Wang,
Shih-Szu-

Professional services andmarketing

Male

R.O.C

Lin, Su-Ming--

Length ofoffice ofindependent
director

Age

Airlines

Male

R.O.C

Wei,
Yung-Yeh

Six to nine
years

Male

R.O.C

Ko, Sun-Ta-

Less than 3
years

Male

R.O.C

Chen,
Han-Ming-

61-70

Has employee status

Male

R.O.C

Ting,
Kwang-Hung

-

51-60

Gender

R.O.C

Chen,
Charles C.Y.

-

Note: Indicates the director has the capability ○ indicates the director has some capability.

42 Corporate Governance Report

APR 25, 2020
Professional
competence

Industrial experience40-50

Nationality-

Name
Hsieh,
Su-Chien

Diversified Core

Basic composition

Status of Implementation

Evaluation ItemYes No(2)In addition to the establishment of
the Remuneration
Committee andAudit Committee as
required by law, did
the Company
establish
committees withother functions of
its own accord?
(3)Has the Company establishedperformance
evaluation
guidelines andevaluation
methods for the
Board of Directors
and does it
evaluate its
performance
regularly eachyear， and,furthermore, does
it report theevaluation results
to the Board of
Directors and use
them asreferences for
deciding on the
remuneration ofindividual
directors andnomination forcontinuing terms
as directors?
(4)Does the Company 
periodically assess
the independenceof external CPAs?

Brief Explanation

Deviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasonsa. Considering that the 11 directors (including 3 independent directors) of the 21st Board of Directors of the Company have businessjudgment, leadership decision-making, operation and management, international market outlook, crisis management, and othercapabilities, as well as industrial experience, and professional ability; Among which, those with experience in transportation andtourism industry are Chairman Hsieh, Su-Chien, director Chen, Charles C.Y., director Ko, Sun-ta, and Director Wei, Yung-Yeh; Those
who are good at marketing are Chairman Hsieh, Su-Chien, director Charles C.Y. Chen, director Ting, Kwang-Hung, director Chen,
Han-Ming and director Ko, Sun-ta; Director Chen, Charles C.Y., who has made significant contributions to public welfare;
Independent director Shen, Hui-Ya, who is competent in legal affairs; Director Wang, Shih-Szu, current politician (vice mayor of
Tainan City); Independent director Chang, Hsieh Gen-Sen, independent director Chung, Lo-Min, director Lin, Su-Ming and director
Ting, Kwang-Hung have the professional ability of accountant or finance and have practical practice, management, or teachingexperience.
b. The average term of office of the company's directors is 6 years, among which two independent directors Chang, Hsieh Gen-Sen andShen, Hui-Ya have tenure of less than 3 years; The term of office of independent director Chung, Lo-Min is 8 years, and theconsecutive term of office of all independent directors does not exceed 3 terms.
The directors are all local citizens, and three independent directors constitute 27% of the board; there is one director who is also an
employee (9%). The age distribution range of directors includes 2 directors aged 40-50, 5 directors aged 51-60, and 4 directors aged
61-70.
In addition to the above, the Company also pays attention to gender equality in the composition of the Board. The current board of
directors consists of three female members (two of which are independent directors), and the proportion of female directors is high,at 27%. In the future, the Company will remain committed to improving the proportion of female directors.
c. The diversity, complementarity, and implementation of directors comply with and exceed the standards specified in Article 20 of the
Corporate Governance Principles of China Airlines;In the future, the board of directors will continue to update its diversified policies
according to board operations, operation style, and development needs, including but not limited to the standards of basic
conditions and values, professional knowledge and skills, so as to ensure that board members generally have the necessary
knowledge, skills, and literacy to perform their duties.
(2) In addition to setting up the Audit Committee and the Remuneration Committee according to law, in order to improve the risk
No Difference
management of the Company, the Company has voluntarily set up a Risk Management Committee, with five directors (including three
Independent Directors) as members. Meetings are held on a quarterly basis according to the organization regulations approved by the
Board of Directors. The Committee answers to the Board of Directors and assists the Board of Directors in reviewing the establishment,
implementation results, and response measures of Company's management strategies for overall finance, economy, flight safety, andother risks, and submits its conclusions and recommendations to be resolved by the Board of Directors. Good operational effectivenesshas been achieved.

(3) The Company approved the “Regulations Governing the Board Performance Evaluation” in the 8th meeting of the 21st Board of No Difference
Directors on November 7, 2019. The internal evaluation of Board performance shall be performed at the end of each year. The
evaluation is divided into the performance evaluation of the entire Board of Directors, the individual Board members, and thefunctional committees. The evaluation shall be completed by the end of January of the following year, and the results of which shallbe submitted by the Human Resources Department to be reported in the Board meeting held by the end of March and referred to in
deciding directors' remuneration and nomination for renewal.
In December 2019, the Company completed the 2019 Board Performance Evaluation in accordance with the above regulations; which
has been reported at the 10th meeting of the 21st Board of Directors on March 18, 2020 and disclosed on the Company’s official
website. The self-evaluation results are as follows:
A.Entire Board of Directors
a.Evaluation items: 10 items in total, including 5 major aspects, i.e., the degree of participation in the Company's operations, theimprovement of Board of Directors’ decision-making quality, the composition and structure of the Board of Directors, thecontinuing education of Directors, and internal control.
b.Results of self-evaluation: Above standards.
B.Individual Board members
a.Evaluation items: 18 items in total, including 6 major aspects, i.e., mastery of Company’s goals and tasks, recognition of Directors'
responsibilities, participation in Company’s operations, internal relationship management and communication, Director's expertiseand continuing education, and internal control.
b.Results of self-evaluation: Above standards.
C. Functional Committees
a.Evaluation items: 10 items in total, including the degree of participation in the Company’s operations, functional committee
responsibility awareness, improvement to functional committees’ decision-making quality, composition and member selection offunctional committee, and internal control.
b.Results of self-evaluation: Above standards.
In addition, the implementation of the performance evaluation of the Board of Directors of the Company will be performed by an
external professional independent institution or a team of external experts and scholars every three years.
(4) The Audit Committee and the Board of Directors of the Company regularly assess the independence and competence of the
No Difference
accountants each year in accordance with the Company's Corporate Governance Principles, completing the “Accountant Independence
Evaluation Form,” and acquiring the “Accountant Independence Declaration.” The evaluation results are as follows:
Assessment Results
Conforms to
Item Assessedindependence
YesNo
1. Issued an accountant independence declaration.
Yes
2. Has not gone seven continuous years without changing accountants.
Yes
3. Not served as Company director or manager.

Yes
4. Not a shareholder in the Company and has never been on the payroll.

Yes
5. The accounting firm for which they work is not a Company affiliated enterprise.
Yes
6. Has not provided any non-auditing services to the Company that could affectYescomplete independence.
After assessment by the Company, accountants Huang, Jui-Chan and Cheng, Shiuh-Ran of Deloitte & Touche both conform to theabove assessment standards for independence, and are suitable to act as CPAs for this company. After the 7th meeting of the 21st
Audit Committee on March 18, 2020, a report will be made to the 10th meeting of the 21st Board of Directors on the appointment ofaccountants.

Corporate Governance Report43Status of Implementation

Evaluation ItemYes NoBrief Explanation

4. Does the TWSE/TPEx listed company havein place anappropriate numberof qualified corporate
governance officers,
and a designatedchief corporate
governance manager
to be responsible forcorporate
governance related
matters (including
but not limited toproviding directors
and supervisors with
the information
required to conductbusiness, assisting
directors andsupervisors in legal
compliance, handling
matters related toboard meetings andshareholders’meetings inaccordance with thelaw, and producing
minutes of the board
and shareholders’meetings)?

(1)The Company approved the establishment of the Chief Corporate Governance Officer in the 6th meeting of the 21st Board of Directors
on May 8, 2019, which is served by the Vice President Chien, Feng-Nien, who has the professional qualifications and conducts legal
related affairs as head of department for more than three years. The Chief Corporate Governance Officer’s main duties include handling
relevant meeting affairs of the Board of Directors and Shareholders Meetings in accordance with the law, producing meeting minutes of
the Board meetings and Shareholders’ Meetings, assisting Directors in assuming their positions and continuing education, providing
Directors with information required to perform their duties, assisting Directors in complying with the laws and regulations, and othermatters provided in laws, regulations, the Company’s Articles of Incorporation, or contracts.
(2)The Chief Corporate Governance Officer supervises the relevant units carrying out corporate governance matters:
A. The Chief Corporate Governance Officer concentrates on the following matters which are handled by the personnel of the Board of
Directors Business Task Force when conducting matters related to the Board of Directors and Committees (including the production
meeting minutes), assisting Directors in assuming their positions, legal compliance and continuing education, and providing Directors
with the information required to conduct business:
a. Notifying respective members of meetings 7 days prior to the convening of meetings of Board of Directors and Committees, withcause(s) or subject(s) of the meeting and sufficient meeting materials attached; having the minutes of each meeting signed orsealed by the Chairman and recorder of each meeting, and be distributed to the members of the meeting within 20 days after the
meeting.
b. Providing new Director training to first-time Directors, introducing the Company's business, organization and other matters needingattention, and providing newly-elected Directors with regulatory guidance manuals regarding insiders and directors to assist
Directors in taking office and legal compliance; also, assisting Directors in completing annual training courses in accordance with theCompany's business characteristics and Directors' requirements.
c. Providing necessary Company information for the Directors, maintaining smooth communication and exchange between the
Directors and supervisors, and assisting in arranging communication meetings between Independent Directors and chief audit
executive, CPAs, or other internal units to facilitate conducting of business by Independent Directors.
d. Amending internal regulations related to corporate governance in cooperation with the latest laws and regulations relevant to theCompany's field of business and corporate governance, and submitting the amendments to be resolved by the Board of Directors.
B. As for the Company’s registration and change of registration, the Administration Division shall be responsible for completing therelevant registration with the competent authority within the time limit for matters required to be registered or changes to registeredmatters of the Company.
C. In addition, the Finance Division shall be responsible for the handling of matters related to the shareholders' meetings (the planningand convening of the shareholders' meetings, the production of meeting minutes and other stock affairs related business). It shallprovide sufficient information to the shareholders to ensure that the shareholders' rights and interests are well protected.
(3)From January 1, 2019 through April 25, 2020, the Chief Corporate Governance Officer has attended the following courses:
Sponsoring Organization
CourseDate(s)Training hours
How will Taiwanese companies respond to and manage theTaiwan Corporate Governance Association
2019/08/07 3hr
huge risks caused by the China-US trade war
Discussion on the responsibilities of directors andTaiwan Corporate Governance Association
2019/10/16 3hr
supervisors and corporate governance practices
Promotional session for effective exercising of directors’
Taiwan Stock Exchange Inc.
2019/11/06 3hr
functions
Corporate Governance Forum - strengthen corporate
Taiwan Corporate Governance Association governance ecology and implement independent director
2019/11/27 6hr
system

5. Has the Company
establishedcommunication
channels withstakeholders(including but notlimited toshareholders,
employees,
customers, andsuppliers) and set up
an area dedicated to
stakeholders on the
Company website?
Does the Company
respondappropriately tocorporate social
responsibility issues
that stakeholders
consider important?

The Company identifies stakeholders in accordance with the five principles of the AA1000 Stakeholder Engagement Standard (SES). In
order to fully and effectively communicate with stakeholders, a spokesperson and “Stakeholders Section” have been established on the
Company’s official website to provide contact information of the units associated with various issues, so as to facilitate stakeholders’contact with corresponding personnel based on different issues (including contact personnel, e-mails, and telephone numbers); also, thewebpage for communication with stakeholders has been disclosed on the corporate social responsibility website, explaining stakeholders’issues of concern, communication channels, response frequency and communication results. The communication situation with various
stakeholders is also reported to the Board of Directors each year. The implementation results from 2019 have been reported at the 9th
meeting of the 21st Board of Directors on January 13, 2020.
Relevant content and frequency of the actual implementation show proper responses to various issues that include corporate social
responsibility. See below for details:(1)Company website - stakeholders section: https://www.china-airlines.com/tw/en/about-us/stakeholder(2)Company Corporate Social Responsibility (CSR) website - stakeholder engagement:
http://calec.china-airlines.com/csr/en/management_interested.html(3)Explanatory table:
Item
Focus ofResult ofContact Person
Channel of Communication
Frequency
Category
Communication
Communication
Labor-Management
Monthly
Conference



Union

Employees•Labor/manageme
nt relations andengagement•Governance andbusiness integrity

44 Corporate Governance Report

Human Resource Div.
Miss Chi
Tel:+886(0)-3-3998917

Real time

Employee concerns mailbox(Wecare listens mailbox,
Speak Out employee
communication mailbox,
Team+ real-time information
platform)

Real time

Website for retired employees
and those who have left
employment

Real time

Employee satisfaction
surveys are conducted
every two years; thescore in 2019 was 6.4(Note: highest score is
10)

Deviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No Difference

No DifferenceStatus of Implementation

Evaluation ItemYes NoBrief Explanation

Category

Item

Customers

Investors

Partners(Suppliers)

Society

6. Has the Company
appointed aprofessional
shareholder services
agent to handle
shareholders meeting
matters?
7. Information
disclosure(1)Has the Company
established apublic website todisclose financial,
operational, andcorporate
governanceinformation?

Focus ofCommunication•Flight safety
management• Passenger
servicesmanagement• Privacy andinformation
security•Financial
performance•Risk and crisis
management•Financial
performance• Governance andbusiness integrity•Governance andbusiness integrity•Flight safety
management• Brandmanagement

Contact Person

Channel of Communication

Frequency

Passenger Service
Passenger dedicatedphone line:+886(0)-2-412-9000

Customer satisfaction surveys
Global business meetings
Taiwan district businessmeetings
Discussions with travel
agencies
Company website, industry
social responsibility network,
Facebook, e-mail, andmessage
Customer-service hotline

Real time
Annually

Corporate customer visits

Occasional

Shareholders meeting
Shareholder hotline/mailbox
Corporate customer hotline
Corporate customer hotline

Annually
Real time
Real time
Annually

Corporate information
meeting

Occasional

Telephone, e-mailConsultative conferences
Business visits

Occasional
Occasional
Occasional

Site inspections

At least
once every
6 months

Hold activities for the public
good, participate in activities
in society

Occasional

Cargo Service
Mr. LinTel:+886(0)-3-3998262
Aircraft Maintenance
Mr. ChouTel:+886(0)-3-3987215
Finance Div.
Mr. Yang
Tel:+886(0)-3-3998331
Finance Div.
Mr. LinTel:+886(0)-3-3998361
General Products
Administration Div.
Miss Xiao
Tel:+886(0)-3-3999143
Aircraft Parts
Engineering Div.
Mr. TsaiTel:+886(0)-3-3834251
Ext.7507
e-Shopping / Duty
Free
In-Flight Service
Supply Chain &Marketing Div.
Miss TsengTel:+886(0)-3-3993913
Corporate
Development Office
Mr. ZhongTel:+886(0)-3-3998530
Corporate
Communications
OfficeMr. LeeTel:+886(0)-3-3998639

Annually
Quarterly
Real time
Real time

Press releases and messages

Monthly
Occasional

Network mailbox

Occasional
Daily

Result ofCommunication

Deviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons2019:
1. Passenger
satisfaction rate was
87.70%
2. Cargo satisfaction
rate was 88.6%
3. Maintenance factorysatisfaction score was
8.76(Note: highest score is
10)

Continues toannounce and respondwith operation-related
results according tolaws, regulations, andinvestors’ demand

A general suppliermeeting was held at
the end of 2019

A total of 157,701
individuals benefitedin 2019

The Company’s professional services organization is CTBC Bank, which has been appointed to handle shareholder meeting matters.

No Difference(1)Dedicated units within the Company provide information to be disclosed on the China Airlines corporate website(http://www.china-airlines.com) regarding marketing, operations, finance, administration, aircraft operations, human resources,
training, shareholders’ meetings, and the annual report, prospectus, and any material information. Through this easily available
information, consumers, suppliers, and investors can better understand China Airlines operations.

No Difference

Corporate Governance Report45

Status of Implementation

Evaluation ItemYes NoBrief Explanation(2)Has the Company 
adopted othermethods ofinformation
disclosure (e.g.,setting up an
English website,
designating a
specialist
responsible forgathering anddisclosing
Company
information,
setting up a
spokesperson
system, uploading
recordings ofinvestor
conferences onto
the Company
website)?

(2)The Company has set up an English language website, the China Airlines Corporate Website (https://www.china-airlines.com/tw/en),with the Office of Public Relations as the spokesperson who is responsible for gathering and disclosing company information on amonthly basis and for announcing corporate information to the outside world, including press releases, new interviews, and press
conferences.

(3)Does the Company 
publicly announce
and register theannual financial
report within twomonths after theend of the fiscal
year, and publicly
announce andregister the first,
second, and third
quarter financial
reports and themonthly operating
status earlier thanthe prescribedtime limit?
8. Does China Airlines
have other important
information tofacilitate better
understanding of theCompany's corporate
governance practices(including, but notlimited to employee
rights, employee
care, investor
relations, supplier
relations, stakeholder
rights, director andsupervisor training
regimes, risk
management
policies, and risk
measurement
standards as well as
the implementationof client policies andthe Company'spurchase of liability
insurance for its
directors andsupervisors)?

(3)The financial statement announcements of the first, second, third quarter and annual financial reports of the Company in 2019 have all
been handled several days earlier than the prescribed registration time limit; the monthly operating status has also been registered
within the time limit specified by the regulations.

Deviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No Difference

No Difference

No Difference(1)Employee rights: In addition to obeying the Labor Standards Act, in 2002 the Company signed a collective agreement that remains inforce today. Salaries and remuneration, benefits and insurance are adjusted annually based on the remuneration policy and revenue,
and there are also procedures for merit pay and higher pay for promotions to select and promote outstanding employees.
(2)Employee care: Primarily in three areas:
A. Information:
a. China Airlines has set up a China Airlines electronic bulletin board on the Company’s internal information webpage to announce
welfare information of the Company (such as childcare measures, various welfare subsidies, complimentary/discounted tickets andemployee stock ownership trust). We have also set up a retirement/resignation section to thoroughly explain various proceduresfor handling retirement/resignation. In addition, a mailbox for all employees and the Team+ real-time messaging platform havebeen established to inform employees of important messages.
b. Wecare listens mailbox, Speak Out employee communication mailbox, Team+ real-time messaging platform, etc. have been
established to provide employees with two-way channels to fully express personal opinions and demands.
B. Organizational:
Based on the scale and dependencies of each unit in the Company, employee relations departments or dedicated personnel havebeen established to be responsible for good communication channels and overall management of relations, assisting in publicizing
various beneficial policies of the Company and eliminating misunderstandings by improving internal employee satisfaction,cohesiveness, feeling of identification with the Company, and work achievements at appropriate times.
C. Systematic:
Periodically hold labor-management conferences and supervisor-employee communication meetings and have employee benefits
committee members participate in meetings with various types of unions and employee representatives to tell employees about
related governance actions at appropriate moments; each resolution gives full respect to employee opinions and interests.
(3)Investor relations:
The Company has established Rules for Handling Investor Relations by which it handles all investor concerns or opinions. A total of 6
were handled in 2019, and the company will continue to announce and respond with operation-related results according to laws,
regulations, and investors’ demand.
(4)Supplier relations:
In accordance with the Company’s Regulations Governing the Procurement and Inspection of General Items, except for patents andemergency procurement, all procurement shall be processed through open tendering and the tender announcement shall be disclosed
on the Company’s website to establish a transparent, open, fair, and competitive trading environment. At the same time, the Company
requires suppliers to issue a “Tenderer Declaration” before bidding, which regulates that suppliers must comply with the integrity andethical requirements including the principle of conflict of interest avoidance, anti-bribery regulations, and supplier integrity, as well as
requiring suppliers to abide by relevant local laws and regulations.
(5)Stakeholder interests:

46 Corporate Governance ReportStatus of Implementation

Evaluation ItemYes NoBrief Explanation

Deviations
from theCorporate
GovernanceBest-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

The Company website has a “Stakeholder Contact” and other diverse communications channels and platforms to appropriately andeffectively address all manner of stakeholder complaints and wishes.
(6)Continuing education for directors and supervisors: see P.66 for details.
(7)Status of implementation for risk management policy and risk balance standards:
The Company's operations are enormously impacted by both the domestic and international environment. So as to further improve therisk management system mechanism and reduce the effect created by interplay among risks, the Company has established a Risk
Committee answering directly to the Board of Directors. The committee meets once per quarter and issues periodic reports to the Boardof Directors, assisting the Board in oversight of the setting, and results and adaptive measures related to company risk management
strategies. See P.40 for operation details.
Moreover, to establish a solid internal governance system, the Company has additionally set up the China Airlines Procedures for
Handling Important Internal Information, Ethical Code of Conduct for Directors, Ethical Code of Conduct for Senior Supervisors and Rules
for Employee Conduct in the Course of Work.
(8)Implementation of customer policies:
The Company takes the initiative to send service satisfaction questionnaires to members’ mailboxes (non-members can also fill out thequestionnaire on the official website) to obtain passenger experience satisfaction with the Company’s passenger flights and theirsuggestions;A total of 314,754 effective customer satisfaction questionnaires were completed in 2019, with a satisfaction rate of
87.70%. After compiling and analyzing statistics, the above data have been reviewed and the products and services will be improved,
where necessary, to comprehensively enhance customer satisfaction.
(9)Company purchase of liability insurance for directors and supervisors:
The Company purchased liability insurance for all Directors in both 2019 and 2020 to reduce and diversify the Directors' legal liability
risks. Important contents, such as Directors' liability insurance insured amount, coverage and premium rate, have been reported in the
5th meeting of the 21st Board of Directors on March 20, 2019, and the 10th meeting of the 21st Board of Directors on March 18, 2020,
respectively.
9. Please explain improvements that have been made in response to the results of the Corporate Governance Evaluation issued by the Taiwan Stock Exchange Corporate Governance Center:(1)The Company’s annual report and website have fully disclosed the specific management goals, current achievements, and other information of the Board members’ diversification
policy, providing detailed descriptions of the diversification policy and implementation situation; it has also been disclosed that the selection of Board members is based on the theirabilities while also considering diversity, including basic components (for example: age, gender and nationality, etc.), experience and skills (for example: aviation, sea freight,
transportation, finance and accounting, law and insurance, electricity, technology, and public utilities, etc.), as well as business judgment, business management, leadership anddecision-making, and crisis management capabilities-sufficient to fully demonstrate that the existing Directors have a high degree of cross-industry, diversified, and complementary
capabilities.
(2)The Company has set up a Chief Corporate Governance Manager to be responsible for corporate governance related matters, and has explained in the Company’s annual report its
functions and powers, and the operation and execution situation of its key businesses.
(3)The Company has, by the resolution of the Board of Directors in January 2019, approved the “Regulations Governing the Board Performance Evaluation,” and completed the 2018 and2019 performance self-evaluation of the Board of Directors. The evaluation results have been published in the annual report and on the website of the Company;in addition, on the
Company’s website and the corporate social responsibility website, the communication situation between the Independent Directors and the chief audit executive and accountants;
the operation status of functional committees other than those required by laws; the implementation status of ethical corporate management; and the information relevant tostakeholder communication, etc., have also been disclosed.

Corporate Governance Report47

3.3.5 Composition, Responsibilities, and Operations of the Remuneration
Committee

The objective of the Remuneration Committee is to assist the Board in implementing and assessing theCompany’s overall compensation and benefits policy and director and manager remuneration.

A. Professional Qualifications and Independence Analysis of Remuneration Committee
Members

Title(Note 1)

Independent
Director(Chairman)
Independent
Director
Other

Criteria Meets One of the Following Professional
Qualification Requirements, Together with atLeast Five Years’ Work Experience
An instructor
A judge, public
or higher
prosecutor,
Has work
position in a
attorney,
department of Certified Public experienc
in thecommerce,
Accountant, or eareasoflaw, finance,
othercommerc
accounting, or professional or e, law,othertechnical
finance,academic
specialist whoordepartment
has passed a
accountin
related to the nationalg, orbusiness
examination
otherwiseneeds of theand beennecessaryCompany in a awarded afor thepublic or
certificate in abusiness
private junior professionof thecollege,necessary forcollege or
the business of Company
Name
university
the Company

Independence Criteria (Note 1)

1

2

3

4

5

6

7

8

9

Number of
Other PublicCompanies inWhich theIndividual is Remarks
Concurrently
10 Serving as a
Remuneration Committee
MemberShen, Hui-Ya



























1

-

Chang, Hsieh
Gen-Sen



























1

-

He, Jyun-Huei



-























0

-

Note 1: Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during their term(s) in office.
1. Not an employee of the Company or any of its affiliates.
2. Not a director or supervisor of the Company or its affiliated enterprise (except for independent directors appointed in accordance with
the Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company,
its subsidiary or a subsidiary of the same parent).
3. Does not hold more than 1% of the Company's outstanding shares in their own names or under the name of spouse, underagechildren, or proxy shareholder; nor is a top-10 natural-person shareholder of the Company.
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the manager
listed in (1) or the personnel listed in (2) and (3).
5. Not a director, supervisor or employee of a corporate shareholder who directly hold more than 5% of the total issued shares of thecompany, is within the top five shareholders, or appointed a representative to be a director or supervisor of the company inaccordance with Article 27, Paragraph 1 or 2 of the Company Act (except for independent directors appointed in accordance with the
Act or the laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its
subsidiary or a subsidiary of the same parent).
6. Not a director, supervisor or employee of another company controlled by the same person who hold more than half of the Company's
director seats or voting shares (except for independent directors appointed in accordance with the Act or the laws and regulations of
the local country by, and concurrently serving as such at, the Company or its parent company, its subsidiary or a subsidiary of thesame parent).
7. Not a director, supervisor or employee of another company or institution with the same person or spouse as the chairman, generalmanager or equivalent of the Company (except for independent directors appointed in accordance with the Act or the laws andregulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or asubsidiary of the same parent).
8. Not a director, supervisor, manager or shareholder holding more than 5% of shares of a specific company or institution that has
financial or business dealings with the Company (except for independent directors appointed in accordance with the Act or the laws
and regulations of the local country by, and concurrently serving as such at, the Company and its parent company, its subsidiary or asubsidiary of the same parent and if the specific company or institution holds more than 20% but less than 50% of the total issued
shares of the Company).
9. Not a professional who provides auditing related services to the Company or its affiliates and did not provide commercial, legal,financial or accounting related services to the Company or its affiliates with cumulative amount of remuneration obtained in the last
two years exceeding NT$500,000; and is not an owner, partner, director, supervisor, or manager, or the spouse of any of the above, ofa sole proprietorship, partnership, company, or organization that provides such services to the Company or its affiliates. However, thisdoes not apply to the members of the Remuneration Committee, the Public Takeover Review Committee or the Special Merger andAcquisition Committee who perform their functions and powers in accordance with the relevant laws and regulations of the Securities
and Exchange Act or the Business Mergers and Acquisitions Act.
10. Not a person of any of the conditions defined in Article 30 of the Company Act.
Note 2: The Remuneration Committee is composed of four members. For the Remuneration Committee Charter, please refer to the Company
website: https://www.china-airlines.com/tw/en/investor-relations/important-company-regulations

48 Corporate Governance Report

B. Attendance of Members at Remuneration Committee Meetings

The Company's Remuneration Committee has a total of 3 members, and the term of the current
Committee members: June 27, 2018, to June 26, 2021.
The Remuneration Committee convened four meetings over the past year (from January 1, 2019,
through April 25, 2020). Committee member attendance is detailed below:
Title

Name

Attendance in Person

By ProxyAttendance Rate (%)

Remarks

Independent Director(Chairman)

Shen, Hui-Ya

40100% None

Independent Director

Chang, Hsieh Gen-Sen40100% None

Other

He, Jyun-Huei

40100% None

Other mentionable items:
1. The members of the Committee shall exercise the due care of a good administrator, perform the following functions and duties faithfully, and shallbe responsible to the Board of Directors and submit their recommendations to the Board of Directors for discussion:(1)Establishment and regularly review of policies, systems, standards, and structures for performance evaluation and salary and compensation for
Directors and managers.
(2)Regular evaluation and setting up of salary and compensation for Directors and managers.
(3)Regular review of matters related to the organization regulations for the Board of Directors’ revision.
(4)Other matters handed over for discussion by the Board of Directors.
2. If the Board of Directors declines to adopt or modifies a recommendation of the Remuneration Committee, the date of the meeting, session,
content of the motion, resolution by the Board of Directors, and the Company’s response to the Remuneration Committee’s opinion (e.g., theremuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for thedifference shall be recorded): None.
3. Resolutions of the Remuneration Committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the dateof the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified:Handling of members’
Resolution
Meeting Dates
Agenda content
opinions by the Company
January 21, 2019
Chairman and Managers' 2018
Approved by all attending members
4th Meeting of theYear-end Bonus and 2019 Lunar
to be reported to the Board of
No further business
Remuneration Committee of
New Year Incentive
Directors for discussion.
the 21st Board of Directors
Adjustment of travel expense for
Directors (including Independent
Directors)
May 8, 2019
5th Meeting of theRemuneration Committee ofthe 21st Board of Directors

Proposal for salary andremuneration of Chief Corporate
Governance Manager
Proposal for salary andremuneration of Chairman Hsieh,
Su-Chien
Proposal for the service pay offormer Chairman Ho, Nuan-Hsuan

October 23, 2019
6th Meeting of theRemuneration Committeeof the 21st Board of
Directors
January 13, 2020
7th Meeting of theRemuneration Committee ofthe 21st Board of Directors

Amendment to the Remuneration
Committee Foundation Policy
Amendment to the Regulations
Governing the Board
Performance Evaluation
Chairman and Managers' 2020
Lunar New Year Incentive

The inclusion of the Chief
Corporate Governance Manager
in the management of theRemuneration Committee wasapproved in accordance withregulations governing the Chief
Corporate Governance Manager;
this matter has been reported to
the Board of Directors fordiscussion.

No further businessApproved by all attending
members to be reported to theBoard of Directors for discussion.

No further businessApproved by all attending
members to be reported to theBoard of Directors for discussion.

No further businessCorporate Governance Report493.3.6 Corporate Social Responsibility and Deviations from the Corporate Social
Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies
Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No Difference

1. Does the Company, based on the materiality
principle, conduct risk assessments onenvironmental, social and corporate
governance issues related to the Company’s
operations and formulate relevant risk
management policies or strategies?



The Company has set up a “Risk Management Committee” under the Board of
Directors to assist the Board of Directors in reviewing the formulation of Company’svarious risk management strategies, their implementation results, and response
measures on a quarterly basis, and requires each unit to be responsible for controllingeach major type of risk. Among which, safety and operation risks are cross-unit
operational risks and shall be handled by the Company’s management level. The“Corporate Safety Committee” and the “Corporate Sustainability Committee” havebeen established under the President of the Company to be responsible for such risks
and report the environmental and energy management performance to the top
management on a quarterly basis. In addition, through the routine “Sustainability
Committee” and “Board of Directors and Risk Management Committee” meetings,
reports have been made to the Directors on environmental and climate risks,
opportunity issues, and various responding control operations and development
plans.

2.Has the Company designated full- (or part-)
time personnel to implement corporatesocial responsibility policy with senior
management authorized by the Board of
Directors to manage them, and do they give
status reports to the Board of Directors?



3.Environmental issues(1)Has China Airlines established anenvironmental management system that is
specifically designed with the Company's
operations in mind?



The Company has set up a Corporate Sustainability Committee in 2014, which is solely No Difference
responsible for the promotion of sustainability and is the highest governanceorganization for sustainability governance promotion, with the President sitting as its
Chairman. There are six major task forces in the Committee, based on different
aspects of sustainability, which are “Trust Value Team, Manpower Value Team, Joint
Creation Value Team, Environmental Value Team, Social Value Team, and Sustainable
Development Foundation Team.” Their main responsibilities are strategy formulation,business planning, and promotion of different aspects of sustainability; the teams
report the implementation status to the Board of Directors on a regular basis every
year in accordance with the Corporate Social Responsibility and Sustainable
Development Best-Practice Principles. The results of the 2018 CSR operation and the2019 CSR operation plan were reported in the 9th meeting of the 21st Board of
Directors on January 13, 2020.
(1)Environmental management organization and system
No Difference
A. In 2011, the Company was the first in Taiwan’s industry to establish a “Corporate
Environmental Committee,” in which the President serves as the representativeof the top management, and the Corporate Safety Office serves as the executive
secretary. According to the business attributes, five major environment
management committees were established to respectively control and carry out
aviation, maintenance and cargo transport service, headquarters and branchadministration, environmental, energy, climate change and other risk andopportunity management related affairs of the operational activities, fully
covering the corporate business scope. The Corporate Environmental Committee
coordinates and integrates various environmental, energy, and climate change
risk and opportunity response strategies and management resources throughquarterly management meetings. Related important resolutions are also
reported to the Directors through routine Board meetings and Risk Management
Committee meetings.
B.In order to integrate environmental protection operations into the daily
operational risk management operations of the enterprise, China Airlines has
introduced a number of international standard management systems since 2009,and has established and improved the environmental management operation
mechanism of the enterprise, covering risk issues such as greenhouse gases,
environmental management, and energy management. The Company has
formulated management strategies and action measures for relevant risks andopportunities identified in various aspects of the environment. Beginning in 2017,
the Company has introduced life cycle thinking and completed control over every
link of the organization's operations; also, considering the issues of interest to
stakeholders, the Company has further improved the level and perspective ofenvironmental and energy risk management, and become comprehensively inline with the standard thinking of international enterprises’ sustainable
development governance. System standards covered by China Airlines’
environmental management mechanism:
ISO 14064-1
ISO 14001
ISO 50001
Greenhouse gas
Environmental
EnergyStandard
inventory andmanagement
management
management
systemsystemsystemTime of
2012
2013
2009
introduction(Note1)(Note2)50 Corporate Governance ReportImplementation Status

Evaluation Item

Yes

No

Brief Explanation

ISO 14064-1
ISO 14001
ISO 50001
Greenhouse gas
Environmental
EnergyStandard
inventory andmanagement
management
management
systemsystemsystem(1)Global aviation(1)Aircraft/engi(1)Aircraft/engine
fuel
nemaintenancemaintenance
operation(2)Ground
operation(2)Flight operation
operations inand management
Taiwan,(2)Flight
including CAL
operation
Park,
and
Scope
maintenancemanagement
facility, Taipei(3)Cargobranch (floors
transport
B1, 1, 2, and 9),
service
Songshan Park,(4)Passenger
and Kaohsiungtransport
branch.
service
Note 1: The ISO 14001: 2015 version transferring operation was completed in2017, and the certificate is valid through March 28, 2022.
Note 2: The ISO 50001:2018 version transferring operation was completed in
2019, and the certificate is valid through April 11, 2022.
(2)Has the Company endeavored to makemore efficient use of resources and use
renewable materials that have a lower
impact on the environment?

(2)The Company’s implementation of environmental and energy performance
management mainly promotes various resource conservation and reuse strategies
and practices based on the “Environmental and Energy Management Policies,” asfollows:
Promotion
strategies
˙Understanding
Complying with Performing
environmental
environmental compliance
protection trends
laws andobligations andin Taiwan andregulations
fulfillingabroad, andenvironmental
improving theprotection andnegotiationenergy conservation
channel andresponsibilities.
platform forstakeholders.
˙Actively
participating ininternational
cooperation andunderstanding
mainstream
issues.
˙Perfecting
management/sup
ervision andevaluation
mechanism
Concepts

Conserving the
Earth's
resources

Policies

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

No Difference

Plans of action

˙Regular regulatory
requirements
checks andself-commitment
reviews
˙Actively
participating indomestic andforeign industry
and government
meetings to grasp
the trends ofregulations.
˙Implementation ofcheckingmechanism for
management
system complianceobligation
˙Participation in
DJSI, CDP, andother leadinginternational
evaluations
˙Understanding
˙Continuously
Establishing
updates to ISO
improving theenvironmental andstandards,
operationalenergy management
implementing andquality of thesystems, andperfecting thecorporate
management
improvement ofenvironmental
performanceenterpriseand energy
indicators.
Environmental
management
Management
systemSystem, EMS.
˙Developing and˙Improving theimplementing
checking, oversightenvironmental
and evaluation
performance andmechanism forcarbon reduction
environmental,
targets
energy, andcarbon emission
risks

Corporate Governance Report51

Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Improving
eco‐efficiency

Implementing
˙Creatingenvironmental anddiversified
energy conservation
guidance andeducation to foster
communication
employees’
channels
environmental
˙Establishingawareness.
incentive
programs tomotivatecolleagues topractice anddevelopenvironmental
protection ideas.

Implementing green ˙Establishing a
supply chain
supply chain risk
management toassessment andenhance overallmanagement
eco-efficiency.
system˙Establishingenvironment andenergymanagement
capacity forcompanies of theGroup

52 Corporate Governance Report

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
˙Establishing andimplementing
various energy
conservation,
carbon reductionand environmental
performancetargets
˙Implementing
internal audit andmanagement
reviewmechanisms andconducting third
party verification.
˙Establishing a Task
Force onClimate-Related
Financial
Disclosures (TCFD)
system˙Establishing a
corporate“Environmental
Management
Information
System” tounderstand anddocument
historicalenvironmental
performance.
˙Implementing
environmental
and energy-saving
education for all
employees
˙Organizing anannual“environmental
protection
education
seminar” and“environmental
protection
competition”
˙Establishing aplatform topromote newknowledge ofenvironmental
protection andenergyconservation fromtime to time
˙Establishing a
reward system for
proposals
˙Cultivating theGroup’s and key
suppliers’
environmental
talent˙Holding value
chain
environmental
protection andenergy saving
education andtraining
˙Performing supply
chain risk
assessment
operation

Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Fulfilling social
responsibility(3) Does the Company assess the potential
corporate risks and opportunities createdby climate change now and in the futureand does it take measures to deal withclimate related issues?



Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

Creating alow‐carbon
operatingenvironment toestablish continual
improvement ofenergy andenvironmental
performance.

˙Optimizing
devices
performance
˙Promoting
energy-saving
education andestablishingcorporateenergy-saving
culture.
˙Introducing
low-carbon andrenewableenergy facilities

Supporting green
design andprocurement topromoteenvironmental
sustainability.

˙Deepening theawareness ofplanners inenvironmental
protection andenergyconservation
˙Promoting green
procurement andgreen consumer
culture˙Organizing
conferences andregular meetings
for suppliers tocommunicate
China Airlines'
sustainability andenvironmental
protection
requirements.
˙Checking andoptimizing energy
equipment andmanagement
measures˙Establishing andimplementing
energyconservation
management andeducational
programs
˙Mastering
technology andregulatory trends,
and introducing
renewable energy
equipment in atimely manner.
˙Incorporating
service process
into the operation
scope of theEnvironmental
Management
System (EMS) andstrengthening
personnel
training.
˙Including
environmental
protection andenergy saving
effects as the key
considerations for
procurement
˙Establishing andpromoting “Green
Fares - Carbon
Exchange Service”
˙Usingenvironment-frien
dly certified
on-board spare
products andsellingenvironment-frien
dly duty-free
products
˙Diversifying thepromotion ofgreen consumerawareness(3)The Company's climate change risk and opportunity management is as follows:
No Difference
A. Climate risk and opportunity management mechanism
With respect to specific issues, the Company has established functional task
forces under the corporation's Environmental Committee, including thefollowing task forces: Carbon management task force, aircraft alternative fuelresearch task force, TCFD work task force, among others, to facilitate
cooperation among units and flexible allocation of required resources.
B. Climate risk and opportunity response measures
Through the carbon management and the TCFD work task forces, the Company

Corporate Governance Report53Implementation Status

Evaluation Item

Yes

No

Brief Explanation

identifies its environmental risk opportunity matrix, considers theidentification and adjustment of changes in external specifications andtechnological development environmental conditions, brings the top nine
topics into the scope of corporate environmental risk management andactively controls the response. Other issues have also been continuously
improved through the operation of the corporate Environmental Management
System (EMS).
Potential risks
Potential opportunities
Response measures
˙ Poor weather
˙ Continue to strengthen
˙ Enhance emergency
conditions lead toresponse ability,
operational
flight delays,
properly handle
procedures andcancellations, etc., andcustomer needs,
emergency response
increase business
improve service quality
mechanisms,
operation costs.
and reputation.
strengthen personnel
˙ The maintenance˙ Properly handle andtraining, and improvefrequency and quality
meet customer needs,
the inter-unit
assurance
and improve thecoordination andrequirements arecorporate tenacity andbusiness operational
increased, meaning
reputation.
efficiency within theincreased costs.
organization.
˙ Bring in a professional
˙ The operational
meteorological team,efficiency of related
improve the accuracy
equipment is reduced,of meteorologicaland operational costs
forecasts, and activate
are increased.
the aircraft dispatching˙ The demand for
operation as early as
passenger and cargopossible.
transport is reduced,
˙ Enhance theand revenue iscoordination of supply
reduced.
chain management
and partnership,
ensure the safe andeasy transportation of
goods and personnel
at all stages.
˙ Higher oil prices
˙ Effectively adjust the
˙ Diversified financing
increase businessrisk of rising fossil fuelchannels
˙ Continuous evaluation
operation costs.
pricesand introduction of˙ The use of aviation
˙ Improve the
new technology (newsustainable fuelconsumption andenergy-saving aircraft,increased, the ratio ofefficiency offuel-saving technology,
fuel added increased,
low-carbon energy andetc.)
and the operational
reduce energy
˙ Continue to promote
cost increased.
expenditure.
the measures of˙ Use aviation
aviation fuel saving
sustainable fuel to˙ Energy consumption
improve brandinventory andbenefits and revenue.
improved efficiency inflight and ground
operations
˙ Promote thedevelopment ofalternative fuels in
Taiwan˙ With the growth of
˙ Continue to reduce
˙ Proactively participate
business, carbon
greenhouse gas (GHG)
in negotiation andemissions continue toemissions and reduce
communication
grow, increasing
our sensitivity to
between publiccarbon exchange andchanges in carbon
departments andregulatory costs.
transaction prices.
international
˙ Install/purchase˙ Derivative income fromorganizations
˙ Establish a carbon
renewable energy
carbon rights sales
discharge monitoring
facilities or adjust work ˙ Improve the energy
and management
details, increasing
efficiency of flight andsystembusiness operation
ground operations and˙ Understandcost.
reduce energy
fluctuations in the
expenditure.
carbon market andmanage carbon rights
appropriately.
˙ Planning andimplementation ofeach item in carbon
reduction measures
˙ Unstable supply of raw ˙ Open up new markets ˙ Carry out supply chainmaterials
and increase revenue.
management guidance
˙ Increase in
˙ Use raw materials ofand strengthen supply
procurement costs
the current season to
chain fitness.
adjust meals and˙ Coordinate with the

54 Corporate Governance Report

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and ReasonsImplementation Status

Evaluation Item

Yes

No

Brief Explanation

reduce costs.
˙ Sign long-term
contracts with relevant
supply partners tomaintain stable
services.

˙ Investors reduce their
willingness to invest
˙ Capital investment isrequired to promote
the consideration ofhighly efficient
aircraft/sustainable
fuel investment.

˙ Work with stakeholders
to adapt to the climate
and capture business
opportunities by using
innovative solutions.

˙ The risk of infectious
˙ Plan to promotediseases has increased,
low-carbon services
reducing the demand
and thereby enhancefor tourism andconsumer support forchanging the demand
our brand.
˙ Master the market
for cargo transport.
˙ The consumer market
model of low-carbon
attaches great
economy/transportati
importance toon issues and create
low-carbon andbusiness opportunities
environmental
and increase
protection ofcompetitiveness.
corporations, both ofwhich affect brandtrust and reducerevenue.
˙ Improvements in theawareness of carbon
reduction changed thedemand for airtransport (such aschanging to cruiselines, high-speed rail,etc.).

˙ Does not meet the
expectations ofstakeholders, affects
brand reputation.
˙ Failure to properly
manage supply chain
issues, affecting
operations.

˙ Strengthen theprediction systemmechanism, maintainthe rights and interestsof customers, andstabilize revenue.
˙ We process emergency
situations properly,
increasing the public's
trust.
˙ Promote supply chain
cooperation andenhance corporate
sustainable
competitiveness.
˙ Cooperate with andsupport the
government's
environmental
protection policies,
enhance industrial
cooperation
opportunities, andpromote industrial
competitiveness.

season to flexibly
adjust raw materials
used in meals to adapt
to climate change
trends, understand thecompliance of goods
carried, and strive fornew market
opportunities.
˙ Discuss acrossdepartments, develop
new routes andservices.
˙ Develop a travel mode
to save fuel and time
˙ Continue to research
and analyze newtechnologies, facilities,
and services, andintroduce feasibility
evaluation.
˙ Cooperate with thegovernments of all
countries to manage
the disease properly,
strengthen
self-protection andresponse, and reducethe degree of impact.
˙ Develop all kinds of
new products/services,
improve service
efficiency, and meetmarket demand.
˙ Launchenvironmentallyfriendly travel service
ECO TRAVEL, invite
passengers toparticipate in carbon
reduction and enhancegreen/low-carbon
business
opportunities.
˙ Continuous researchand development of
new market channels
or customer groups
˙ Develop diversified
green and low-carbon
activities andstrengthen customer
communication.
˙ We continue tostrengthencommunication
between external
stakeholders, supportscientific research,
participate ininternational
environmental
sustainability
comparison
assessments, andenhance the corporate
sustainable image.
˙ Strengthen employee
education and training,
hold environmental
protection and energy
conservation activities,
and improve employee
awareness.
˙ Strengthen
cooperation withdomestic and overseas
suppliers of
low-carbon products
to enhance thesustainable value ofthe supply chain.

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

Corporate Governance Report55Implementation Status

Evaluation Item

(4) Has the Company compiled statistics on
the past two years of GHG emissions,water usage, and waste amounts, and has
it devised policies for energy conservationand carbon emissions reduction, GHG
emissions reduction, water conservation,and other waste management?

Yes



No

Brief Explanation(4)The Company's environmental/carbon/energy performance management is asfollows:
A. Greenhouse gas inventory and verification
Since 2009, the Company has actively implemented ISO14064-1 greenhousegas management, conducted and organized inventory of greenhouse gas
emissions generated by operations, and carried out third-party verification.
Greenhouse gas emissions
Scope of GHG
2018
2019
Aviation operations
7,229,903
7,059,083
Scope 1
Ground operations
3,511
4,981
Scope 2Ground operations
19,94918,169Total (Tons CO2e)7,253,363
7,082,233
B. Greenhouse gas management and reduction strategy
The Company’s greenhouse gas management and reduction strategy takes into
account the international industrial carbon reduction targets, strategy
implementation and benchmarking technology of the same and different
industries. It combines its corporate financial operation plan and technicalfeasibility to formulate air and ground carbon-reduction targets. In the future,
it will continue to incorporate the Science-Based Target (SBT) concept to carryout rolling inspection of corporate carbon reduction objectives andmanagement paths through the corporate risk management mechanism andplatform.
Carbon reduction
goals

Aviation

GroundTarget description

2020

To increase aviation fuelefficiency by 1.5% every year
on average

2025

To increase aviation fuelefficiency by 1.5% every year
on average
Cooperate with CORSIA topromote CNG2020
operations

2030

Reduce carbon emissions by
50% by 2050

2020

38% reduction in carbon
emissions2025

42.34% reduction in carbon
emissions2030

50% reduction in carbon
emissions2019 Achievement rate
In 2019, the actual
performance of fuelconsumption efficiency
was 0.2459
tons/thousand RTK, andthe pre-established target
value of 0.2147
tons/thousand RTK was
not achieved. Follow
CORSIA, carry out MRV
operations on
international routes in
2019.

The actual groundemissions in 2019
amounted to 23,150
CO2e; when compared tothe expected target valueof 22,712 tons of CO2e forthat year, theachievement rate is 97%.

Aviation operations was the first phase carbon reduction target to be achieved
for the airlines industry: "By 2020, fuel consumption efficiency will be increasedby 1.5% every year." The Company will continue to strengthen fuel consumption
efficiency countermeasures, and has formulated four major fuel saving
strategies, including "promoting green energy flights," "improving ground service
controls," "continuous regular maintenance" and "fuselage weight reduction,” aswell as a number of specific implementation measuresHowever, due to changes
in the internal and external business environments in 2019, although total
aviation fuel consumption decreased by 53,986 tons, a decrease of 2.36%
compared with 2018, performance in revenue ton kilometer (RTK) decreased by
471,498 kiloton-kilometers, a decrease of 4.94% compared with 2018; theoverall fuel consumption efficiency was 0.2459 tons/thousand RTK, which failed
to reach the target value set in 2019 (0.2147 tons/thousand RTK).
For ground operations, 57 environmental management KPIs and 15 fuel saving
measures were promoted in 2019, which resulted in a total annual carbon
reduction of 124,365 metric tons of CO2e; among which, carbon reduction in
ground operations amounted to 1,747 metric tons of CO2e. Various data are as
follows:

56 Corporate Governance Report

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No DifferenceImplementation Status

Evaluation Item

Yes

No

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

Brief Explanation

Item
Aircraft fuel savings
Ground fuelconservation

48,447

Kiloliter

Carbon reduction (TonsCO2e)
122,618

236

Kiloliter

620

Savings

Unit

1,000 kilowatt
Energy conservation
1,940
1,075
hours
1,000 kilowatt
Water conservation
3
1
hours
Paper conservation
12
Tons
51
2019 total carbon reduction
124,365
C.Targets and achievements in energy resource reduction
The Company sets various environmental protection and energy conservation
objectives in accordance with sustainable development goals (SDGs):
Achieve2020 expected targets
Item2019 targets
ments
Did not
meet
Aviation fuelImprovement of 1.5%
Improvement of 1.5%
target over 2018
efficiency
over 2018(Note)
Ground carbon
Reduction of 36.7%
Reduction of 38% over97%
emissionsover 20092009
Reduction of 0.75%
Reduction of 1.5% over
Water resources
100%
over 20182018
Reduction of 1% overReduction of 2% overDomestic waste
100%
2018
2018
Hazardous
Recycling ratio reached
Recycling ratio reached100%
industrial waste
40%
40%
Reduction of 2.5% overReduction of 5% over
Photocopy paper
100%
2018
2018
Note: Affected by the operating environment, the efficiency of fuelconsumption is poor.
D.Increased energy efficiency
After obtaining "Diamond Green Building Label" certification in 2017, theheadquarters for China Airlines continued to promote equipment renewal,
optimize operational processes, and improve overall energy efficiency ofbuildings; in 2019, the Company further responded to Taiwan's green energy
policy. It completed the installation of 99kW solar photovoltaic facilities on theroof of the simulator training building for parallel power generation to support
Taiwan's renewable energy through practical actions. As of December 31,
2019, it has generated about 90,000 kWh of electricity and reduced emissions
by about 48 tons of CO2e. The Company was awarded the Bureau of Energy’s(MOEA) Conservation Benchmark–Silver Award, Taipei Energy Conservation
Leadership Award, and No. 1 in the Taoyuan Airport Energy Conservation andCarbon Reduction Reward Competition.
E.Water resource utilization increase
The total water consumption of the Company in 2019 was 146,490 kWh, which
is about 1.17% less than that in 2018. Among which, the China Airlines
headquarters park is located in a specific area of the airport. The airport
management unit collectively applies for and obtains tap water from the watersupply unit and pays the sewage treatment fee. The domestic sewage iscollected and sent to the domestic sewage treatment plant for treatment. The
maintenance facility, Songshan Park, and Taipei branch apply directly for watersupply from the water company.
In order to reduce the risk associated with water resources, the Company has
successively set up water meters at important water line nodes, and it tracks
and analyzes the direction of water resource flow and water consumption hot
spots, and promotes water reduction and recycling measures, including:
Purchasing water conservation label products, promoting water conservation
advocacy, setting up a rainwater recovery system, recycling cooling water andintroducing Eco-shine, etc.
Item
Unit
107
108
Tap water use volume
Kilotons
148.22146.49Recycled water use volume
Kilotons
31.94
17.41
Recycling percentage % (recycled%21.55%
11.88%
volume/water use total volume)

Corporate Governance Report57Implementation Status

Evaluation Item

Yes

No

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons

Brief Explanation

F.Waste Management
The Company processes waste management in accordance with the five
following principles: Refuse, Reduce, Reuse, Recycle, Repair. We have set a
goal for 100% resource reclamation of waste and have annually increased
waste reuse rate.
Waste
Management
Strategies and goals
Actions
Principles
Cooperate with suppliers to develop
and purchase non-disposable plastic
Refuseproducts (such as: wooden cocktail
Through green designstir rods);Increase green procurement.
and procurement,
Accurately plan business and service
reduce resource
supplies to reduce consumption;
consumption andimprove maintenance processes andwaste disposal
reduce end waste;Implement
Reducedemand at the source.
electronic teaching materials andoperations, conserve paper arisingfrom training and communication.
Improve the reuse ratio (e.g: plastic
waste bucket) of hazardous industrial
Reuse
Through improvement
waste.
of operation
Working with the environmental
processes, improve
protection agency's plastic film
the reuse rate of
Recyclerecycling platform, improving thewaste and reduce therecycling ratio of packaging plastics.
opportunities wherewaste would be
Continue to use passenger and freight
generated.
equipment (such as pallets orRepaircontainers/netting) after repair.
In 2019, the production of ground operation and domestic waste was 702,966
kg, which is about 5.9% less than that of 747,202 kg in 2018. In 2019, the amountof business waste also decreased by 5.9% compared with that in 2018.
2018
2019
Item
Handling method
Domestic
waste
GroundOperational

In the air
Service

Hazardous
industrial
waste

Generalindustrial/
domestic
waste

Non-recyclable
Incineration
Recyclable:
Resources recycled
Non-toxic:
Entrust qualified
organization toremove/dispose
Toxic: solidification
and burial/chemicaltreatment
Non-recyclable
Incineration
Recyclable:
Resources recycled

Total waste (kg)399,266

381,626

347,936

321,340

251,317233,018

16,434

18,8152,674,334

3,052,461

995,369

1,116,396

4,684,656

5,123,656

4. Social issues(1)Has the Company establishedmanagement policies and procedures inaccordance with relevant laws andregulations and international human rights
conventions?

(1)In the area of comprehensive management systems and organizational capacity, No Difference
the Company not only abides by the Employee Code of Conduct and Employee
Work Standards set forth in various labor laws, but also refers to the Universal
Declaration of Human Rights, the United Nations Global Compact, theInternational Labor Organization's basic compact on core labor standards, the UN
Guiding Principles on Business and Human Rights, and local laws and regulations.
The company has established a Human Rights Policy based on the aforementioned
norms as guiding principles for the Company's management.

(2)Does the company establish andimplement reasonable employee welfare
measures (including compensation,
vacation, and other benefits) thatappropriately reflect the operating
performance or results through employeecompensation?

No Difference(2)Employees are the most important assets of a company. In addition to improved
planning and setting standards for the implementation of salary, work bonuses,
flight safety bonuses, vacation, preferential air tickets, and a number of welfare
measures, the Company allocates performance bonuses, annual bonuses, year-end
bonuses, promotions, and employee compensation with reference to theperformance of employees after the end of each fiscal year and based on the
Company's annual profit situation. The Company takes this opportunity to care forits employees and treat them as the core of its sustainable operations. The
average salary adjustment of all employees of the Company increased by about 2%
in 2019.

58 Corporate Governance ReportImplementation Status

Evaluation Item(3)Does the Company provide employeeswith a safe and healthy work environmentand regularly implement health and safety
education programs for employees?

Yes



No

Brief Explanation(3)In order to protect the rights of employees, provide a healthy and safe working
environment, and create a friendly workplace, the Company has establishedinternal rules and regulations related to "employee complaint measures" and"employee safety report reward operation measures," and provides multiple
communications channels, such as a speaking area, regularly scheduledlabor-management consultation meetings, and special e-mails for complaints invarious cases (including WeCare, workplace sexual harassment, professional
ethics). Such channels are made available to all employees, and complaints are
accepted in accordance with the operational procedures.
A. Keep pace with international double certification in this new era of workplacesafetyTo adapt to trends of global international labor development, improve theefficiency of safety and health management, and promote systematicmanagement measures, the Company established an independent safety andhealth management system and obtained ISO45001:2018 and TOSHMS
certification on April 20, 2019, which serve as the management basis ofoccupational safety and health management system certification.
Self-management and preventive measures based on the PDCA cycle mode areused to effectively control occupational disaster risk, improve occupational
disease preventive management, improve occupational safety and healthmanagement performance, and actively implement occupational safety
policies;Provide a safe, healthy, and comfortable working environment for
employees, and promote industry competitiveness.
B. Occupational safety and health committee for two-way effective
communication
The Company has established an Occupational Safety and Health Committee inaccordance with law. The committee is tasked with the objective of preventing
occupational hazards and protecting the safety and health of all employees byreviewing, coordinating, and making recommendations pertaining to safety
and health related matters. The position of chairman is served by thepresident. There is one vice chairman and one executive secretary under thechairman. The committee consists of the first-level management of designatedunits, occupational safety and health personnel, engineering and technicalpersonnel, medical personnel, and labor representatives appointed by thelabor union as members. A meeting is held once every three months to gather
statistics and analyze the Company’s occupational accidents and to report andfollow up on subsequent safety and health management plans. A total of 14
safety and health proposals were reviewed, coordinated, and provided withsuggestions in the meetings in 2019, and all proposals have been concluded;
relevant meeting minutes have been announced on the Company’s internal
website.
C. Regular implementation of safety and health inspections to discover hazards
and make improvements
A total of 1,488 inspections were conducted in 2019, 402 deficiencies were
found, and those 402 cases were improved, with an improvement rate of100%; random checks on various necessary equipment or facilities of theCompany’s leased transportation vehicles were performed, in addition,maternal health protection for employee workplace and operation hazard risk
and management classification was conducted, with a total of 260 persons. The
workplace environmental risk levels all belong to level-1 management.
D. Full AQD for comprehensive risk assessment
Taking advantage of China Airlines’ Aviation Quality Database (AQD) of all
personnel to reflect hidden hazards of the operating environment andimplement risk assessment to reduce occupational accidents; in 2019, a totalof 98 AQD safety and health related cases were received, and 98 cases were
improved and settled, with an improvement rate of 100%.
E. Strengthening safety and health education and popularizing safety and healthconcepts
We strengthen the promotion of safety and health education at all levels. Every
three years, each person receives at least 3 hours of education and training.
Education and training for supervisors will be held depending on the
promotion and transferring of the supervisors. The members of the
Occupational Safety and Health Committee must complete at least three hours
of safety and health education and training every three years to cultivate
correct attitudes towards safety and health work;assisting in the training ofsafety and health officers at all levels to disseminate safety and healthknowledge;holding necessary education and training sessions for newly hired
labor, transferred labor, safety and health management personnel, special
operators, and supervisors to perform work and prevent disasters, as follows:a.A total of 4 batches of new general personnel’s safety and health educationand training sessions were implemented, with a total of 76 participants.
b.A total of 4 batches of industry-academia interns’ safety and healtheducation and training sessions were implemented, with a total of 76
participants.

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No Difference

Corporate Governance Report59Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasonsc.A total of 2 batches of new supervisors’ safety and health education andtraining sessions were implemented, with a total of 59 participants.
d.One education and training session for all members of the Occupational
Safety and Health Committee.
e.A total of 14 batches of occupational safety and health training sessions forin-service employees.
f.First-aid personnel training.
g.A total of 21 batches of safety and health training sessions for special
operators.
F. Hierarchical safety and health management, and the establishment of safety
and health officers at all levels
Implementing safe and healthy work;initiating a safety and health hazard
identification proposal system to extend the participation in safety and healthto all personnel;regularly strengthening the on-the-job training for safety andhealth officers of various units, including how to identify hazards in theworkplace, risk classification, how to compose management plans, andoccupational accident identification process and operations. Guiding the risk
assessment of units at all levels and conduct prevention and improvement tobuild the concept of a corporate community.
G. The Company held various health promotion activities in 2019. The topics
included cardiovascular disease, infectious disease prevention, physical andmental stress relief, cancer screening, first aid education, pregnancy care, andvision care. The number of sessions and the number of participating employees
are as follows:a. There were 5 health promotion activities in CAL Park, with a total of 252
participants.
b. There were 6 health promotion activities at the Taipei branch, with a totalof 209 participants.
c. There were 4 health promotion activities at the Kaohsiung branch, with a
total of 153 participants.
d. Flu shots: A total of 1,622 persons vaccinated (including 217 persons in
Taipei, 1,325 persons in Taoyuan, and 80 persons in Kaohsiung).
e. A total of 636 cabin crew and first-line ground staff have received MMR
vaccination.
f. Providing a total of 4 issues of “Disease Management Information andBusiness / Travel Suggestion” periodicals to enable colleagues tounderstand domestic and foreign health knowledge, enrich the knowledgeof epidemic diseases, and establish disease prevention concepts.
(4)Has the Company established an effective
career skill development training programfor employees?

(4) In order to cultivate the Company's human resources, the Company has a Training
Advisory Committee, which is responsible for the planning of annual educationand training for all colleagues, including strategic occupational training,
management occupational training, and job training. At the same time, in
accordance with the Company's operational development strategy, and to deepen
the Company's various levels of management professionals and broaden thehorizon of potential talents, strategic and management occupational training washeld on a regular basis to refine employees’ necessary knowledge and skills. In
addition, since 2009, the Company has established a Management Talent Training
and Development System to cultivate talents with international vision andmanagement capabilities, and to strengthen the management knowledge ofmanagement professionals through job experience, management course training,
and rigorous assessment systems. As of today, more than 100 outstanding
management professionals have been cultivated and are now serving in key units
in Taiwan and foreign branches. In 2019, a total of NT$253 million was invested in
the training and development. The total number of training hours exceeded
52,865 hours.

No Difference(5)With regard to customer health andsafety, customer privacy, marketing andlabeling of the products and services, does
the Company follow relevant regulations
and international standards, andformulate relevant policies and complaint
procedures for consumer rights
protection?

(5)In addition to stipulating service commitments, transportation terms andconditions, and disclaimer clauses in accordance with the law, regarding theconsumer rights policies, the Company has also established and disclosed on the
Company’s website the information security policy with its “privacy protection
policy” and “privacy protection statement.” It is committed to protecting theprivacy of all customer personal information. Also, to protect the rights andinterests of the passengers, reservation and ticket-related rules upon flightchanges have been clearly disclosed in the FAQs on the official website.
Furthermore, the Company has in place consumer complaint procedures toprovide consumers with complaint channels for products and services, including:company website (including: stakeholders section, customer feedback, and service
satisfaction survey), Facebook fan page, customer service e-mail, and global
branches’ addresses and phone numbers; consumers may also send letters to theCompany directly. All complaints will be replied to after processing.

No Difference

60 Corporate Governance ReportImplementation Status

Evaluation Item

(6)Has the Company formulated suppliermanagement policies that require
suppliers to follow relevant regulations on
issues such as environmental protection,
occupational safety and health or laborhuman rights, and their implementation
status?

Yes



No

Brief Explanation(6)The Company has formulated the “Supplier Code of Conduct” which specifies that
suppliers shall provide a healthy and safe working environment and shall ensurethat workers respect each other, enjoy dignity and fairness, and abide byprofessional ethical standards;in any case, when providing products and services,suppliers shall strictly comply with the legal, ethical requirements and theircommitment to be responsible to the society and environment;if the Code isviolated, the Company may terminate the business relationship between the twoparties.
Moreover, the Company evaluates the supplier’s past credit history, and reviews
the supplier’s quality, delivery date, and whether there are any negative reports
before dealing with the supplier. In 2019, a total of 118 suppliers were reviewed.
According to the operation of Collaborative Value Task Force under the CSR policyof the Company, risk assessment of “Supply Chain Sustainability Questionnaire(SAQ)” is conducted annually for key first-tier suppliers. The questionnaire includes
aspects such as legal, environmental, social and quality, and information security.
Among them, the legal aspect includes questions concerning ethics, legal
compliance and compliance practices. If high-risk vendors are identified, on-site
inspection will be conducted and guidance will be given to reduce potential risks
and improve existing impact.
In 2019, the Company surveyed 72 suppliers (mainly key first-tier suppliers)
according to the supplier’s sustainable supply chain mechanism. The questionnaire
response rate reached 65%, and the average supply chain sustainability
performance score was 88.88, showing that most of the Company’s suppliers haveinternalized the concept of sustainability in their management mechanisms.
In addition, in accordance with the “Sustainable Supply Chain Management Policy
Statement” of the Company, since 2016, we have requested that every suppliersign the “Supplier Code of Conduct” when making a tender, jointly undertaking tocreate a sustainable industrial environment;we have also continued to promote
the procurement of Green Mark certified products: by the end of 2019, we havecompleted green procurement of approximately NT$19,258,000 in total.

Deviations
from theCorporate
SocialResponsibility
Best-PracticePrinciples for
TWSE/TPEx
ListedCompanies
and Reasons
No Difference

5. Does the Company make reference to
The Company follows the GRI Standards - Core option issued by the Global
No Difference
internationally accepted report preparation
Sustainability Standards Board and refers to the UN Global Compact when preparing
standards or guidelines to prepare its
its CSR Report. In May 2020, the Company’s limited level report verification was
Corporate Social Responsibility (CSR) Reportcompleted by KPMG based on the GRI Standards and ISAE3000 Assurance Standard,
and other reports that disclose theand a third-party verification statement was issued, which has been disclosed on the
Company’s non-financial information? Has
Company’s “Corporate Social Responsibility” section on its website.
the aforementioned report been assured,verified, or certified by a third-party
verification unit?
6. If the Company has drawn up a code for CSR based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, please
describe any differences between said code and the Best-Practice Principles:
In order to fully implement the scope of corporate social responsibility, comply with the government's direction of CSR promotion, and accord withinternational practice, the Company has added to and amended the Company's Corporate Social Responsibility and Sustainable Development Best-PracticePrinciples in March 2017 based on the revised Corporate Social Responsibility Best-Practice Principles for TWSE/GTSM Listed Companies; through this CSR's
highest guiding principle, we have comprehensively reviewed the Company's operational constitution, reflected to the management and execution aspects,
and striven to fulfill corporate social responsibility in three major aspects: environmental, social, and governance (economic) (ESG); there was no operational
difference this year. For related information, please refer to the Company's corporate social responsibility website.
7. Other important information for facilitating the understanding of CSR and its implementation:(1)Promoting the internationalization of local education:
A. Strengthening education: 45,578 persons benefited in 2019
Educational exchange: The Company firmly believes that education is the only way to cultivate more future talent. Therefore, upholding the spirit ofdeeply cultivating the community, giving back to local neighborhoods, and caring for the disadvantaged and the society, we have been cultivating thereading habits of school children through educational volunteers since 2010, and starting from 2013, we began to have long-term cooperation with
universities in Taiwan to provide opportunities to learn professional knowledge and practical skills, strengthening industry-academia collaboration toachieve the ultimate goal of talent cultivation.
Lectures by volunteers: Since its establishment in 2011, the “China Airlines Volunteers Club” has been dedicated to supporting disadvantaged groups insociety. Every year, it regularly visits neighboring schools to give lectures, encourage students to cultivate an international vision, and pass on aviation
knowledge and English lessons. In 2019, 16 lectures in schools such as Xihai Elementary School, Zhuwei Elementary School, Shanfeng Elementary School,
and Kuolin Elementary School in Dayuan District were held. In total, there were 92 participating volunteers and 32 hours of service, benefiting 1,106
students. Upholding the spirit of mutual support and spreading love, the China Airlines Volunteers Club gives back to the society and community withactual actions. In order to realize remote students’ dreams to fly, Mandarin Airlines specially launched a charity dream-come-true journey, arranging forstudents from Hualian Tafalong Elementary School and Nantou Chin-ai Music Experimental School to take the Mandarin Airlines’ Taichung-Hualien flightto visit each other. It allows students from the two schools in eastern and central Taiwan to conduct educational and cultural exchanges and have aprecious experience that will last as a lifetime memory
Since 2014, China Airlines has been working with the Global Views Educational Foundation to collaborate on the “Common Knowledge Platform Public
Welfare Project” sponsorship plan and to donate subscriptions to the “Global Kids Junior Monthly” to students in various elementary schools in Taoyuan
City, Taitung County, Nantou County, and Hualien County to help students develop reading habits and to contribute to the cultural education of children.
In 2019, 102 schools and about 44,472 students benefited. Continuing to hold the “Mandarin Airlines Flying Experience Camp” to provide localized flighttraining opportunities for young Taiwanese students.
B. Environmental coexistence: 552 participants in 2019
Responding to environmental protection: In response to international coastal cleanup activities, the Zhuwei Fishing Port Coastal Cleanup has been held
on a yearly basis since 2011. For the first time, in 2019, we moved the activity to Shalun, Tamsui, where a total of 552 employees and their family

Corporate Governance Report61Implementation Status

Deviations
from theCorporate
SocialResponsibility
Evaluation Item
Best-Practice
Yes NoBrief Explanation
Principles for
TWSE/TPEx
ListedCompanies
and Reasons
members from various units in the China Airlines Group participated. In addition, we extended the activity to be held in Cijin, Kaohsiung. We cherish theearth with concrete actions and playing our part in environmental protection.
Animal conservation: Mandarin Airlines continued its blue-tailed bee-eater eggs incubation project with the Taipei Zoo, and Kinmen County assisted in airtransporting these little VIP eggs to Taipei for incubation. Through the participation of Mandarin Airlines in the “Kinmen Blue-Tailed Bee-Eater
Abandoned Eggs Incubation and Research Project,” this flock of cute “summer fairies,” i.e. the blue-tailed bee-eaters, was successfully born in the Taipei
Zoo in 2019 and made their debut with the establishment of the Tropical Rainforest Area in July.
(2)Enhancing international visibility of local brands in Taiwan:
A. Humanitarian relief: 419 persons benefited in 2019
In 2019, the Company continued to promote the “In-flight Doctors” project, combining the resources of aviation industry with medical professions, sothat passengers can have safer and more protected flights. China Airlines has been cooperating with Chang Gung Hospital since 2017. In July 2018, we
expanded such cooperation and established the “In-flight Doctors” project with the Taiwan Medical Association and the Paujar Charity Foundation,
inviting doctors to volunteer and take the initiative to lend a helping hand during flight and assist China Airlines and the ground medical support team injointly protecting the health of passengers with urgent medical needs. In 2019, based on the concept of “compassion for society and kindness for thecountry,” China Airlines’ “In-flight Doctors” project was actively joined by the Tzu Chi medical system.
B. Sports activist: 303 participants in 2019
The Company has supported the development of Taiwan’s sports for many years. Through our own air transportation expertise, we help Taiwanese
athletes participate in international sports events, supporting Taiwanese athletes and teams to win international fame with concrete actions. In 2019,
China Airlines sponsored a number of sports events to jointly improve the sports environment in Taiwan and enhance Taiwan’s international reputation.
Moreover, China Airlines continued to support Taiwan’s local teams and players, and sincerely received many Taiwanese sports players. In the future, wewill continue to support various sports activities with actual actions and help Taiwanese athletes to win international fame with concrete actions.
Sports events supported in 2019: “2019 Taiwan Legends Championship”.
Sports players and teams supported in 2019: “2019 Formosa Dreamers Basketball Team, Taoyuan Pauian Archiland Basketball Team, basketball player
Jeremy Lin, baseball player Wei-Chung Wang / Wei-Yin Chen, tennis player Chun-Hsin Tseng, fencer Yi-Tong Chan, volleyball player Pei-Hung Huang, ultra
marathon runner Tommy Chen, Rising Star RG, and others.”(3)Charity support: 61,448 persons benefited in 2019
A. Disadvantaged students and the general public:“Love All Around Team” is a spontaneous China Airlines volunteer group. On their days off, volunteers visit remote rural schools to spread love and flightknowledge to balance the urban-rural education gap. Since 2014, it has covered 15 counties and cities in Taiwan, including 27 townships, 53 junior highand elementary schools and social welfare groups, and cared for 3,207 students. In addition, colleagues from China Airlines also organized a group bythemselves to visit remote rural schools in Taitung and have deep cultivation interactions with 345 students. Such efforts have broadened theirunderstanding of the aviation industry in order to cultivate more future talent. In 2019, the cabin crew held a total of 15 fundraising and charity bazaar
activities to provide assistance needed by disadvantaged groups, benefiting a total of 58,035 people. China Airlines plays its part in fulfilling corporatesocial responsibilities. Along with the sponsored sports players, we organize public welfare sharing sessions to benefit students from rural areas. In 2019,
the “China Airlines 60 New GO Jeremy Lin Charity Sharing Session” was held;baseball stars back from the U.S. Wei-Yin Chen and Wei-Chung Wang wereinvited to hold the joint “China Airlines Charity Baseball Camp,” with expectations for fostering future stars in Taiwanese sports through charity sharing
sessions. Mandarin Airlines has cared for disadvantaged groups in Hualien and Taitung for many years. Upon the 28th anniversary celebration, Mandarin
Airlines especially held a charity bazaar carnival and donated all the income from the bazaar, amounting to NT$100,000, and 5 boxes of charity goods toHannah’s Hope Home in Taitung, to build a warm new home for dispossessed children under the age of two in Hualien and Taitung. After more than two
years of fundraising and construction by the Taitung Christian Hospital and public welfare partners, along with the help of kind people from all walks oflife, Hsin Shih Hall, a place that can provide both day care for the disabled or elders with dementia and a better quality new home for dispossessedchildren under the age of two, was finally officially completed.
B. Elders:
Upholding the spirit of “extending the same care for our own elders to all elders in general,” the Company has maintained long-term cooperation with
the Huashan Social Welfare Foundation to care for local disadvantaged elders. In 2019, a total of three charity events were held: “Love the Elderly andReunite,” “Love the Elderly and be Active on the Dragon Boat Festival,” and “Love the Elderly and Light Up the Mid-Autumn Festival.” A total of 400
elders were cared for. During holiday reunions, volunteers from the Volunteers Club visited the elders’ homes, from door to door, to give care and gifts
and accompany the elders. China Airlines continues to invest in social care, bringing warmth to the cold winter.

62 Corporate Governance Report3.3.7 Ethical Corporate Management and Deviations from“the Ethical Corporate
Management Best-Practice Principles for TWSE/GTSM Listed Companies”
Implementation Status

Evaluation ItemYes NoDeviations fromthe EthicalCorporate
Management
Best-PracticePrinciples for
TWSE/TPEx Listed
Companies andReasonBrief Explanation
1. Establishment of ethical operation
policies and programs(1)Has the Company formulated an ethicalmanagement policy approved by the
Board of Directors, and expressly
stated in the regulations and external
documents the policies and practicesof ethical management, as well as theBoard of Directors and senior
management’s commitment to actively
implement the management policy?

(1) CAL has established Ethical Corporate Management Best-Practice Principles andProcedures for Ethical Management and Guidelines for Conduct, which were passed
in 2016 at the 5th meeting of the 20th Board session. These guidelines and principles
clearly spell out the Company’s ethical operating policies, methods, andcommitments. They are published on the CAL website and the Taiwan Stock Exchange
Market Observation Post System.

No Difference(2)Has the Company established anassessment mechanism for the risk ofunethical behaviors, regularly analyzed
and evaluated business activities with ahigher risk of being unethical within
the business scope, and formulated aplan accordingly to prevent unethicalbehaviors, which covers at least thepreventive measures provided in
Article 7, Paragraph 2 of the EthicalCorporate Management Best PracticePrinciples for TWSE/GTSM Listed
Companies?
(3)Has the Company specified theoperating procedures, behavioral
guidelines, disciplinary penalties, andgrievance system in its plan for
unethical conduct prevention, and has
it implemented said program while
also periodically reviewing and revisingit?

2. Implementing ethical corporate
management(1)Does the Company evaluate the ethicalrecords of the businesses with which it
has dealings and include clear ethicalcorporate behavior provisions incontracts with such counterparties?

(2) The Company’s Ethical Corporate Management Best Practice Principles sets out
various business activities with a higher risk of being unethical to be prevented
within the business scope to strengthens relevant preventive measures, which
include behaviors provided in the subparagraphs under Article 7, Paragraph 2 of the
Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed
Companies.

No Difference(3) The Company's Procedures and Guidelines of Conduct for Ethical Management clearlysets out all unethical and prohibited conduct, the whistleblowing system, and thedisciplinary system. These procedures and guidelines are implemented in theoperations of all units.

No Difference(1) In the process of business dealings with other companies, CAL employees explain our
ethical management policy and related regulations to counterparties and expressly
refuse to directly or indirectly provide, promise, demand, or accept any form of
improper benefit. When signing contracts with others, CAL fully reviews thecounterparty’s ethical corporate behavior and includes complying with our ethicalcorporate management policies as a provision in contracts.

No Difference(2)A. The Company’s Human Resources Management Division, which is the dedicated unit
for ethical management, is responsible for consolidating the ethical management
implementation status in relevant units of the Company and reporting periodicallyto the Board of Directors once per year. The 2019 implementation status has beenreported at the 8th meeting of the 21st Board of Directors on November 7, 2019.In
addition, the Company encourages the reporting of unethical conduct andmisconduct. An independent reporting mailbox has been set up and announced. The
General Audit Office reports the received cases, handling methods, and follow-up
review and rectification to the Board of Directors.
B. Relevant status of the Company’s implementation of ethical management policies
in 2019:
a. An E-learning training course was held to raise awareness of service principles
and code of conduct.
b. Whistleblowing channels such as the following have been announced:
chairman’s mailbox, General Audit Office’s confidential mailbox, the Speak Out
area, and the WeCare listens mailbox. These facilitate employees’ immediate
reporting to management and the Human Resources Management Division.
c. "Employee Workplace Code of Conduct", "Employee Job Specifications", andrelevant reward and disciplinary procedures have been established; clear
standards and an effective disciplinary system have been set out.
d. Ethical management is implemented through scheduled and unscheduledannual inspection mechanisms to prevent fraud and corruption.

No Difference(2)Has the Company set up a special unit
affiliated to the Board of Directors topromote corporate ethicalmanagement that periodically (at least
once per year) reports to the Board of
Directors on the status of theimplementation of ethicalmanagement policies, the plan for
unethical conduct prevention, and its
supervision?



Corporate Governance Report63Implementation Status

Evaluation ItemYes NoBrief Explanation

Deviations fromthe EthicalCorporate
Management
Best-PracticePrinciples for
TWSE/TPEx Listed
Companies andReason(3)CAL Procedures for Ethical Management and Guidelines for Conduct expressly statethat should a conflict of interest arise in the execution of Company duties,
employees shall report the situation to their direct supervisor, who should provide
appropriate guidance.

No Difference(4)Has the Company established aneffective accounting system and aninternal control system in efforts toimplement ethical management? Has
the Company’s internal audit unit used
the results of ethical management risk
assessments to draw up relevant audit
plans and examined compliance withthe plan for unethical conduct
prevention or entrusted an accountant
to perform such an audit?

(4)The Company has established effective systems, including an accounting system andinternal control system. Annual audit plans are formulated every year based on risk
assessments to examine the Company’s accounting and internal control systems.
The systems are continuously inspected to implement ethical management.

No Difference(5)Does the Company periodically holdinternal and external ethical corporate
behavior training?

(5)The Company promotes ethical behavior and corporate ethics when new employees
assume office, and conducts E-Learning online courses for supervisors dispatched in
Taiwan and abroad. The Ethical Corporate Management Best-Practice Principles, theProcedures and Guidelines of Conduct for Ethical Management, and otherdocuments have been disclosed on the Company's internal and official website forthe reference of internal and external personnel.
In order to strengthen employees' understanding of the Company's corporate
culture of ethical management, employees have been receiving training since 2017
through the E-learning system. The training situation for the last two years is asfollows:
A. 2018:
a.Trainee(s): Current foreign branch office/agency staff (excluding foreign cabincrew members and personnel on leave of absence during training).
Number of trainees: 1,596 persons.
Number of completions: 1,356 persons.
Completion rate: 85%
b.Trainee(s): Taiwanese and foreign cabin crew members (excluding personnel onleave of absence during training).
Number of trainees: 3,439 persons.
Number of completions: 3,439 persons.
Completion rate: 100%
B. 2019:
Trainee(s): Taiwanese and foreign cabin crew members (excluding personnel onleave of absence during training).
Number of trainees: 1,293 persons.
Number of completions: 1,293 persons.
Completion rate: 100%(1) Article 20 of the Company's Procedures and Guidelines of Conduct for EthicalManagement expressly provides and discloses the rules of reporting, the reporting
channel, and the processing procedures; the reporting mailbox
auditor@china-airlines.com is disclosed and announced on the Company's website
and internal website for the use of Company’s internal personnel and external
personnel. The reported cases will be handled by the General Audit Office of theCompany and the circumstances of the report, its handling methods, follow-up
review, and improvement measures will be reported to the Board of Directors.

No Difference(2) Has the Company established thestandard operating procedures for theinvestigation of received reports, thefollow-up measures to be taken after
the investigation is completed, and therelevant confidentiality mechanism?

(2) According to CAL Procedures for Ethical Management and Guidelines for Conduct,
all reports of violations and related follow up investigations are kept strictly
confidential and CAL has set up clear and effective awards and punishments, anappeals system, violation reporting confidentiality mechanism, and investigation
SOP. In addition, the Company also incorporates ethical management into
employee performance evaluation and human resources policies. A clear andeffective reward and disciplinary system, grievance system, and the standard
operating procedures for the investigation of reports have also been established.

No Difference(3)Does the Company have any measuresin place to protect individuals frompossible mistreatment arising from
reporting violations?

(3) Employees who process violation reports must sign a written statement pledging tomaintain confidentiality of the reporters and the details of the case. CAL also
promises to protect the whistleblower from being improperly punished due to thereporting.

No Difference
4. Strengthening information disclosure
Does the Company disclose the content of
our Ethical Corporate Management
Best-Practice Principles and theireffectiveness on our website and the
TWSE Market Observation Post System?

CAL’s Ethical Corporate Management Best-Practice Principles and Procedures for
Ethical Management and Guidelines for Conduct are disclosed on the China Airlines
website and the Taiwan Stock Exchange Market Observation Post System, along withthe effectiveness of ethical operations and fair trade principles.

No Difference(3)Has the Company formulated andimplemented policies to prevent
conflicts of interest and provide
appropriate ways to record any
potential conflicts found?

3. Operation of the Company's Violation
Reporting System(1)Has the Company established aconcrete violation reporting andrewards system, set up convenientreporting channels, and appointed
suitable personnel to handle thesecases?



64 Corporate Governance Report

No DifferenceImplementation Status

Deviations fromthe EthicalCorporate
Management
Evaluation Item
Best-Practice
Yes NoBrief Explanation
Principles for
TWSE/TPEx Listed
Companies andReason5. If the Company has established a code of ethical corporate management based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx
Listed Companies, please describe any differences between said code and the Best-Practice Principles: No Differences.
6. Other information that will assist in the understanding of Company ethical corporate management practices: None.

3.3.8 Corporate Governance Guidelines and Regulations

The Company has established a Corporate Charter, Rules for Discussions of Official Business at Shareholder
Meetings, Rules for Discussions of Official Business by the Board of Directors, Ethical Code of Conduct for Directors,
Election of Directors, Rules for Corporate Governance, Guiding Principles for Operational Integrity, Guide toIntegrity in Management and Business Procedures and Conduct, Practical Guidelines for Corporate Social
Responsibility and Sustainable Development, Ethical Code of Conduct for Directors, Ethical Code of Conduct for
Senior Supervisors, Employee Workplace Rules of Conduct, China Airlines Group Rules of Conduct, Supplier Code of
Conduct, and Human Rights Policy; it has formed 3 committees under the Board of Directors for audit,
remuneration, and risk, and has established various organizational rules. The relevant rules listed above are all
made public on the Company's website (http://www.china-airlines.com) and the Company's social responsibility
network (https://calec.china-airlines.com/csr/en/index.html).

3.3.9 Summary table of the resignation and dismissal of relevant persons of the Company
April 25, 2020
Date of

Title

Name

ChairmanHo, Nuan-Hsuan

06/24/2016

04/02/2019

Lu, Shih-Ming

01/05/2015

11/18/2019

Appointment

Date of Dismissal

Reason for Resignation or
Dismissal
Removal of juridical person
director representative

Vice President, Information
Management Div.
(concurrently research andTransferdevelopment manager)

Note: "Relevant persons in the Company" refers to the chairman, general manager, accounting
management, financial management, internal audit management, corporate governance manager,
R&D management, and others.

3.3.10 Other Important Information Regarding Corporate Governance
A. The organization and operations of Company’s internal auditing

The Company’s internal audit operations are handled by the General Audit Office. In compliancewith Article 11 of the "Regulations Governing Establishment of Internal Control Systems by PublicCompanies," the General Audit Office is under the jurisdiction of the Board of Directors. The maininternal audit operation methods are announced via the quality document management system in
the Company's corporate internal information network. Information announced include themanual of "Detailed Rules for Internal Audit Implementation" and relevant operational methods. A
summary is provided as follows:(1)Day-to-day audit (pre-incident audit and post-incident audit).
(2)Annual audit (on-site inspection of the head office, branch units, and subsidiaries).
(3)Project audit.
(4)Supervision of construction, maintenance, and procurement.
(5)Financial inventory.

Corporate Governance Report65

(6)Self-assessment of the internal control system.
(7)Periodical audit required by the Financial Supervisory Commission.
(8)Other units that need unscheduled audits.

B. Certifications of the personnel related to the Company's internal audits
Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate: 1 person, International
Internal Auditor Certificate: 1 person, R.O.C. Certified Public Accountant License: 2 people, R.O.C.
Securities (Senior) Specialist: 1 person, R.O.C. Futures Specialist: 2 people, R.O.C. Financial Planning
Personnel Proficiency Test Passing Certificate: 1 person, R.O.C. Stock Affairs Specialist Proficiency
Test Passing Certificate: 1 person.

C. Company financial staff certifications and licenses: Institute of Internal
Auditors-Chinese Taiwan Internal Auditor Certificate
Institute of Internal Auditors-Chinese Taiwan Internal Auditor Certificate: 4 people, International
Internal Auditor Certificate: 3 people, R.O.C. Certified Public Accountant License: 2 people, R.O.C.
Securities (Senior) Specialist: 6 people, R.O.C. Securities Investment Trust and Consulting
Professional: 5 people, R.O.C. Futures Specialist: 4 people, R.O.C. Financial Planning Personnel
Proficiency Test Passing Certificate: 4 people, R.O.C. Stock Affairs Specialist Proficiency Test Passing
Certificate: 7 people, USA Certified Public Accountant License: 1 person, R.O.C. Basic EnterpriseInternal Audit Proficiency Test Passing Certificate: 3 people.

D. Company Director Continuing Education
Title

Chairman

Director

Director

Director

Director

Director

Director

Name

From January 1, 2019, through April 25, 2020

Traininghours

Date(s)Sponsoring Organization

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

11/12/2019

Taiwan Institute of Directors

The 8th Annual Chinese Family Businesses Forum3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

2.5hr

10/01/2019

Taiwan Insurance InstituteAnalysis of Laws and Regulations related toAnti-Money Laundering and Counter-Financing ofTerrorism (2019)

Hsieh,
Su-Chien

Chen,Charles C.Y.

Ting,
Kwang-Hung

Chen,
Han-Ming

Ko, Sun-Ta

Wei,
Yung-Yeh

Lin, Su-Ming

66 Corporate Governance Report

CourseTitleName

Wang,
Shih-Szu

Director

Independent Chang, Hsieh
Director
Gen-SenIndependent
Director

Chung,
Lo-MinIndependent
Shen, Hui-Ya
Director

Traininghours

Date(s)3hr

11/12/2019

Taiwan Insurance Institute

Financial Consumer Protection Act and the Principleof Fair Hospitality

3hr

11/21/2019

Taiwan Insurance InstituteImpact of IFRS17 on the business strategy of the
Insurance Enterprise

3hr

12/24/2019

Taiwan Corporate Governance IFRS17 Conversion and Insurance enterprise
Association
response strategy

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

08/07/2019

Training by: Taiwan Corporate
Governance Association

How Taiwanese companies respond to and manage
the huge risks caused by the China-US trade war

3hr

05/08/2019

Training by: Taiwan Corporate
Governance Association

Developing Trends and Prevention of Corporate
Corruption

3hr

05/24/2019

Taipei Foundation of FinanceCorporate Governance - Analysis of Financial Crime
Practices

3hr

09/20/2019

Taipei Foundation of FinanceCorporate Governance Training - The UN
Convention Against Corruption, Anti-Fraud andWhistleblower Protection

3hr

11/15/2019

Avoid Unintentionally Violating the Securities andSecurities and Futures Institute Exchange Act - Starting with Untruthful Financial
Statements and Insider Trading

Sponsoring Organization

CourseE. Corporate Governance Related Training Attended by Company Managers

From January 1, 2019 through April 25, 2020

Traininghours

Date(s)Vice
President,
Chen, I-Chieh
FinanceDiv.

12hr

10/21/201910/22/2019

Accounting Research andDevelopment Foundation

Continued Education for Principal Accounting
Officers of Issuers, Securities Firms, and Securities
Exchanges

Assistant
Vice
President,
FinanceDiv.

12hr

01/09/202001/10/2020

Accounting Research andDevelopment Foundation

Continued Education for Principal Accounting
Officers of Issuers, Securities Firms, and Securities
Exchanges

6hr

07/19/2019

Accounting Research andDevelopment Foundation

Internal Audit and Internal Control Practices ofReward Systems for Corporate Employees

6hr

10/21/2019

Institute of Internal
Auditors-Chinese Taiwan

Internal Auditing Professional Course- How Audit
Supervisors Assist the Board of Directors andAdvisory Service

6hr

09/09/2019

Institute of Internal
Auditors-Chinese Taiwan

Internal Auditing Professional Course- The Functions
and Duties of Corporate Governance Personnel in
the Corporate Governance Blueprint

6hr

10/21/2019

Institute of Internal
Auditors-Chinese Taiwan

Internal Auditing Professional Course- How Audit
Supervisors Assist the Board of Directors andAdvisory Service

Title

Name

Yen, Yang

DeputyAuditor
General,Fang, Juo-Ling
General
Audit
OfficeDeputyAuditor
General,General
Audit
OfficeSponsoring Organization

Ho, Hui-Fen

CourseCorporate Governance Report67

F. Succession plan for the Board of Directors and key management of the Company
The selection and nomination of China Airlines’ directors are carried out inaccordance with the Company Act, Securities and Exchange Act, China Airlines’
Rules Governing the Election of Directors, and Regulations Governing Appointment
of Independent Directors and Compliance Matters for Public Companies. All
elections of directors are conducted in accordance with the candidate nomination
system. Shareholders may nominate director candidates; through shareholders'voting in the annual general meeting, directors (including independent directors)
are elected from the list of candidates nominated by shareholders. The term ofoffice of a director is 3 years.
As for the selection of director successors, the director representative successors
should generally have the required abilities stated in the chapter within China
Airlines’ "Corporate Governance Principles" describing reinforced competencies of
the Board of Directors. As required by the law, independent directors must haveobtained certain professional qualification and work experience. Professionals whoare experienced in the industry, including the governmental and academic fields,
are the main direction of selection that forms the basis of succession planning(please refer to P.41 for diversification). In addition, the independence of all Board
members is ensured in accordance with the law, and the results of its annual
evaluation are an important reference for whether continued nomination isneeded.
In order to enhance the directors' ability to exercise the powers of their posts andensure that the Board's effectiveness is up-to-date, scheduled advanced studies
are arranged every year to help elevate the professional competencies of thedirectors. The studies involve courses on corporate governance-related topics,
including finance, accounting, business, commerce, legal affairs, information, risk
management, internal control systems, and corporate social responsibility. To
ensure that the succession plan is comprehensive, the study contents align withthe updates of regulations and conditions of the internal and external
environments, as well as topics applicable to future development
needs.Furthermore, regarding the succession plan for important management, in
addition to having excellent professional management ability, its behavior, ethics,
and instructions shall be based on the resolutions of the Board of Directors, and be
handled in accordance with the “China Airlines Executives Code of Ethical Conduct”
and related laws and regulations to maintain the best interests of the Company,
employees, and shareholders.
In the training plan for the Company's important management, regular senior
management lectures are held every year, where there are invited personages
from the fields of industry, public sector, and academia to give special lectures on
the state of the global market and the development of the aviation industry, sothat the Company's supervisors can better understand the state of the market andthat the height and breadth of professional competence development may be
improved. Periodic inter-agency transfers shall be handled according to theCompany's rules to comprehensively cultivate diversified management capabilities
of important management. In addition, to deepen the Company's various levels ofmanagement professionals and broaden the horizon of potential talent, strategic
68 Corporate Governance Reportand management occupational training sessions are held on a regular basis andtalent training programs have been established to refine the necessary knowledge
and skills of mid-level supervisors, cultivate talent with international vision andmanagement capabilities, and strengthen the management knowledge ofmanagement professionals through job experience, management course training,
and rigorous assessment systems. As of today, more than 100 outstanding
management professionals have been thus cultivated and are now serving in key
units in Taiwan and foreign branches.
G. On December 6, 2012, after approval by the Board of Directors, the Company
established the China Airlines Ltd. Procedures for Handling Material Inside
Information. In addition to announcing the new procedures to the Board,
management, and employees, they were also published under Important Company
Regulations on the Investor Relations section of the CAL website so the Board,
management, and employees can reference them at any time in order to avoid
violations and the occurrence of insider trading.

Corporate Governance Report693.3.11 Internal Control Systems
A. Internal Control Statement

70 Corporate Governance Report

B. If the Company has commissioned external auditors to review the Company’s
internal control system, the external auditor’s report should be disclosed: None.

3.3.12 Any disciplinary measures taken against the Company or its internal staff
due to violations of legal requirements or taken by the Company against
its own staff due to violations of the internal control system. The detailsof the disciplinary measures, major faults, and improvement measures
should be notedNo.
1

Penalty
A fine of
NT$1,000,000.

Deficiency
The Company underwent labor inspection on
January 16, 2019. There was a violation of
Article 49, Paragraph 1 of the Labor Standards
Act, because cabin crew members’ nighttime
work had not been approved by the labor
union.

2

A fine of
NT$40,000.

The Company underwent labor inspection on
February 13, 2019. There was a violation of
Article 49, Paragraph 1 of the Labor Standards
Act, because female workers’ nighttime work

Improvement(1)In the case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe outcome of the case was unfair, since thecompetent authority was biased towards the union’s
claim and imposed the penalty.
(2)An administrative appeal has been filed for this case toprotect the Company's rights and interests.
(3)The Company and the Company union have initiatednegotiation, and will reconfirm the provisions allowing
female workers' nighttime work.
(1) In the case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes
that the outcome of the case was unfair, since the

Corporate Governance Report

71

No.

Penalty

Deficiency
at the customer service center of the Taipei
office had not been approved by the labor
union. There was also a violation of Article 34,
Paragraph 2, because the interval between
two shifts was less than 11 hours.

3

A fine of
NT$1,000,000.

The Company underwent labor inspection on
April 22, 2019. There was a violation of Article
49, Paragraph 1 of the Labor Standards Act,
because cabin crew members’ nighttime work
had not been approved by the labor union.

4

A fine of
NT$1,000,000.

The Company underwent labor inspection on
October 16, 2019. There was a violation of
Article 49, Paragraph 1 of the Labor Standards
Act, because cabin crew members’ nighttime
work had not been approved by the labor
union.

5

A fine of
NT$20,000.

The Company underwent labor inspection on
January 9, 2020. There was a violation of
Article 38, Paragraph 2 of the Labor Standards
Act (leave arranged by workers), because therequest for paid leave raised by pilots in the
Flight Operations Division was not granted
due to worker allocation.

Improvementcompetent authority was biased towards the union’s
claim and imposed the penalty.
(2) An administrative appeal has been filed for this case toprotect the Company's rights and interests.
(3) The Company and the Company union have initiatednegotiation, and will reconfirm the provisions allowing
female workers' nighttime work.
(4) As for the case in which the interval between two
shifts was less than 11 hours, it was caused by thelarge influx of calls triggered by the short-notice strikeby the Pilots Union. The Company has rectified thiscase, and an administrative appeal will be filed
because the case was due to the need to respond to aparticular emergency.
(1)In the case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe outcome of the case was unfair, since thecompetent authority was biased towards the union’s
claim and imposed the penalty.
(2)An administrative appeal has been filed for this case toprotect the Company's rights and interests.
(3)The Company and the Company union have initiatednegotiation, and will reconfirm the provisions allowing
female workers' nighttime work.
(1)In the case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe outcome of the case was unfair, since thecompetent authority was biased towards the union’s
claim and imposed the penalty.
(2)An administrative appeal has been filed for this case toprotect the Company's rights and interests.
(3)The Company and the Company union have initiatednegotiation, and will reconfirm the provisions allowing
female workers' nighttime work.
(1)In this case, paid leave could not be scheduled due topilot allocation issues; the Company and the pilots had
communicated to schedule the leave on other days.
The competent authority insisted that the law statedthe leave could only be arranged by workers and issued
the penalty.
(2)An administrative appeal has been filed for this case toprotect the Company's rights and interests.
(3)The Company will strengthen communication with
employees to coordinate paid leave dates.

In addition, from 2019 to the printing of the annual report, the Company was fined
NT$60,000 by the Ministry of Labor due to the ruling in the case of an unfair labor
practice dispute with the Taoyuan Flight Attendants Union, and we continue to seek
administrative remedies. The relevant statistics of cases and content of the disputes
are as follows:
Number of cases

Main dispute

Total amount of fines

1

Dispute regarding granting of leave for union
related business of the union’s cadre.

NT$60,000

72 Corporate Governance Report3.3.13 Major Resolutions of Shareholders’ Meeting and Board Meetings
A. Major Resolutions of Shareholders’ Meeting in 2019

Item
Major resolutions
Execution
1. Business Report and Financial Statements This resolution was passed Announcement was made after resolution of
for the year 2018as proposed upon voting.
Shareholders’ Meeting on June 25, 2019
This resolution was passed Announcement was made after resolution of
2. 2018 Surplus Earnings Distribution
as proposed upon voting.
Shareholders’ Meeting on June 25, 2019
Announcement was made after resolution of
3. Amendment to the Articles ofThis resolution was passed
Shareholders’ Meeting on June 25, 2019, and has been
Incorporation
as proposed upon voting.
complied with since that day.
Announcement was made after resolution of
4. Amendment to the Procedures Governing This resolution was passed
Shareholders’ Meeting on June 25, 2019, and has been
the Election of Directors
as proposed upon voting.
complied with since that day.
Announcement was made after resolution of
5. Amendment to the Procedures Governing This resolution was passed
Shareholders’ Meeting on June 25, 2019, and has been
the Acquisition and Disposal of Assets
as proposed upon voting.
complied with since that day.
Announcement was made after resolution of
6. Amendment to the Operational
This resolution was passed
Shareholders’ Meeting on June 25, 2019, and has been
Procedures for Derivatives Trading
as proposed upon voting.
complied with since that day.
Announcement was made after resolution of
7. Amendment to the Operational
This resolution was passed
Shareholders’ Meeting on June 25, 2019, and has been
Procedures for Lending Funds to Others as proposed upon voting.
complied with since that day.
Announcement was made after resolution of
8. Amendment to the Operational
This resolution was passed
Shareholders’ Meeting on June 25, 2019, and has been
Procedures for Endorsements/Guarantees as proposed upon voting.
complied with since that day.
Announcement was made after resolution ofThis resolution was passed
9. The Release of Tigerair Taiwan Stock
Shareholders’ Meeting on June 25, 2019, and has beenas proposed upon voting.
complied with since that day.
The non-competition restriction on Chairman Hsieh,
10. Proposal to release the non-competition
This resolution was passed Su-Chien was lifted based on the resolution of
restriction of holding concurrent
as proposed upon voting.
Shareholders’ Meeting on June 25, 2019, which was
positions on Chairman Hsieh, Su-Chien
subsequently announced.

B. Major Resolutions of Board Meetings (January 1, 2019 to April 25, 2020)

Handling ofIndependent
Directors’ opinions
by the Company

Date

Item

Opinions of
independent directors

January 21, 2019
21st Board of
Directors
4th Meeting(1)The Selling of Two A340-300 Aircrafts: B-18806 and B-18807(2)Selling of Shares in “Huachuan Travel Agency”(3)Listing Application Plan of Tigerair Taiwan(4)Provision of General Financing Limit and Financial Commodity
Trading Risk Limit by Five Financial Institutions, Including MegaInternational Commercial Bank
(5)Regular Review of Performance Evaluation Systems of Directors
and Managers(6)Regular Review of Policies, Systems, Standards, and Structures
for Salary and Compensation of Directors and Managers(7)2018 Employee Salary and 2019 Lunar New Year Incentive(8)2019 Employee Salary Adjustment(9)Chairman and Managers' 2018 Year-end Bonus and 2019 Lunar
New Year Incentive(10) Proposal of Salary and Compensation for the Senior Vice
President (VV) Wang, Chen-Min(11) Lifting of Non-competition Restriction on Holding Concurrent
Posts for Wang, Chen-Min, Senior Vice President

Approved by all
attending Independent
Directors

None

March 20, 2019
21st Board of
Directors
5th Meeting(1)2018 Internal Control System Effectiveness Audit and Statement(2)The Convening of the 2019 Annual General Meeting(3)Amendment to “Directors Election Regulations”(4)2018 Financial Report and Consolidated Financial Report(5)2018 Business Report

Approved by all
attending Independent
Directors

None

Corporate Governance Report

73

Date

Item

Opinions of
independent directors

Handling ofIndependent
Directors’ opinions
by the Company

Approved by all
attending Independent
Directors

None

Approved by all
attending Independent
Directors

None

Approved by all
attending Independent
Directors

None

Approved by all
attending Independent
Directors

None

Approved by all
attending Independent
Directors

None(6)2018 Surplus Earnings Distribution(7)2019 CPA Appointment and Remuneration(8)Amendment to “Company’s Articles of Incorporation”(9)Revision of “Procedures for the Acquisition or Disposal of Assets”(10) Revision of “Procedures Governing Derivatives Trading”(11) Provision of General Financing Limit and Financial Commodity
Trading Risk Limit by Six Financial Institutions, Including the
Bank of Taiwan(12) Revision of Definition of Employee Compensation and 2018
Employee Compensation(13) The handling status of four meetings between the Company
and the Taoyuan Union of Pilots at the Ministry ofTransportation and Communications and the signing of acollective agreement on February 21, 2019, at the meeting with
the Department of Labor, Taoyuan City Government.
April 2, 2019
21st Board of
Directors
5th Extraordinary
Meeting

May 8, 2019
21st Board of
Directors
6th Meeting

Election of new Chairman(1)Proposal on salary and remuneration of Chairman Hsieh,
Su-Chien.
(2)Proposal to release the non-competition restriction of holding
concurrent positions on Chairman Hsieh, Su-Chien.
(3)Proposal on the service pay of former Chairman Ho, Nuan-Hsuan.
(4)Adjustment of travel expenses for Directors (including
Independent Directors).
(5)Establishment of Corporate Governance Manager.
(6)Proposal on Salary and Remuneration of Chief Corporate
Governance Officer.
(7)Establishment of Domestic Tier-1 Division.
(8)Amendment to “Rules of Procedure for Board of Directors
Meetings”.
(9)Amendment to “Corporate Governance Principles”.
(10) Amendment to “Operational Procedures for Loaning Funds toOthers” and “Procedures for Endorsement and Guarantee”.
(11) The Plan for the Stock Release of “Tigerair Taiwan”.
(12) Provision of General Financing Limit and Financial Commodity
Trading Risk Limit by Five Financial Institutions, Including
Cathay United Bank.
(13) NT$5.5 Billion Five-year Non-guaranteed Commercial Paper
Financing.
(14) The Sale-leaseback Operation of Five Company-owned
A330-300 Aircrafts.
(15) Evaluation and Selection of New Narrow-body Passenger
Aircraft and Introduction of New Aircraft.

June 25, 2019
21st Board of
Directors
6th Extraordinary
Meeting(1)Introduction of new 777F cargo aircraft.
(2)Introduction of the New A321neo Narrow-body Passenger
Aircraft.

July 3, 2019
21st Board of
Directors
7th Extraordinary
Meeting

Plan to handle the relevant matters of releasing the shares ofTigerair Taiwan

August 7, 2019
21st Board of
Directors
7th Meeting(1)Dismissal of Senior Vice President (VW).
(2)Issuing NT$3 Billion of Total Face Value of Domestic Unsecured
Convertible Corporate Bonds.
(3)Provision of General Financing Limit and Financial Commodity

74 Corporate Governance ReportOpinions of
independent directors

Handling ofIndependent
Directors’ opinions
by the Company

Approved by all
attending Independent
Directors

None

November 7, 2019
21st Board of
Directors
8th Meeting(1)2020 Audit Plan
(2)Decision on the Authorization of the Chairman to Pre-determine
the Transaction Limit of Contracts in which the Company Leases
Real Estate to Subsidiaries.
(3)Amendment to the "Regulations Governing the Board
Performance Evaluation"(4)Amendment to the "Remuneration Committee Foundation
Policy"(5)2020 Business Plan and Budget(6)Stock Release of “Tigerair Taiwan” Prior to Emerging Stock
Market Registration(7)Provision of General Financing Limit and Financial Commodity
Trading Limit by Five Financial Institutions, Including CTBC Bank

Approved by all
attending Independent
Directors

None

January 13, 2020
21st Board of
Directors
9th Meeting(1)Provision of General Financing Limit and Financial Commodity
Trading Risk Limit by Four Financial Institutions, Including DBS
Bank (Taiwan)(2)2019 Year-end Bonus and 2020 Lunar New Year Incentive(3)Matters Regarding the Signing of Agreement with the CAL
Employees Union on Issues of “13th Month Full Salary (Flight
Safety Bonus)” and “Working Hours Rearrangement and Female
Employees’ Nighttime Work” on December 31, 2019(4)2020 Employee Salary Adjustment(5)Chairman and Managers’ 2020 Lunar New Year Incentive(6)Lifting of Non-competition Restriction on Holding Concurrent
Posts for Senior Vice President(7)Report on the Company’s Lease on Real Estate with a Subsidiary

Approved by all
attending Independent
Directors

None

March 18, 2020
21st Board of
Directors
10th Meeting(1)Amendment to 2020 Audit Plan
(2)2019 Internal Control System Effectiveness Audit and Statement(3)New Branch Unit in Response to Route Launch(4)Change in Personnel and Position(5)The Convening of the 2020 Annual General Meeting(6)2019 Financial Report and Consolidated Financial Report(7)2019 Business Report(8)2019 Deficit Make-Up(9)2020 CPA Appointment and Remuneration(10) Issuance of Domestic Unsecured Ordinary Corporate Bonds(11) Provision of General Financing Limit and Financial Commodity
Trading Risk Limit by Three Financial Institutions, Including First
Commercial Bank
(12) Amendment to “Company’s Articles of Incorporation”(13) Amendment to “Rules of Procedure for Shareholders Meetings”(14) Amendment to “Rules of Procedure for Board of Directors
Meetings”(15) Amendment to “Audit Committee Organizational Rules”

Approved by all
attending Independent
Directors

None

Date

Item
Trading Risk Limit by Five Financial Institutions, Including Taishin
International Bank.
(4)Execute the Conversion of Three Options for Boeing 777F into
Firm Orders.

October 8, 2019
21st Board of
Directors
8th Extraordinary
Meeting(1)The Case of “Engine Selection and the Procurement of 4 Backup
Engines for the New A321neo Narrow-body Passenger Aircraft.”(2)The Company’s provision of endorsement and guarantee toTigerair Taiwan Co., Ltd.

3.3.14 Major Issues of Record or Written Statements Made by Any Director orSupervisor Dissenting with Important Resolutions Passed by the Board of
Directors: None.
Corporate Governance Report75

3.4 Information Regarding the Company’s Audit Fee andIndependence
3.4.1 Audit Fee

Accounting Firm
Deloitte & Touche

Name of CPA
Huang, Jui-Chan

Period Covered by CPA’s Audit

Remarks

01/01/2019-12/31/2019

None

Cheng, Shiuh-Ran

Unit: NT$ thousands
Fee Items

Fee Range
1

Under 2,000

22,000 - 3,999

34,000 - 5,999

46,000 - 7,999

58,000 - 9,999

6Over 10,000

Audit Fee

Non-audit Fee

Total





3.4.2 Audit and Non-Audit Fees Paid to CPAs, the Certified Accounting Firm toWhich Said CPAs Belong and Any Affiliated Enterprises and Details
Regarding Non-Audit Fees. See Below:

Unit: NT$ thousands

Non-audit Fee

Accounting Name of Audit
System of Company
Firm
CPA
Fee
Design Registration

Touch

Huang, Jui-Chan
Cheng, Shiuh-Ran

Deloitte &

7,350

-

-

Human
Resource-

PeriodCovered by
Others Subtotal
CPA’s Audit

5,829

5,829

01/01/201912/31/2019

Remarks
Others include the businesstax audit fee of dual-statusbusiness entities adopting
direct deduction, the transfer
pricing report service fee, therelated accountant
certification fee for issuanceof corporate bond, the US
airport Passenger Facility
Charge (PFC) tax collection
and audit fee, and theconsulting fee of General
Data Protection Regulation(GDPR).

3.4.3 Changed audit firms and the audit fee paid was less than the audit fees
paid in the previous year prior to the change: Not Applicable.
3.4.4 Those with audit fees amounting to a reduction of 15% or more comparedto the previous year: None.

76 Corporate Governance Report3.5 Replacement of CPA:

3.5.1 On the previous accountant
Date of change

March 20, 2019

Reason and explanation forchangeDue to internal reorganization at the CPA firm, the resolution was passed at the
5th meeting of the 21st Board of Directors on March 20, 2019 that from thefinancial report for Q1 of 2019, the CPAs would be switched to Huang, Jui-Chanand Cheng, Shiuh-Ran.
Involved party

Explanation was terminationof the person or accountant
appointed or refusal of
appointment

Newest check report within
two years other than one
signed and issued without
disclaimer and reason

Situation

Accountant

Proactive termination of
appointment

Appointee

None.

Did not accept further(continuing) appointment

None.

Accounting principles or customary practiceYes

Financial report disclosure
Scope of check or steps
Other

Objection from issuer
None

Explanation
Other items disclosed (forwhich disclosure is required
under Article 10, Clause 6,
items 1d through 1g)

None.

3.5.2 On successor accountants
Name of firm

Deloitte & Touche

Accountant Name

Huang, Jui-Chan; Cheng, Shiuh-Ran

Date of appointment

March 20, 2019

Pre-appointment consultations for opinions on method of
accounting or accounting principles for specific transactions
and consultation on possibility of signing and results of same

None.

Written opinions of successor accountants at odds with thoseof previous accountantsNone.

3.6 Audit Independence: None.

Corporate Governance Report773.7 Changes in Shareholding of Directors, Managers, and Major
Shareholders
Title

Major
Shareholder
Chairman
Director
Director
Independent
Director
Independent
Director
Independent
Director
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Auditor General
Data Protection
Officer
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Vice President
Deputy Auditor
GeneralAssistant Vice
President

Name

Unit: Shares
The current year through2019
April 25, 2020
PledgedPledged
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

China Aviation Development Foundation (Note)
China Aviation Development Foundation
Representative: Hsieh, Su-Chien
China Aviation Development Foundation
Representative: Chen, Charles C.Y.;
Ting, Kwang-Hung; Chen, Han-Ming;
Ko, Sun-Ta; Wei, Yung-Yeh
National Development Fund, Executive Yuan
Representative: Lin, Su-Ming; Wang, Shih-Szu

0

0

0

0

0

0

0

0

Chung, Lo-Min

0

0

0

0

Chang, Hsieh Gen-Sen

0

0

0

0

Shen, Hui-Ya

0

0

0

0

Hsieh, Su-Chien

0

0

0

0

Kao, Shing-Hwang

0

0

0

0

Wang, Chen-Min

0

0

0

0

Wang, Houng

0

0

0

0

Chang, Young

0

0

0

0

Fang, Juo-Ling

0

0

0

0

Wu, Hsiao-Sui

0

0

0

0

Chien, Feng-Nien
Chen, I-Ko
Lai, Ming-HuiPeng, Pao Chu
Liu, Der-Chuan
Liu, Tsao-Yang
Yeah, Shao-Ting
Chen, Wei-Tau
Chen, I-Chieh
Hong, Tsu-Kuang
Chung, Wan-Chun (Assumed post on 11/23/2019)
Chou, Jyh-Shyan
Chu, Te-Hsiu (Assumed post on 11/18/2019)
Chang, Cheng-Hao (Assumed post on 01/21/2019)
Chung, Ming-Jyh
Sun, Jia-Min
Lee, Jung-Hui
Li, Chih-Wei

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Ho, Hui-Fen

0

0

0

0

Yu, Yueh-Han

0

0

0

0

78 Corporate Governance Report

The current year throughApril 25, 2020
PledgedPledged
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
2019

Title

Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Vice President
ChairmanVice President
Senior Vice
President
Assistant Vice
President

NameChen, Chwen-Der

0

0

0

0

Tung, Hsing-Hua

0

0

0

0

Huang, Hsiang-Piao

0

0

0

0

He, Cheng (Assumed post on 11/01/2019)

0

0

0

0

Chen, Pei-Ti

0

0

0

0

Mao, Li-Chung (Assumed post on 12/20/2019)

0

0

0

0

Sheu, Yuh-Shy (Assumed post on 01/22/2019)

0

0

0

0

Shann, Da-Sin

0

0

0

0

Lin, Herng Shan (Assumed post on 04/16/2019)

0

0

0

0

46,455000Yen, Yang

0

0

0

0

Huang, Hui-Na

0

0

0

0

Fang, Yuan-Hua

0

0

0

0

An, Long-Chi (Assumed post on 04/01/2020)

0

0

0

0

Huang, Chin-Feng (Assumed post on 10/16/2019)

0

0

0

0

Hsu, Hsueh-Wen (Assumed post on 02/01/2020)

0

0

0

0

Wang, Wei

0

0

0

0

Liu, Shou-Shu

0

0

0

0

Liu, Duan-Shiuh

0

0

0

0

Hsiao, Jui-Fu

0

0

0

0

Wei, Shi-Jong (Dismissed on 01/21/2019)

0

0

0

0

Ouyang, John (Dismissed on 01/24/2019)

0

0

0

0

Hung, I-Lan (Dismissed on 03/21/2019)

0

0

0

0

Chen, Kang-Reuy (Dismissed on 03/31/2019)
China Aviation Development Foundation
Representative: Ho, Nuan-Hsuan(Dismissed on 04/02/2019)
Chiu, Chang-Hsin (Dismissed on 08/01/2019)

0

0

0

0

0

0

0

0

0

0

0

0

Lo, Ya-Mei (Dismissed on 08/01/2019)

0

0

0

0

Hsiao, Kuo-Chih (Dismissed on 08/05/2019)

0

0

0

0

Lee, Pei-Chen (Assumed post on 04/01/2019)

Corporate Governance Report

79The current year throughApril 25, 2020
PledgedPledged
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
2019

Title

Name

Assistant Vice
Yu, Yau (Dismissed on 10/01/2019)
President
Assistant Vice
Fang, Cheng-Ru (Dismissed on 10/01/2019)
President
Assistant Vice
Jeng, Jong-Shinn (Dismissed on 10/31/2019)
President
Vice President
Lu, Shih-Ming (Dismissed on 11/18/2019)
Assistant Vice
Chiu, Wei-Tuan
President(Assumed post on 08/10/2019)(Dismissed on 03/19/2020)
Assistant Vice
Chen, Jo-Ching (Dismissed on 04/01/2020)
President
Assistant Vice
Kao, Shu-Chuan (Dismissed on 04/01/2020)
President
Note: Refers to major shareholders holding more than 10% of company shares.

3.7.1 Shares Trading with Related Parties: None.
3.7.2 Shares Pledge with Related Parties: None.

80 Corporate Governance Report

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

3.8 Relationships among the Top Ten Shareholders
Name

Current Shareholding
SharesChina Aviation Development Foundation(Representative: Wang, Kwo-Tsai)%

1,867,341,935 34.45%

Spouse’s/minor’s
Shareholding

Shareholding
by Nominee
Arrangement

SharesShares%%April 25, 2020
Name and Relationship
Between the Company’s
Top Ten Shareholders, orRemarks
Spouses or Relatives
Within Two Degrees
Name
Relationship

0

0%

0

0%

None

None

None

National Development Fund of The
Executive Yuan

519,750,519

9.59%

0

0%

0

0%

None

None

None

263,622,116

4.86%

0

0%

0

0%

None

None

None

63,333,017

1.17%

NA

NA

0

0%

None

None

None

60,727,000

1.12%

NA

NA

0

0%

None

None

None

53,130,442

0.98%

NA

NA

0

0%

None

None

None

48,727,000

0.90%

0

0%

0

0%

None

None

None

35,442,146

0.65%

NA

NA

0

0%

None

None

None

35,300,821

0.65%

NA

NA

0

0%

None

None

None

33,591,761

0.62%

NA

NA

0

0%

None

None

None

(Representative: Dr. Chen, Mei-Ling)
Chunghwa Telecom Co. Ltd.
(Representative: Sheih, Chi-Mau)
China Airlines Ltd. Employee Stock
Ownership Trust Plan
New Labor Pension Fund
Vanguard Total International Stock Index
Fund, a series of Vanguard Star Funds
Ocean Investment Holding Co., Ltd.
(Representative: Wang, Yun-E)
Vanguard Emerging Markets Stock Index
Fund, a Series of Vanguard International
Equity Index Funds
JPMorgan Chase Bank N.A. Taipei Branchin custody for Norges Bank
iShares MSCI Taiwan Index

Corporate Governance Report813.9 Ownership of Shares in Affiliated Enterprises
Affiliated Enterprises

Ownership by the Company

Direct or Indirect Ownership by
Directors, Managers
Shares%5,000
100.00400,000
100.00-Dec 31, 2019
Unit: shares; %Total Ownership

Shares%Shares
1. CAL-Dynasty International, Inc.
2,614,500
100.002,614,500
1A Dynasty Properties Co., Ltd.
5,000
1B Dynasty Hotel of Hawaii, Inc.
400,000
2. CAL-Asia Investment Inc.
7,172,346
100.007,172,346
2A Eastern United International
1,050,000
35.00
1,050,000
Logistics (Holdings) Ltd.
2B Arport Air Terminal (Xiamen)
28.00(Note1)(Note1)
Co., Ltd.
(Note2)
2C Arport Air Cargo Service
28.00(Note1)(Note1)(Xiamen) Co., Ltd.
(Note2)
2D Taikoo (Xiamen) Landing Gear
(Note1)
2.59(Note1)Services Co., Ltd.
2E Haeco Composite Structures(Note1)
5.45(Note1)(Jinjiang) Co., Ltd.
3. Dynasty Aerotech International
77,270100.0077,270Corp.
4. Yestrip Co., Ltd.
1,600,000
100.001,600,000
5. CAL Park Co., Ltd.
150,000,000
100.00150,000,000
6. CAL Hotel Co., Ltd..
46,500,000
100.0046,500,000
7. Taiwan Aircraft Maintenance And
135,000,000
100.00135,000,000
Engineering Co., Ltd.
8. Mandarin Airlines, Ltd.
188,154,025
93.99
188,154,025
9. Sabre Travel Network (Taiwan)
13,021,042
93.93
13,021,042
Ltd.
10. Tigerair Taiwan Co., Ltd.
138,906,275
69.45
15,433,000
7.72
154,339,275
11. China Pacific Laundry Services
13,750,000
55.00
13,750,000
Ltd.
12. Taiwan Air Cargo Terminal Ltd.
135,000,000
54.00
12,500,000
5.00
147,500,000
13. Kaohsiung Airport Catering
21,494,637
53.67
21,494,637
Services
13A Delica International Co., Ltd.
1,020,000
51.00
1,020,000
14. Dynasty Holidays, Inc.
160
20.00
160
15. China Pacific Catering Services
43,911,000
51.00
43,911,000
Ltd.
16. Taoyuan International Airport
34,300,000
49.00
34,300,000
Services Co., Ltd.
17. Taiwan Airport Service Co., Ltd.
20,626,644
47.35
469,755
1.08
21,096,399
17A Taiwan Airport Service(Note1)100.00(Note1)(Samoa) Co., Ltd.
18. NORDAM Asia Ltd.
3,797,500
49.00
3,797,500
19. Global Sky Express Ltd.
250,000
25.00
250,000
20. China Aircraft Services Ltd.
28,400,000
20.00
28,400,000
21. Jardine Air Terminal Services
12,000,000
15.00
12,000,000
Ltd.
22. Everest Investment Holdings(Note3)
13.59(Note3)
Ltd.
23. Chung-Hwa Express Co., Ltd.
1,100,000
11.00
1,100,000
Note 1: This company has not issued shares.
Note 2: CAL-Asia Investments Inc. directly holds 14% stake, Taiwan Airport Service (Samoa) Co., Ltd. directly holds 14% stake.
Note 3: Includes 1,359,368 shares of common stock and 135,937 shares of preferred stock.

82 Corporate Governance Report%100.00100.00100.00100.0035.00
28.00(Note2)28.00(Note2)2.59
5.45
100.00100.00100.00100.00100.00
93.99
93.93
77.17
55.00
59.00
53.67
51.00
20.00
51.00
49.00
48.43
100.00
49.00
25.00
20.00
15.00
13.59
11.00

Capital Overview
4.1 Capital and Shares
4.2 Corporate Bonds
4.3 Other Depository Receipts
4.4 Financing Plans and Implementation

Capital Overview

83IV. Capital Overview
4.1 Capital and Shares
4.1.1 Source of Capital
A. Issued Shares

Authorized Capital

Paid-in Capital

RemarkMonth/
Year

Par
Value
(NT$)

SharesAmountSharesAmountSources of Capital

02/201210

5.2 billion

52 billion

5.2 billion

52 billion

Cash increase
NT$5,683,776,490

05/201510

6 billion

60 billion

5.24 billion

52.4 billion

05/201510

6 billion

60 billion

5.37 billion

53.7 billion

09/201510

6 billion

60 billion

5.47 billion

54.7 billion

12/201510

6 billion

60 billion

5.47 billion

54.7 billion

12/201710

6 billion

60 billion

5.47 billion

54.7 billion

12/2018

10

6 billion

60 billion

5.42 billion

54.2 billion

05/201910

7 billion

70 billion

5.42 billion

54.2 billion

Note: There was no “Capital Increase by Assets Other than Cash.”Jing Shou Shang No.
10401079310, May 7, 2015
Jing Shou Shang No.
10401096840, May 28, 2015

Jing Shou Shang No.
10401186200, September
17, 2015
Jing Shou Shang No.
10401250360, December 8,
2015
Jing Shou Shang No.
10601158980, December 4,
2017
Jing Shou Shang No.
Treasury Stock Retired
10701157330, December 18,
NT$500,000,000
2018
Adjustment ofauthorized capital in
Jing Shou Shang No.
accordance with the10801043180, May 8, 2019
Articles ofIncorporation

Issued Shares

Authorized Capital
Un-issued Shares

Total Shares

5,420,985

1,579,015

7,000,000

Common Stock Inscribed

4.1.2 Status of Shareholders
Government
Agencies

Remarks
Listed Stocks

APR 25, 2020; Unit: shares

Financial
Institutions

Other Juridical
Persons

Foreign Institutions
Domestic
Treasury& Natural Persons Natural Persons Stock

Total

4

19

217

711

143,2750144,226

519,754,485
9.59%

67,439,391
1.24%

2,484,721,933
45.84%

728,144,422
13.43%

1,620,924,419
29.90%

00.00%

5,420,984,650
100.00%4.1.3 Shareholding Distribution Status
Class of Shareholding
1-999
1,000-5,000
5,001-10,000
10,001-15,000
15,001-20,000
20,001-30,000
30,001-40,000
40,001-50,000
50,001-100,000
100,001-200,000
200,001-400,000
400,001-600,000
600,001-800,000
800,001-1,000,000
1,000,001 or overTotal

84 Capital Overview

Jing Shou Shang No.
10101028630, February 20,
2012

APR 25, 2020; Unit: Thousand shares

Share Type

Number of
Shareholders
Shareholding%

Approval Date andDocument No. by Ministryof Economic Affairs

Corporate debt for
equity swap
NT$491,665,650
Corporate debt for
equity swap
NT$1,208,413,350
Corporate debt for
equity swap
NT$1,000,652,560
Corporate debt for
equity swap
NT$8,169,930
Corporate debt for
equity swap,
NT$945,010

B. Type of Stock:Item

APR 25, 2020
Unit: shares; NT$

Number of Shareholders
33,52366,491
18,991
6,602
5,091
4,461
2,139
1,698
2,859
1,290
516
201
80
50
234
144,226

APR 25, 2020; Unit: shares
Shareholding
10,849,315
160,343,416
154,440,495
83,509,579
95,134,934
115,451,031
76,948,793
80,038,450
208,967,105
185,797,043
146,905,639
98,028,565
54,717,582
45,051,240
3,904,801,463
5,420,984,650

Percentage
0.20%
2.96%
2.85%
1.54%
1.75%
2.13%
1.42%
1.48%
3.85%
3.43%
2.71%
1.81%
1.01%
0.83%
72.03%
100.00%4.1.4 List of Major Shareholders

APR 25, 2020; Unit: shares
Shareholding

Shareholder's Name
China Aviation Development Foundation
National Development Fund of The Executive Yuan

SharesPercentage

1,867,341,935

34.45%

519,750,519

9.59%

Chunghwa Telecom Co. Ltd.

263,622,116

4.86%

China Airlines Ltd. Employee Stock Ownership Trust Plan

63,333,017

1.17%

New Labor Pension Fund

60,727,000

1.12%

Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds

53,130,442

0.98%

Ocean Investment Holding Co., Ltd.

48,727,000

0.90%

35,442,146

0.65%

35,300,821

0.65%

33,591,761

0.62%

Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International
Equity Index Funds
JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank
iShares MSCI Taiwan Index

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

Unit: Thousand shares; NT$

Year
Items

2018
(Distributed in 2019)(Note 10)

2019(Distributed in 2020)(Note 11)2020
(As of APR 25)(Note 9)MarketPrice per
Share
(Note 1)Highest Market Price

12.90

11.25

9.12

Lowest Market Price

8.97

9.00

5.50

Average Market Price

10.44

9.69

7.40

Net Worthper Share(Note 2)

Before Distribution

10.54

10.44

9.68

After Distribution

10.44

10.44

-

Earnings per Weighted Average Shares
Share
Diluted Earnings Per Share (Note 3)

5,456,579
5,418,096
5,418,367
0.33(0.22)(0.70)Cash Dividends
0.20960737
Dividends
Dividends from Related Earnings
Stock
per Share
Dividends
Dividends from Capital Surplus(Note 8)
Accumulated Undistributed Dividends (Note 4)
Price / Earnings Ratio (Note 5)
31.21
NAReturn on
Price / Dividend Ratio (Note 6)
49.14
NAInvestment
Cash Dividend Yield Rate (Note 7)
2.04%
NA*If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose information onmarket prices and cash dividends retroactively adjusted based on the number of shares after distribution.
Note 1: Annual Average Market Price=Annual Turnover Value/Trading Volume.
Note 2: Based both on the number of issued shares at the end of the year, and on the distribution decided on at the Shareholders’Meeting the following year.
Note 3: For those requiring retroactive adjustment due to stock grants, both the pre-and post-adjustment EPS should be listed.
Note 4: In issuing equity securities, provisions may be made to accumulate undistributed dividends for the year and postpone
distribution until a year when profit is made. The dividends accumulated over the period ending in the year of distribution
should be disclosed.
Note 5: P/E Ratio=Average market price of a share in the current year/EPS.
Note 6: P/D Ratio=Average market price of a share in the current year/cash dividend per share.
Note 7: Cash dividend yield=cash dividend per share/average market price of a share in the current year.
Note 8: In accordance with Taiwan Stock Exchange regulations, treasury share effects have already been considered.
Note 9: Net worth per share and EPS are calculated based on the financial statement for the most recent quarter that has beenverified by an accountant. All other fields are based on the current year data through the publication date of the annual
report. As of publication of this report, the Q1 2020 financial information has not yet been reviewed by Deloitte & Touche.
Note 10: 2018 surplus allocation plan resolution passed at the 5th meeting of the 21st Board of Directors on March 20, 2019, and it
will be sent to the 2019 shareholders' meeting for recognition.
Note 11: The Company’s EPS for 2019 was negative and thus it will not distribute earnings; it has been decided by the 10th meetingof the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends for 2019, thus this does not
apply.
Note 12: The Company's 2019 final daily closing price was NT$9.06.

Capital Overview

854.1.6 Dividend Policy and Implementation Status
A. Dividend Policy

The CAL Articles of Incorporation outlines the following dividend policy:
If the Company makes a profit over the year, an amount of no less than 3% of the profit must be
distributed as employee compensation. If the Company has accumulated losses, funds must be
retained to offset the deficit.
The aforementioned employee compensation is primarily disbursed as stock or cash and theresolution must be approved at a meeting of the Board of Directors with two-thirds of directors inattendance and must receive support from half of participating members.
Should the Company make a profit over the year, said profit must first be used to pay all taxes andoffset accumulated losses, then 10% of the remaining amount is to be set aside as a legal reserve.
After setting aside or reversing a special reserve, any remaining amount along with accumulated
undistributed earnings shall be distributed as shareholder dividends and bonuses according to a
resolution drawn up by the Board:(1)Not less than 50% of the amount shall be distributed as shareholder dividends and bonuses. Afterpretax profits are deducted as outlined above, should the amount left not be sufficient for
distribution, the difference will be made up by accumulated undistributed profit.
(2)In the event of a yearly loss, depending on financial, operation, and management considerations,
all or part of the legal reserve may be distributed as new stock or cash as prescribed by law andcompetent authority regulations.
(3)Dividends and bonuses are distributed as stock or cash, with cash dividends making up no lessthan 30% of the total distributable dividends.

B. Proposed Distribution of Dividend

The Company does not have distributable earnings for 2019; it has been decided by the 10th
meeting of the 21st Board of Directors on March 18, 2020, that the Company will not pay dividends
for 2019.

C. No significant change in expected future dividend policy.

4.1.7 Impact of Stock Dividends Issuance on Company’s Business Performanceand Earnings per Share: Not Applicable.
4.1.8 Employees’ Compensation and Directors' Remuneration

A. Articles of Incorporation regulations: See 4.1.6 Dividend Policy and Implementation
Status.
B. The basis for estimating the amount of employee compensation and director
bonuses, for calculating the number of shares to be distributed as stock bonuses,
and the accounting treatment of the discrepancy, if any, between the actual
distributed amount and the estimated figure, for the current period
The Company has not allocated employee compensation for this period. In addition, in accordancewith the Articles of Incorporation, it will not pay remuneration to the directors.

C. Board approved employee compensation and director bonus proposal(1) Amount of employee bonuses (including stock and cash) and director bonuses distributed. If theactual amount distributed differs from the original estimated amount, the difference, reason, andhow this was handled is to be disclosed:
It has been decided by the 10th meeting of the 21st Board of Directors on March 18, 2020, that
the Company will not pay dividends for 2019.
(2) The amount of any proposed distribution of employee stock bonuses and the size of such an
amount as a percentage of the sum of the net income for the current period and total employee
bonuses: Not Applicable.

86 Capital Overview

D. The actual employee compensation and director bonuses distributed for theprevious year (2018) (including number of shares distributed, value, and stock
price). Should there be a discrepancy with the proposed amount of employeecompensation and director bonuses, the difference, reason, and how this washandled should be stated(1) Employee compensation: There is no difference between the proposed employee compensation
approved by the Board of Directors and the actual amount paid.
(2) Director bonuses: Not Applicable.

4.1.9 Buyback of Treasury Stock: None.

Capital Overview

874.2 Bonds

4.2.1 Corporate Bonds

APR 25, 2020
Domestic Unsecured
Domestic Unsecured
Domestic Unsecured
Straight Bond (2016-1) Straight Bond (2016-2) Straight Bond (2017-1)

Domestic Unsecured
Straight Bond (2017-2)

Issue date

05/26/2016

09/27/2016

05/19/2017

10/12/2017

Denomination

NT$1,000,000

NT$1,000,000

NT$1,000,000

NT$1,000,000

Republic of China

Republic of China

Republic of China

Corporate Bond Type

Issuing and transaction location Republic of China
Issue price

Par

Par

Par

Par

Total price

NT$5,000,000,000

NT$5,000,000,000

NT$2,350,000,000

NT$3,500,000,000

Coupon rate

1.19% per annum.

1.08% per annum

Tranche A: 1.20% perannum
Tranche B: 1.75% perannum

Tranche A: 1.14% perannum
Tranche B: 1.45% per
annum

Tenor

5 year(May 26, 2016 to May
26, 2021)

5 year(September 27, 2016
to September 27,
2021)

Tranche A: 3 years(May 19, 2017 to May
19, 2020);
Tranche B: 7 years(May 19, 2017 to May
19, 2024)

Tranche A: 3 years(October 12, 2017 to
October 12, 2020);
Tranche B: 5 years(October 12, 2017 to
October 12, 2022)

Guarantee agency

Not applicableNot applicableNot applicableNot applicable

Consignee

Huanan Commercial
Bank

Huanan Commercial
Bank

Huanan Commercial
Bank

Huanan Commercial
Bank

Underwriting institution

YuanTa Securities
Ltd.

Masterlink Securities
Ltd.

Masterlink Securities
Ltd.

Fubon Integrated
Securities Ltd.

Certified lawyer

Ture Honesty
International Law
OfficeKuo, Hui‐Chi, Attorney
At Law

Ture Honesty
International Law
OfficeKuo, Hui‐Chi, Attorney
At Law

Ture Honesty
International Law
OfficeKuo, Hui‐Chi, Attorney
At Law

Ture Honesty
International Law
OfficeKuo, Hui‐Chi, Attorney
At Law

CPA

Huang, Jui-chan(Deloitte & Touche)

Yang, Chen-Hsiu(Deloitte & Touche)

Yang, Chen-Hsiu(Deloitte & Touche)

Yang, Chen-Hsiu(Deloitte & Touche)

Repayment method

Repayment of 50% of
the principal in the
fourth year and theremaining 50% in thefifth year

Repayment of 50% of
the principal in the
fourth year and theremaining 50% in thefifth year

Tranche A: one-time
payment upon maturity;
One-time repayment of Tranche B: return ofcapital upon maturity. 50% of capital 4 and 5
years from the startdate, respectively.

Outstanding principal

NT$5,000,000,000

NT$5,000,000,000

NT$2,350,000,000

NT$3,500,000,000

Terms of redemption oradvance repayment

None

None

None

None

Restrictive clause

None

None

None

None

None

None

None

Not applicableNot applicableNot applicableNot applicableNot applicableNot applicable

None

None

None

Name of credit rating agency,
rating date, rating of corporate None
bonds
As of the printing
date of this annual
report, converted
amount of(exchanged or
subscribed)
Other
ordinary shares,
Not applicablerights
GDRs, or otherattached securities
Issuance andconversion(exchange orsubscription)
methodIssuance and conversion,exchange or subscription
Not applicable
method, issuing condition
dilution, and impact on existing
shareholders’ equity
None
Transfer agent

88 Capital Overview

Corporate Bond Type

Domestic Unsecured 6th
Convertible Bond

APR 25, 2020
Domestic Unsecured Ordinary
Corporate Bonds (2018-1)

Domestic Unsecured Ordinary
Corporate Bonds (2019-1)

Issue date

01/30/2018

10/30/2018

06/21/2019

Denomination

NT$100,000 per unit

NT$1,000,000 per unit

NT$1,000,000 per unit

Issuing and transaction location Republic of China

Republic of China

Republic of China

Issue price

Issued at 100.2% of par value Par

Par

Total price

NT$6,012,000,000

NT$4,500,000,000

NT$3,500,000,000

Coupon rate

0.00% per annum

Tranche A: 1.32% per annum
Tranche B: 1.45% per annum

Tranche A: 1.10% per annum
Tranche B: 1.32% per annum

5 years(January 30, 2018, toJanuary 30, 2023)

Tranche A: 5 years (November
30, 2018, to November 30,
2023)
Tranche B: 7 years (November
30, 2018, to November 30,
2025)

Tranche A: 5 years (June 21,
2019, to June 21, 2024)
Tranche B: 7 years (June 21,
2019, to June 21, 2026)

Guarantee agency

Not applicableNot applicableNot applicable

Consignee

Chinatrust Commercial Bank
Huanan Commercial Bank
Trust Department

Taishin International Bank

Underwriting institution

Taishin Integrated Securities
Fubon Integrated Securities Ltd.
Ltd.

Fubon Integrated Securities Ltd.

Certified lawyer

Handsome Attorney-at-Law
Chiu, Ya-Wen, Attorney At
Law

Ture Honesty International Law Ture Honesty International Law
OfficeOfficeKuo, Hui‐Chi, Attorney At Law
Kuo, Hui‐Chi, Attorney At Law

CPA

Not applicable

Yang, Cheng‐Hsiu(Deloitte & Touche)

Huang, Jui-chan(Deloitte & Touche)

Repayment method

According to the offering ofDomestic Unsecured 6thconvertible bond section 6

Tranche A: Repayment of 50% of
the principal at the end of the
fourth year and the remaining
50% at the end of the fifth year;
Tranche B: Repayment of 50% of
the principal at the end of thesixth year and the remaining
50% at the end of the seventh
year

Tranche A: Repayment of 50% of
the principal at the end of the
fourth year and the remaining
50% at the end of the fifth year;
Tranche B: Repayment of 50% of
the principal at the end of thesixth year and the remaining
50% at the end of the seventh
year

Outstanding principal

NT$6,000,000,000

NT$4,500,000,000

NT$3,500,000,000

Terms of redemption oradvance repayment

According to the offering ofDomestic Unsecured 6thconvertible bond section 18
and 19None

None

Restrictive clause

None

None

None

None

None

Not applicableNot applicableNot applicableNot applicable

Tenor

Name of credit rating agency,
rating date, rating of corporate None
bonds
As of the printing
date of this annual
report, converted
amount of
Not yet converted(exchanged or
subscribed) ordinary
shares, GDRs, or
Other
other securities
rightsattached Issuance andconversion (exchange
According to the offering ofor subscription)
Domestic Unsecured 6th
method as per theconvertible bond section 8
5th issue of domestic
and 9
unsecuredconvertible bonds
Issuance and conversion,exchange or subscription(Note)
method, issuing condition
dilution, and impact on existing
shareholders’ equity

Transfer agent
None
None
None
Note: As of April 25, 2020, according to the conversion price NT$12.60 of the sixth unsecured convertible bonds, and assuming theconvertible bonds have been fully converted, the shareholdings percentage of the three major shareholders, namely China
Aviation Development Foundation, National Development Fund, and Chunghwa Telecom, will be reduced from 48.90% to44.95%, but there will be no significant change in the shareholding structure, thus it has little effect on shareholder equity.

Capital Overview

894.2.2 Corporate Bonds Undergoing Private Placement
A. At the 7th meeting of the 21st Board of Directors on August 7, 2019, theCompany’s seventh issuance of 30,000 domestic unsecured convertible corporate
bonds was approved, each with a face value of NT$100,000, to be issued at 100% 100.5% of the face value. The total issuance amount was capped at NT$3,015,000
thousand. It has been reported and put into effect by the approval of Financial
Supervisory Commission letter Jin-Guan-Zheng-Fa-Zi No. 1080341270 dated
January 3, 2020.
B. Due to the recent changes in the domestic capital market conditions and the
COVID-19 pandemic’s continuing impact on the air transport industry, andconsidering that rash pricing and non-ideal issuance conditions might damage
shareholders’ rights, we applied for a three-month extension of the offering period
for the seventh issuance of domestic unsecured convertible corporate bonds. It wasapproved and filed for future reference in letter Jin-Guan-Zheng-Fa-Zi No.
1090334953 dated March 20, 2020, and the offering period was extended to July 3,
2020. Once the market stabilizes, we will find the correct timing for pricing in orderto protect the Company’s interests and shareholders’ rights.

4.2.3 Convertible Bonds

Types of Corporate Bonds
Year
Item
HighestConvertible Bond
LowestMarket Price
Average
Conversion Priceth

Unit: NT$

Domestic Unsecured 6 convertible bond
2019

The current year through April 25, 2020

102.00100.00
99.15
98.55
99.91
99.21
12.90
12.60
The convertible bonds were listed on the Taipei Exchange on January 30, 2018; theconversion price upon issuance was NT$13.20. Due to the distribution of 2018 cash
Issuance date and conversion
dividends, according to the provisions of the sixth unsecured convertible bonds’
price at the time of issue
issuance and conversion regulations, the conversion price shall be adjusted. The
conversion price was thus reduced to NT$12.60.
Conversion method
Issue new shares.

4.2.4 Exchangeable Bond, Shelf Registration, Shelf Registration: None.

4.3 Other Securities-Related Issues
4.3.1 Preferred shares: None.
4.3.2 Global Depository Receipts: None.
4.3.3 Employee Stock Options: None.
4.3.4 Employee Restricted Stock: None.
4.3.5 Status of New Shares Issuance in Connection with Mergers andAcquisitions: None.

4.4 Financing Plans and Implementation

As of April 25, 2020, the use of funds earned through previously issued securities areprogressing as planned and are in accordance with expected results.

90 Capital Overview

Operational Highlights
5.1 Business Activities
5.2 Market and Sales Overview
5.3 Human Resources
5.4 Environmental Protection Expenditure
5.5 Labor Relations
5.6 Important Contracts

Operational Highlights

91

V. Operational Highlights
5.1 Business Activities
5.1.1 Business Scope

A. Main areas of business operations(1)Civil air transport business: Air passenger transport, regular and irregular contracting ofinternational charter flights business, and training of civil aviation personnel.
(2)General aviation business: In-flight commodity sales.
(3)Airport ground service business: Ground services for civil international airports and transit
aircraft.
(4)Air cargo terminal entrepot operation: Air cargo transport services.
(5)Aircraft and parts maintenance and manufacturing business: Aircraft body maintenance.
(6)Inflight catering service: Provision of in-flight catering or other related supplies.
(7)Laundry, dyeing, printing and finishing, and wholesale and retail of dyeing mills and dyestuff
cleaning supplies: Washing of cloth and clothing inside the aircraft and general washing businessin the hospitality industry.
(8)Warehouse and storage: Warehousing services for import, export, and entrepot air cargo.
(9)Other: All business items that are not prohibited or restricted by law, except for those that are
subject to special approval.

B. Revenue distribution
Proportion of Overall Business
Item
Passenger Revenue
Cargo Revenue
Other
Total

Unit: NT$ thousands
2019
Net Revenue
Proportion of Revenue
111,413,435
66%
43,793,256
26%
13,237,469
8%
168,444,160
100%

C. Main products(1)Passenger service: Air passenger transport and regularly scheduled and non-scheduled contract
international charter flight services.
(2)Cargo service: Transport services for cargo, courier, mail, and packages.
(3)Ground services: Handling of luggage and cargo, aircraft cleaning, and ground support
equipment.
(4)In-flight sales: Providing in-flight duty free sales services.
(5)Airline catering: Providing meal services to airlines.
(6)Warehousing and logistics services: Provide airfreight forwarding and logistics services.
(7)Aircraft maintenance services: Airframe, engine, and aircraft component maintenance.
(8)Tourism and leisure services: General hotel industry and travel services.
(9)Investment holding and leasing services: Engaged in real estate investment, building management,
and leasing.
(10)Civil aviation personnel training: Provide maintenance training courses, develop professional
maintenance personnel.

92 Operational Highlights

D. Product Development(1)Website optimization

The Company is committed to improving its website experience quality; expanding the development of
website functions to optimize the ticket purchasing process; introducing 3D verification functions for credit
card transactions to ensure the security of customer transaction and prevent credit card fraud; and building
multiple payment tools and supporting multi-currency payments.

(2)New fare products

To better service the passengers, new fare products were launched in September 2019. Passengers canchoose additional products according to their travel needs, such as baggage allowance, preferred seats, andmileage accumulation standards, for them to select a la carte or package fares.

(3)Developing potential destinations and optimizing the aviation network extension

In order to actively expand the Southeast Asian aviation network layout and to strengthen the aviation
network transfer market, the Company plans to launch several routes in 2020, including the Taoyuan-Cebu
and Taoyuan-Chiang Mai routes.

5.1.2 Industry Overview

A. State of the industry and future development(1)Economic growth

According to the economic forecast published by IHS Markit in February 2020, the estimated global
economic growth rate is 2.5%; Taiwan’s economic growth rate has been revised down to 2.1% (originally2.4%) due to the impact of COVID-19 pandemic situation on consumption and trade. The economic growth
rates of other major economies and countries are as follows: United States at 2.1% and the Eurozone at
0.9%. Affected by the COVID-19 pandemic, countries have adopted unprecedented measures for isolation,
quarantine, and control, resulting in the stagnation of production and consumption activities in many
regions. Therefore, in 2020, Japan’s economic growth rate has been revised down to 0.5% (originally 0.6%),
and China’s to 5.4% (originally 5.8%).

(2)Oil prices

The price of aviation fuel has been kept stable, at around US$80 per barrel at the beginning of 2018, andbegan to rise at the end of Q1, with an increase of more than 20%, reaching the highest price of US$96 perbarrel in October 2018. However, in November and December, sharp market decline, subpar global
economic performance, along with the strong supply of oil shale manufacturers in the United States led to a
rapid decline in prices, a decline more than 25% by the end of 2019. The average oil price in December was
about US$72. In 2020, the aviation industry was affected by the pandemic, which resulted in the declined
demand for oil. The fuel price is estimated to be US$48.60 per barrel on average.

(3)Air passenger market

The IATA originally estimated in December 2019 that in 2020, the growth rate of demand for the air
passenger transport market would be 4.1% globally, and 4.8% in the Asia-Pacific region. However, as the
COVID-19 pandemic has increased in severity, the IATA estimates that the growth rate of demand in the air
passenger transport market in 2020 will turn negative, and passenger transport revenue will be reduced byabout US$63 billion to US$113 billion due to the implementation of tourism restrictions on the grounds ofpandemic prevention in various countries.

(4)Air cargo market

Demand in the global cargo transport market shrank by 3.3% in 2019, which was the first year of cargotransport volume decline since 2012 and the weakest performance since the global financial crisis in 2009.
The tense international trade situation leading to insufficient global economic growth momentum was the
key factor in the 2019 air cargo transport volume decline. Cargo supply volume has increased slightly by 2.1%,
resulting in a decrease in the loading rate by 2.6%. The IATA estimated in December 2019 that in 2020,
benefiting from the revival of trade, the growth rate of demand for the air cargo transport market would bearound 2%. However, due to the uncertain geographical distribution and duration of the pandemic at thisstage, its impact on the air cargo transport market can not yet be accurately estimated.

B. Relationship between upstream, midstream, and downstream firms

The air transport service industry primarily provides transportation for passengers and cargo. These operations
rely on the support and assistance of upstream, midstream, and downstream industries that enable us toprovide comprehensive services and meet our customers’ needs.

(1)Upstream industries

Primarily aircraft, aircraft engine, and ground service equipment (such as towing vehicles, loading vehicles,
and equipment needed on the apron) manufacturers. Currently, in addition to purchasing aircraft,
Taiwanese airlines also utilize leasing to add to their fleets, so the aircraft leasing industry is also an
upstream industry for air transport providers.

Operational Highlights

93

(2)Midstream industries

Primarily airlines themselves and related support industries such as the oil industry that provides aviation
fuel, the aircraft maintenance industry that repairs and maintains airlines’ aircraft and components, and theairline catering industry that provides in-flight meals. In response to the changing needs of downstream
industries, the air transport industry’s strategic adjustments in their operating scale, fleets, or flight
networks will also affect the development of upstream industries.

(3)Downstream industries

In terms of passenger transport, the air transport industry primarily serves the public and travel agencies,
while cargo transport services are provided to the courier and freight forwarding industries. As a member of
the air transport industry, the needs of downstream customers are at the core of the CAL’s product andservices planning. Our mission is to provide safe, convenient, and comprehensive services.

C. Product development trends(1)Aviation alliance cooperation

With the liberalization of the air transport market, airports have become increasingly congested. There
being limited resources, airlines provide passenger transportation services in the form of alliance teams,
with such mechanisms as code-sharing, extended route agency systems, and combined mileage cumulation
frequent flyer programs. Aviation alliance cooperation also includes operating in the same terminal at major
airports, sharing maintenance facilities and operating equipment, mutual support of personnel, andcooperation in ground handling and inflight catering to reduce costs. Benefiting from alliance cooperation,passengers can purchase flight tickets at a lower price. As long as they take alliance airlines, they can earnflight miles. Flight schedules provided by the alliance are more flexible with less transfers, making it easierfor passengers to reach their destination. At present, there are three major alliances in the aviation industry,
namely SkyTeam, Star Alliance, and One World. The Company is currently one of the 19 member airlines of
SkyTeam. Through extensive global network cooperation, we provide transportation services in 170
countries and 1,036 destinations.

(2)Joint Venture (JV)In order to establish a closer strategic alliance relationship, airlines further share their route network withbusiness partners and perform joint marketing and bear risks together in order to obtain more revenue androute profit. Joint ventures share revenue on cooperative routes, sometimes including cost sharing. The
economies of scale, aviation network revenue, cost reduction and management efficiency improvements
generated through cooperation can effectively improve operational efficiency, surpassing the benefits ofalliance cooperation. For example, United Airlines (UA) and All Nippon Airways (ANA / NH) have launchedjoint ventures since 2012. Passengers can take ANA from Taipei via Tokyo Narita or from Songshan via Tokyo
Haneda to gateway cities in the United States, or choose United Airlines’ daily Taipei - San Francisco directflight and transfer to major cities in the United States. Under the JV fare structure, due to the unified fare
for the same cabin class and greater flight interoperability, the sales process is simpler.

(3)Grasping logistics trends and expanding business territory

In response to the different transportation needs of special cargoes, such as semiconductor precision
machinery, aircraft engine materials and the demand for equipment driven by the emerging 5G technology
products, the Company provides professional large cargoes loading services with its Boeing 747-400
cargo-only aircraft. In addition, having obtained IATA CEIV Pharma certification, we are strongly developing
the potential markets for special goods, such as the temperature-controlled cold chain and biotechnology
and pharmaceutical markets. In response to the development of cross-border e-commerce, we arestrengthening cooperation with express delivery companies and inter-airline cooperation, developing
e-commerce postal air-bridge service transport, so as to expand business and increase the added value oftransportation services.

D. Product competition

The Company is mainly engaged in international passenger and cargo transport services. Due to our continuous
commitment to stable revenue and controlling costs, we not only stand in the leading position in the domestic
aviation market, but are also fairly representative world-wide;according to the statistics of the Civil Aeronautics
Administration (CAA), the Company’s share in the passenger and cargo transport market is ahead of its
peers;According to the IATA’s 2018 international passenger and cargo transport volume rankings published in
2019, the Company ranked 34th in the world, with a passenger transport volume reaching 41,390 million
Revenue Passenger Kilometers ( RPK）
；In terms of cargo transport, the Company ranked 12th in the world, witha cargo transport volume reaching 5,804 million Freight Revenue Ton Kilometers (FRTK).

94 Operational Highlights

Taiwan National Airlines International and Cross-Strait Market Share for Passengers and Cargo in 2019
AirlinePassenger
Cargo
China Airlines
23.45%
37.37%EVA Air
21.70%
24.12%
Mandarin Airlines
2.17%
0.64%
UNI Air
1.43%
0.56%
Far Eastern Air Transport
0.46%
Tigerair Taiwan
4.70%
0.04%
Other-Foreign Carriers
46.09%
37.27%
Source: Civil Aeronautics Administration Monthly Statistics from January to December 2019-Taiwan National Airlines
International and Cross-Strait Market Share for Passengers and Cargo

IATA Global International Route Passenger and Cargo Rankings 2018

Passenger (Passenger-Kilometers) Rankings
Unit: 1 million
1 Emirates
302,298
2 Ryanair(4)170,900
3 United Airlines
155,178
4 Lufthansa(3)153,639
5 Qatar Airways
152,210
6 British Airways(3)148,477
7 Delta Air Lines
136,647
8 Air France(3)136,476
9 Turkish Airlines(3)125,229
10 American Airlines
121,416
11 Cathay Pacific Airways
114,699
12 KLM(3)107,676
13 Singapore Airlines
100,492
14 easyJet(3)93,60915 Air Canada
86,06916 Etihad Airways
84,25217 Norwegian(3)(4)
79,82518 Korean Air
77,32719 Air China
74,61120 LATAM Airlines Group(3)67,335
21 Thai Airways International
66,26322 Aeroflot Russian Airlines
64,01923 China Southern Airlines(3)63,01624 China Eastern Airlines
62,46325 Qantas Airways
59,05626 Saudi Arabian Airlines
55,65227 Iberia(3)52,34028 All Nippon Airways(3)50,74729 EVA Air
48,28130 Wizz Air(1)(5)45,05031 Asiana Airlines
44,22032 Japan Airlines
44,17533 Ethiopian Airlines
41,80434 China Airlines
41,390Source: IATA WATS 2019

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Cargo (Ton-Kilometer) Rankings
Unit: 1 million
Emirates
Qatar Airways
Cathay Pacific Airways
Federal Express
Korean Air
Lufthansa(3)Cargolux
Singapore Airlines
United Parcel Service
Air China
Turkish Airlines
China Airlines
AirBridgeCargo Airlines
China Southern Airlines
British Airways
All Nippon Airways(4)United Airlines
Asiana Airlines
Polar Air Cargo
Atlas AirAir France(4)KLM(4)EVA Air
American Airlines
Etihad Airways
Kalitta Air(2)(3)
LATAM Group(3)AeroLogic(1)China Cargo Airlines
Saudi Arabian Airlines
Thai Airways International
Delta Air Lines
Japan Airlines
Silk Way West Airlines

12,713
12,695
11,284
8,455
7,815
7,391
7,322
6,491
6,252
5,912
5,860
5,804
5,511
5,309
4,270
4,113
4,064
4,052
4,010
3,792
3,672
3,604
3,580
3,550
3,471
3,121
3,044
2,803
2,702
2,487
2,438
2,417
2,410
2,354

E. Intellectual Property

The Company has internal regulations governing corporate identity system management and has a brandmanagement platform to perform control and management. The scope includes the Company’s office buildings
and airport terminals (indoor and external signboards, marks and signs, etc.), transportation, advertisements,
printed matters, in-flight and ground service supplies, logos, products, and other installations, publishing, or
broadcasting with the application of corporate identity covered by the Corporate Identity System Guideline(hereinafter referred to as the “CIS Guideline”).By managing the Company’s corporate identity, application, andauthorization of corporate logos (i.e., trademarks), and through reviewing the plan, we maintain theconsistency of corporate identity exposure, unify the Company’s visual identity, and strengthen the Company’s
corporate image.According to the application situation of corporate identity in units in Taiwan and abroad, theCompany will discuss and report the implementation method every two years, and notify the units to beaudited by e-mail or memo. The units to be audited shall upload the audit samples on the brand management
platform for the responsible unit to review (or an on-site audit shall be performed) to maintain the Company’s
trademark rights being under the protection of the law.

Operational Highlights

955.1.3 Research and Development

A. Costs of R&D investment and successfully developed technologies or products

From January 1, 2019, through the publication date of this report, the Company invested
approximately NT$95 million in research and development. The following table summarizes thetechnologies and products developed:
Project

R&D Project Description
To improve employee productivity and efficiency, we have built a robotic process automation
platform, using robots to simulate the work flow of human beings at the computer to replace therepetitive operations of manual data input and reduce the omissions caused by manual input errors,
thereby allowing employees more time to focus on creativity and decision-making judgments andthinking, and use manpower for high yield work. The platform was completed and went live in May
2019.

Robotic Process
Automation, RPA

Ticket purchasing
instant
marketing platform

Completion in the stage of online ticket purchasing user log collecting and tracking, instantly grasping
online user activities and conducting customer analysis, and cooperating with online sales activities
to achieve marketing models, such as targeting and remarketing. Integration and application with
Artificial Intelligence (AI) and Big Data technologies and systems can be planned in the future. Thiswas completed and went live in June 2019.

New generationcrew
member shiftarrangement
systemIn response to the substantial growth in the number of Company’s flights and crew members, as wellas the needs of passenger and cargo flight dispatch, we planned to build a next generation crew
member dispatch system, to quickly meet the requirements of civil aviation regulations, optimize
manpower dispatch, and fairly and efficiently allocate crew members’ shifts, ensuring crew members’
dispatch quality. The system was completed and went live in June 2019.

In-Flight Equipment
Management
System,IEMS

The system was built to implement the systematic management of the cabin in-flight service supplies
data, promptly provide external agents with complete and accurate loading information, and use
data analysis to further improve the loading efficiency and operation quality. The system wascompleted and went live in August 2019.

New sub‐accounting
systemIn order to respond to the significant changes in the industry’s prorating rules for joint venture
account settlement in the future and be able to make modifications in due course, the new prorating
system introduces interfacing with the passenger transport revenue system, to reduce manualintervention in fare prorating, improve prorating accuracy and account settlement quality of joint
ventures. New prorating system uses the cloud construction method, which can reduce the use costand maintenance risk of the Company’s own physical facilities. The system was completed and went
live in December 2019.

Flight Control &Monitoring System,
FCMS

To enable flight control personnel to fully grasp the Company’s flight transport capacity and current
flight status and to produce the most appropriate flight operation decisions, through the automatedanalysis of the system, flight operation decision-making supplementary information was generated,such as flight on-time, late departure or arrival status, current and estimated flight transportation
capacity, airport airworthiness, flight schedule surveillance and real-time flight trajectory. In addition
to taking into account the flight operation cost and service quality, emergencies can be responded toat all times to ensure that flights arrive on time and safely. The system was completed and went livein December 2019.

B. Future R&D Projects

In order to meet future development needs, China Airlines will continue to invest in R&D projects.
Over 2020, we plan to invest a total of NT$61 million into R&D. The following table summarizes
future projects:
Project

Future R&D Project Description

Estimated
Completion Date

Customer
RelationshipManagement,
CRM

To establish the Company’s consistent customer relationship service system and to
expand business opportunities through data analysis in integrated systems. The
primary goal is to serve passengers. We plan to consolidate data platforms such as
membership, ticket files, reservations, in-flight duty-free products, and customer
feedback. Through one single platform, data visualization and other operations, we
can effectively accelerate customer service processing and improving service quality.

December 2020
The
implementation
progress was
12% as of theannual reportprinting datePromoting relevant application of robotic process automation to all business units in
China Airlines, reducing the manpower requirements for indirect manual operations,
so to avoid the oversights caused by repetitive data input and manual input errors,
improve work efficiency, and improve operating performance. Related projects
carried out in 2020 include:
Robotic Process
Automation, RPA (1)Audit tool improvement-establishment of automatic pricing function robotic
system(2)Establishment of IATA account settlement, receipt, and disbursement automatedsystem(3)Establish the automatic fare-downloading function.

December 2020
The
implementation
progress was
17% as of theannual reportprinting date

96 Operational Highlights

Project
Establish therelevant
mechanismof Cyber Security
Management
Act

Estimated
Completion Date

Future R&D Project Description
The Cyber Security Management Act will be the focus of information security
protection work in 2020. Annual protection operations will be implemented
according to the Company’s information security protection plan. Plans to obtain the
PCI DSS certification will be implemented; reinspections on the information security
management system against the international standard ISO27001:2013 and thecertification of the privacy information management system against theinternational standard ISO27701:2019 will be performed. These will ensure thesecurity of the Company’s credit card transaction environment as well as the legality
and effectiveness of the Company's privacy protection system.

December 2020
The
implementation
progress was
30% as of theannual reportprinting dateJune 2020

iCabin Service
2.0, iCS 2.0

The cabin team leader/manager/head attendant can obtain information aboutpassengers/flights/team members right away through mobile devices. They canwrite up cabin reports with flexibility, regardless of time or location. In addition, thedigitized cabin manual is not only available for team members to read at any time, italso ensures that the content is kept up-to-date at all times. This effectively achieves
synergy across improved passenger service quality, cabin management, and flightsafety.

November 2020

e-Shopping

The "e-Shopping Duty-free Website" has been in use since the first project revisionin 2013. After observing the functions and web designs of other airlines' websites
and online shopping platforms, improvements will continue to be made to thewebsite. In order to uphold the company's service spirit through continuous
innovation and optimization while keeping up with today's trend of smart
technology, plans to revise and optimize the website will be implemented. This will
provide a more novel shopping experience that will in turn increase sales.

December 2020

CI Mobile APP

In order to enhance user experience on mobile devices, the Company continues tooptimize CI mobile app functionality. The planned improvement projects cover car
rental, accommodation booking/ticket refund application/chatbot customer
services/pre-stored travel documents/passport scanning (OCR)/China Airlines eMall
home delivery/push notification of system records/Google Pay-supported electronicboarding pass service/seat preselection/collaboration with credit cardcompanies/proof of purchase application/function upgrade for the membership
app/the establishment of an app for co-branded cards.

March 2020

Chatbot

Provide an innovative channel that reaches passengers and provides flight status inreal time. During peak seasons or when significant changes are made to flights due
to force majeure, provide passengers with an online instant chatbot conversational
service to minimize the time passengers spend waiting on the customer service
hotline. In addition, continue to utilize AI services and AI’s continuously-growing
sematic understanding to enhance passenger experience and improve service
quality.

OnlineCC

The China Airlines Customer Service Center was established in October 2003. The
customer service system was introduced in 2004 and has been in use for more than
16 years. The equipment of the system must keep up with the times to cope withtoday’s multifaceted business environment. In response to customer service center’sheavy workload, changing times, and technological advancements, China Airlines
plans to establish a next-generation multimedia customer service system. It involves
several functions, including telephone services, fax, automated voice answeringsystems, voice outbound dialing, e-mail, Facebook, and online customer service on
the official website. The system will not only increase passenger access channels,
but also help managers obtain workload information and staff status in real time,
promptly allocate human resources, and improve service effectiveness and quality.

The
implementation
progress was
86% as of theannual reportprinting dateThe
implementation
progress was
10% as of theannual reportprinting dateThe
implementation
progress was
30% as of theannual reportprinting date

Implementation
progress was
100% as of theannual reportprinting date

May 2020
The
implementation
progress was
96% as of theannual reportprinting date

Operational Highlights

975.1.4 Long-term and Short-term Development

To promote sustainable operations and strengthen international competitiveness, CAL has planned thefollowing short- and long-term passenger and cargo transport developments:

A. Short-term Development(1) Passenger
 Make short-term adjustments to ASK in response to the impact of the COVID-19 pandemic.

Since the outbreak of COVID-19 in late January 2020, the cross-strait and Hong Kong routes have beenheavily impacted, and the passenger loads and booking volumes of Northeast Asian routes continue todecline due to the spread of the disease. The pandemic continues to worsen as it inflicts heavy losses on
the aviation and tourism industries in the Asia-Pacific region. In addition to cancelling some flights, China
Airlines proactively adjusted ASK according to market conditions in response to the sharp decline inpassenger volume and revenue. Considering that the pandemic has yet to ebb, the China Airlines Groupwill continue to review market demand trends, adjust ASK accordingly, and reduce operational costs with
the intention of minimizing losses.

 Cooperate with the government in promoting the New Southbound Policy; expand the aviation
network in the ASEAN market through inter-airline cooperation.

China Airlines has formulated plans to start flight routes in potential destinations in Southeast Asia (suchas Cebu, Philippines; Chiang Mai, Thailand). In addition, as visa benefits for travelers from Southeast Asia
are in place and the demand for exchange between Taiwan and ASEAN countries has been increasing, theCompany will continue to review the potential of expanding in the markets of Southeast Asia routes for
ASEAN countries(including Thailand, Malaysia, and Vietnam) and increasing flights. At the same time,increasing the number of charter flights for specific seasons, holidays, and themes will be arranged
according to different needs to increase revenue. Through inter-airline cooperation (such as: code sharing,
SPAs), China Airlines will expand its aviation network in the ASEAN market.

 Open up new routes and explore market potential.

Open up Cebu and Chiang Mai flight routes to seize business opportunities in the Southeast Asia travel
market, and strengthen the positioning of transfers to North America. For many years, Taiwanese people
have frequently travelled to Southeast Asia, and with the support of the government’s New Southbound
Policy, the number of tourists from Southeast Asia to Taiwan has increased year by year. According tostatistics recorded by the Tourism Bureau, Ministry of Transportation and Communications, 5.57 million
tourists travelled between Taiwan and Southeast Asia in 2019. They made up 19% of Taiwan's travel
demand, which showed an annual growth rate of 12%. Among which, the number of Taiwanese people
who travelled to Southeast Asia grew by 17%, while the number of people who travelled from Southeast
Asia to Taiwan grew by 6.7%. Both numbers are higher than the growth rate of the overall market,
showing promising future prospects. Taking these into consideration, in 2020, China Airlines Groupstarted successively opening up the Taoyuan-Cebu route and resuming the Taoyuan-Chiang Mai route toseize business opportunities in the market. At the same time, the schedules of these flights are arranged
alongside the existing North America aviation network, so they can be connected to flights going to Los
Angeles, Ontario, San Francisco, Vancouver, New York, and vice versa. This way, more convenient andcomfortable services are provided to passengers travelling between Southeast Asia and North America.

(2) Cargo Make adjustments to market layout in response to the impact of the COVID-19 pandemic.

Due to the impact of the global COVID-19 outbreak at the start of 2020, most factories in Mainland China
delayed resumption of production, resulting in a slow recovery of production capacity. The transportationof goods has also been restricted due to the restrictions on the passage of people and vehicles at different
key import and export destinations. In addition, different airlines' passenger flights flying into Mainland
China have been reduced or canceled. This has also significantly impacted the airfreight market connected
to Mainland China's imports and exports. Furthermore, the impact of last year's (2019) China-US trade
war still continues, resulting in many uncertainties in the airfreight market this year. Regarding this matter,
China Airlines has begun planning and successively adjusting the market strategy for the Southeast Asia
region to strengthen the company's foothold in the export markets of Taiwan and Southeast Asia. At thesame time, China Airlines continues to closely observe changes in market capacity and demands, and it
will flexibly adjust its ASK and freight rate strategy accordingly. The Company is making an effort to secureurgent orders of goods and short-notice charter flight demands that are coming up in the short period oftime after production resumed in Mainland China.

 Improve revenue management and promote customized services.
We will continue to improve revenue management. Regarding the different transportation needs ofspecial cargo, such as time limit, volume, and special loading procedures, we will continue to enhance
price differentiation and increase the added value of transportation services by utilizing the advantages oflarge cargo loading and professional services of our Boeing 747-400 all-cargo aircrafts. In addition, in
recent years, the promotion of the charter business has been strengthened. Customized charter services
have been tailored to meet the needs of individual customers, which has contributed significantly to theincrease in revenue. In 2020, we will continue to deepen our development in emerging markets, such as
Southeast Asia, secure the efficiency of the overall aviation network in response to market changes,
promote the customized routine and regular charter flight business, and maximize the benefits of the
cargo fleet.

98 Operational Highlights

B. Long-term Development(1) Passenger
 Roll out fleet plans.

In order to improve operational efficiency, in 2019, the Company finished its plans to replace the oldcargo fleet and the old narrow-body fleet. Between 2021 and 2023, we will introduce 25 A321neo
aircrafts, which will gradually replace the narrow-body aircrafts currently in operation. The new cabin
design will enhance passenger service quality and strengthen product competitiveness.

 Efficiently establish aviation networks and deepen inter-airline cooperation to increase
revenue.

Utilize the new-generation, long-haul aircrafts 777 and A350 to proactively maximize the benefits of China
Airlines' aviation network in California (North America) and expand the customer base for long-haul flights;
provide a more interconnected, and convenient aviation network in Europe to secure China Airlines'
leading position in the market of flights flying from Taiwan to Europe; continue to expand the aviation
network covering bi-directional transfers in routes between New Zealand/Australia, Europe, andNortheast Asia to strengthen China Airlines' travel services. Furthermore, increase flight destinations andexpand into major cities and tourist destinations around the world through inter-airline cooperation;
increase the overall earnings generated by the aviation network by increasing flight frequencies andinterconnectivity.

 Optimize cabin products and strengthen brand marketing to enhance passenger experience andincrease loyalty.
Continue to improve personnel service and cabin hardware; provide passengers with the best flight
quality and pleasant in-flight services. Establish brand positioning and a marketing direction that is in linewith the brand improvement plan and based on the corporate philosophy; enhance the brand recognitionof China Airlines; further ensure the consistency of passenger experience and strengthen the brand loyalty
passengers have for China Airlines' products.

(2) Cargo Improve revenue management and promote charter flight business.

Continuing efforts made in 2019, we will continue to improve revenue management. Regarding thedifferent transportation needs of special cargo, such as time limit, volume, special ground treatment, andmachinery requirements brought about by emerging 5G technology products, we will continue to enhance
price differentiation and increase the added value of transportation services by utilizing our Boeing
747-400 all-cargo aircrafts, which not only provide advantages in large cargo loading and professional
services, but also meet the standards of carrying large machinery cargo.We will also strengthen the
promotion of bidding mechanisms for shipping space in peak seasons to enhance unit revenue. In
response to customer demand, we will continue to promote scheduled and non-scheduled customized
charter flight business. Fifty-five such flights were operated in 2019. In 2020, we will continue to deepen
our development in emerging markets, such as Southeast Asia, flexibly adjust the aviation network in
response to market changes, promote the customized charter flight business, and maximize the benefitsof the cargo fleet.

 Work with inter-airline express delivery companies and promote cold chain cargo.

Strengthen and deepen cooperation with inter-airline express delivery companies and mutual benefits;
continue to work with international express delivery companies, including UPS, DHL, FedEx, and SF
Express. This includes cooperation with UPS in regard to the shipping space at flight destinations on the
Taoyuan-Shenzhen freighter route as well as charter flights to the United States. We will also strengthen
our partnerships with Japanese and American airlines operating in the Asia region. We hope that, throughinter-airline cooperation, we will be able to provide more diversified products, generate mutual benefits
from the aviation network, and prosper together with our partners. Furthermore, to innovate cargotransportation, we have upgraded our cold chain services. China Airlines has been actively promoting
IATA’s CEIV Pharma certification. In April 2019, China Airlines officially obtained certification, becoming
the first aviation company in Taiwan to have such honorable achievement and become one of the 17
internationally certified airline companies in the world. We have significantly improved our cold chaintransportation capability. We hope that the international certification will enable us to enhance ourservice quality and provide clients with more sophisticated cold-chain transportation services.

 Start cargo fleet renewal.

In 2019, the Board of Directors of China Airlines approved the plan to bring in six new 777F cargo aircrafts
between 2020 and 2023. Since the fuel efficiency of the aircraft can increase payload capacity, after they
are acquired, they will be prioritized to fly transoceanic routes and replace parts of the 747-400F cargo
fleet. This will effectively increase fuel efficiency, increase the carrying capacity of transoceanic flights,
improve operational efficiency, and significantly reduce operational noise, reaching environmental
sustainability goals.

Operational Highlights

99

5.2 Market and Sales Overview
5.2.1 Market Analysis

A. Main Sales (Service) Region

Overview of Company passengers/cargo (RPK/FRTK, REV) by region and passenger and cargotransport market share over the past two years:(1)Passenger routes:

2018
2019
No. of
RPK
Revenue
No. of
RPK
Revenue
Area
Passengers(Million)(NT$ Million)
Passengers(Million)(NT$ Million)
Trans-Pacific984,161
10,404
14,4781,017,031
10,78015,282Europe603,342
5,678
9,661
623,389
5,863
10,209South-East Asia
3,769,593
9,334
18,3963,890,748
9,604
18,685
Domestic
1,239,130
292
1,967
1,467,638
344
2,252
Hong Kong/Macau
2,687,782
2,136
7,730
2,532,308
2,033
7,567
North-East Asia
6,805,685
12,12935,454
7,023,173
12,58936,752
Oceania
662,302
3,808
5,954
651,7933,832
6,279
Mainland China
2,642,732
2,475
14,7062,624,929
2,417
14,387
Total
19,394,727
46,256108,346
19,831,009
47,462
111,413
Note 1: Revenue passenger kilometers (RPK) equal the total number of revenue passengers multiplied by the flight distancetravelled (kilometers).
Note 2: The above data includes scheduled flights, charter flights, and extra flights.
Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.
Item(2) Cargo routes:

Item
2018
2019
Area
FRTK(Million)
Revenue(NT$ Million)
FRTK(Million)
Revenue(NT$ Million)
Trans-Pacific
3,764
27,742
3,358
23,896
Europe
779
6,106
717
5,284
South-East Asia
814
8,879
756
7,901
North-East Asia
255
3,250
229
2,907
Oceania
156
794
161
780
Mainland China
147
3,076
149
3,025
Total
5,915
49,847
5,370
43,793Note 1: Freight revenue ton-kilometer (FRTK) equals the revenue cargo load (tons) multiplied by the flight distance travelled(kilometers).
Note 2: The above data includes scheduled flights, charter flights, and extra flights.
Note 3: The above data includes Mandarin Airlines and Tigerair Taiwan.

B. Market Share (%) of Major Product Categories in the Last Two Years

Passengers
Cargo
Year
Airline
2018
2019
2018
2019
China Airlines
24.23%
23.45%
38.60%
37.37%EVA Air22.13%
21.70%
24.44%
24.12%
Mandarin Airlines
2.34%
2.17%
0.71%
0.64%
UNI Air
1.52%
1.43%
0.52%
0.56%
Far Eastern Air Transport
0.40%
0.46%
Tigerair Taiwan
4.52%
4.70%
0.05%
0.04%
Other-Foreign Carriers
44.86%
46.09%
35.68%
37.27%
Source: Civil Aeronautics Administration Monthly Statistics from January to December 2018 and 2019-Taiwan National Airlines
International and Cross-Strait Market Share for Passengers and Cargo

C. Market Analysis of Major Product Categories(1) Passenger

According to statistics on the Taiwanese passenger transport market in 2019 published by the Tourism
Bureau of the Ministry of Transportation and Communications, approximately 11.86 million foreigners
entered Taiwan (a growth rate of 7.2%) and 17.1 million Taiwanese people went abroad (a growth rate of
2.7%). The growth rate of the number of foreigners entering Taiwan increased, showing that Taiwan’s
tourism market has potential for development. However, as the COVID-19 pandemic has been growing
more sever since late January 2020, the IATA estimates that the air passenger transport market will see
negative growth in demand in 2020, and global passenger transport revenue will drop by 11% to 19%,
which is equivalent to 63 billion to 113 billion USD. The twists and turns in COVID-19's unfolding are almost
unprecedented. Within approximately two months, the implementation of tourism restrictions on the
grounds of pandemic response in various countries caused a significant drop in passenger traffic, which inturn resulted in flight cancellations and decline in ASK. The aviation industry is experiencing dramatic
downturn in most parts of the world. While airlines are performing the important job of connecting theworld economy, they are also doing their best to sustain their operations. The COVID-19 outbreak will be a
global crisis which tests not only the aviation industry, but also the resilience of the global economy.

100 Operational Highlights

(2)Cargo

In 2019, the global economy was affected by factors such as protectionism, the China–US trade war, andthe slow down in airfreight businesses growth. January 2020 was the 10th consecutive month in which theglobal freight volume was less than that of the same period in the previous year. Global freight supply
increased by 0.9% compared to the same period in the previous year, marking the 21st consecutive monthin which the supply growth exceeded demand growth. It was originally expected that the signing of the
US-China trade deal on January 15, 2020, would effectively boost market demand. However, the global
supply chain was disrupted by the COVID-19 pandemic. Due to the overly-significant changes in theunfolding of the pandemic, at this stage the IATA remains unable to forecast future impacts on airfreightbusinesses.

D. Competitive Niche(1) The new-generation fleet can help to enhance service quality.

All aircrafts of China Airlines' new-generation long-haul fleet, which includes 10 Boeing 777-300ER and 14
Airbus A350-900, were delivered at the end of 2018 and were all allocated to fly long-haul routes. Flights forseveral routes, including the Taoyuan-Los Angeles, Taoyuan-Honolulu, and Taoyuan-Melbourne routes, willcontinue to increase. The overall cabin design concept was formulated from the perspective of passengers.
It combines ideas of environmental protection, life aesthetics, and cultural creativity. The design has won
recognition from many Taiwanese and foreign awards, including Japan's Good Design Award, Red Dot
Design Award, Golden Pin Design Award, and Taiwan International Creative Design Competition. In the
future, as the plan to phase out and renew the narrow-body aircraft fleet is implemented, the diversified,advanced, thoughtful, consistent hardware and software plan for the new-generation products will once
again introduce a new look and new concept for the aviation industry, enabling China Airlines' passengers tohave premium in-flight experiences.

(2) Highly-efficient cargo aircrafts to be introduced.

In June 2019, China Airlines’ Board of Directors confirmed the purchase of three 777F cargo aircrafts from
Boeing. Then, in August, the Board of Directors converted three option orders for 777F into firm orders. Six
Boeing 777F cargo aircraft are expected to be introduced into the fleet between 2020 and 2023. Between
2014 and 2016, ten 777-300ER passenger aircrafts were introduced, and the benefits generated from theirfuel efficiency are significant. Those aircraft are in the same series as the 777F cargo aircraft that China
Airlines has discussed with Boeing. The 777F cargo aircraft is installed with the GE90 engine, which is thesame as that used in passenger aircraft. This helps with engine management optimization and the loweringof maintenance costs. After the aircrews complete training on aircraft differences, they will be able toperform flight missions. This will enable flexible crew allocation.
In addition, China Airlines' Board of Directors agreed in 2019 that new A321neo passenger aircrafts will be
introduced successively starting in 2021. Detailed cabin and system designs are underway. We look forward
to providing products that better meet market demands and the most comfortable flying experience. China
Airlines has also started selecting new-generation regional wide-body passenger aircrafts, which will provide
the Company with the final puzzle piece for its new-generation product provision and give passengers amore consistent service standard.

(3) CEIV Pharma Certification

In April, 2019, China Airlines officially obtained IATA’s CEIV Pharma Certification, becoming the first aviationcompany in Taiwan to earn such an honorable achievement and become one of the 17 internationallycertified airline companies in the world. The certification shows that China Airlines has reachedinternational standards in the field of medicinal air transport, which is sensitive to time and temperature.
This not only enhances the Company’s competitiveness and benefits generated in the highly valued freightmarket, but also strengthens the Company’s leading position in the airfreight market in the Asia-Pacificregion.

(4) Steady development of aviation networks.

In February 2019, the flight frequency for the Taoyuan-Palau route increased from 2 flights a week to 3 flights aweek; in June, it further increased to 4 flights a week. In addition, in order to actively expand the Southeast Asian
aviation network and strengthen the aviation network transfer market, China Airlines announced plans in 2020 toopen up several routes, including the Taoyuan-Cebu and Taoyuan-Chiang Mai routes. As of the end of December
2019, China Airlines (including Mandarin Airlines) flew to a total of 23 countries across Asia, Europe, America, andOceania, 72 passenger flight destinations, and operated an average of 712 flights a week.

(5) The Group’s integrated resources increase overall efficacy.

China Airlines Group's overall combined fleet ASK provides differentiated aviation services and products to target
markets with differentiated market positioning. Tigerair Taiwan operates with a low-cost airline business modeland mainly flies regional routes. In the civil aviation market, Tigerair Taiwan, China Airlines, and Mandarin Airlines
have each established its own positioning in different segments, providing consumers with a diversity of productoptions.

(6) Taken a leading position in the inter-airline cooperation market

In addition to self-owned routes, China Airlines is the first airline in Taiwan to join the global aviation
alliance. We are also the first Taiwanese airlines to conduct code-sharing cooperation. Currently, we havecooperated with 23 airlines in code-sharing, ranking first among all Taiwanese airlines. The Company isactive in its global market layout and provides more convenient and comprehensive services for passengers
to travel between Taiwan and major cities around the world through the tightly-woven aviation network of
China Airlines.

Operational Highlights

101

E. Corporate Policies(1) Corporate Human Rights Policy

To implement the concept of corporate respect for human rights, the Company formulates human rights
policies and management mechanisms based on the UN Guiding Principles on Business and Human Rights(hereinafter referred to as “UN Human Rights Guiding Principles”), international human rights trends, andlocal laws and regulations.
The scope of application covers the members in the China Airlines Group and their suppliers, and the Talent
Value Task Force under the Company’s Corporate Sustainability Committee is responsible for human rights
management. China Airlines sees its employees as its family and aspires to communicate and reach mutual
understanding with the union through equal and respectful negotiation procedures, to create a more
harmonious and friendly working environment, one based on a mutually beneficial situation for both laborand management. The Company and the union shall maintain an equal, cooperative, and respectful
relationship. It is our core attitude to promote rational communication through open and transparent
negotiations, so that labor and management can reach consensus and achieve common good, and canconduct two-way friendly communication on collective agreement issues. China Airlines believes that
employees are the Company’s most important assets. The Company gradually strengthens and optimizes
the working conditions and environments of colleagues to ensure they have employment safety and roomfor growth. The Company will treat each union with empathy and communicate and negotiate with them on
their individual needs; give priority to fair protection of the labor rights of every employee; and perform theobligation to stay neutral in accordance with the law, showing the unions consistent respect and providingthem with equal resources.

(2) Sustainable Supply Chain Management

Based on the corporate vision of “becoming the top airline in Taiwan,” the Company, based in Taiwan andflying around the world, is committed to pursuing the business goal of corporate sustainable development.
We deeply understand that only by cooperating with business partners can we truly implement corporate
sustainable development and create sustainable value. Therefore, the Company has been promoting
sustainable supply chain management since the beginning of 2014. Subsequently, we established a Joint
Creation Value Team for important procurement categories, including “aviation materials, aviation fuel,in-flight meals, service procurement, and general business affairs”; formulated long-term sustainability goals
based on the United Nations’ Sustainable Development Goals (SDGs); and established China Airlines’
Sustainable Supply Chain Management Policy Statement and Supplier Code of Conduct with reference to
the Global Reporting Initiative (GRI), ISO 26000, United Nations Global Compact (UNGC), International
Labour Organization (ILO), and other international standards. In addition, the Company has also establisheda risk investigation mechanism, performed audit operations, organized supplier meetings to enhance theeffectiveness of engagement, and set up other management measures, and has regularly reported the
management results to the Corporate Sustainability Committee for follow-up inspection on a quarterly
basis.

(3) Environmental Sustainability Management

The Company adheres to the belief of environmental sustainable management and regards “environment”
as one of the key elements for the implementation of sustainable management. Since 2007, we haveestablished the concept of environmental and energy management. In 2011, a dedicated environmental
department and Environmental Committee were set up; every quarter, the president reviews theCompany’s environmental and energy management performance and has set incentive measures. In 2013,an environmental and energy policy statement was issued; the Company became the first domestic airline
to establish a dedicated environmental organization and formulate policies. While pursuing businessdevelopment, China Airlines recognizes the value and irreversibility of the global environment, andunderstands the corporation’s responsibility and obligation for protecting natural resources andenvironment. Based on this understanding, the Company established the four environmental and energy
management concepts and six environmental and energy policies according to the codes of practice for“Sustainable Environment Development” in the China Airlines Corporate Social Responsibility andSustainable Development Best Practice Principles announced by the Board of Directors. The Company also
referred to the UN’s SDGs when devising instructional strategies, to ensure the business operation direction
is towards sustainable development, namely environmental friendliness, low-carbon emissions, and energy
conservation.

(4) Corporate Social Responsibility

China Airlines is deeply aware that its achievements come from the support of the society, and “social
support” is the key to promoting China Airlines’ success. The Company continues to make contributions andadheres to its core concept of “giving back to society” to build a loving society and fulfill its corporate
responsibilities as a member of Taiwan. As a leader in Taiwan’s aviation industry and a corporate citizen of
Taiwan, the Company takes “continuous creation of social value” as an important commitment forsustainable development. In 2019, China Airlines continued to use “brand perception,” one of the major
directions in its sustainable strategy blueprint, to extend its development strategy to give back to thesociety: with “promoting the internationalization of local education” and “enhancing international visibilityof local brands in Taiwan” as its main directions, and adding “promoting disadvantaged groups to obtainequal opportunities in society,” it looks to create co-prosperity and common good with the society throughspecific actions, such as “improving the overall quality of Taiwan’s education,” “strengthening Taiwan’s
international visibility,” and “helping disadvantaged groups ameliorate their difficulties”.

102 Operational Highlights

(5) Enterprise Risk Management Architecture and Process

China Airlines understands the importance of risk management, and places great emphasis on possible
interactions between risks. It refers to Enterprise Risk Management (ERM) and other publications andpractical methods while also considering the environment and operational characteristics of the industry.
The airline industry is currently facing three major risk sources: security, operations, and financial risk
management structures, and uses four major steps, identification, risk analysis, risk assessment, and risk
management”. The Company identifies potential risks in these three areas and, based on frequency ofoccurrence and seriousness of the risk, performs analysis and assessment, distinguishing the degree of risk
and finally developing response plans for high-risk items to reduce the impact on company operations.

F. Favorable and Unfavorable Factors in the Long Term
(1) Favorable Factors

 The government strongly develops a diversified market, continues to promote the simplification of visa
process for New Southbound countries, and combines local resources to complete transportation andticket services, effectively increasing the number of international tourists visiting Taiwan.
 Global aviation has benefited from the growth of emerging economies and the middle class. The growthin the passenger transportation volume is most prominent in the Asia-Pacific region. The total number ofpassengers in Taiwan has grown steadily and is dominated by passengers on international routes.
 With increasingly updated technology, transportation has become convenient, online security trading
platforms have matured, cross-border e-commerce has changed business models, and the demand forlogistics networks is increasing.

(2) Unfavorable Factors

 Labor awareness is rising. Striving for labor rights through strikes not only causes inconvenience topassengers, but also affects company’s business performance.
 Geopolitical conflicts and economic and trade disputes will affect the global supply chain layout, which inturn will affect the overall aviation industry operations.
 Most air traffic rights lean towards the Treaty on Open Skies, in addition to allowing existing operators toincrease flights, it also provides new operators with opportunities to join and LCCs with opportunities tohave significant growth, intensifying competition in the route market.
 The development of air transport infrastructure is not as fast as that of the aviation industry, making it
difficult to obtain or adjust time slots in airports at various locations. The airlines’ route planning andaviation network expansion are thus limited, which is not conducive to business.
 International aviation environmental protection related regulations have developed rapidly. For example,
ICAO CORSIA has been officially implemented, and many countries have also planned to levy aviation
environment related taxes and promote sustainable aviation fuel policies, which will all affect theoperation and operating costs of airlines.

(3) Response Measures We adapt to the unpredictable passenger transport market by increasing the passenger load factor andprofit margins for the routes through the flexible adjustment of flights, deployment of aircrafts, andregulation of transportation capacity. Furthermore, based on the seasonal market demand in various
places, adding extra flights or irregular charter flights for potential profitable destinations can grasp
business opportunities and increase revenue.
 Through inter-airline cooperation, extending destinations, expanding the global aviation network andincreasing the number of passengers, deepening resource sharing with alliance member airlines, and inturn reduce operating costs.
 Faced with the growth of new operators and low-cost carriers (LCC) in Asia, China Airlines Group will also
combine the transportation capacity of Tigerair Taiwan’s fleet to provide differentiated aviation service
products to target customers based on market positioning, so as to consolidate the overall interests of
the Group.
 It is planned to launch various marketing activities and improve the quality of website experience; expand
the development of website functions to optimize the ticket purchasing process; and build multiple
payment tools and support multi-currency payments. In addition, new fare products were launched.
Passengers can choose fares and additional products on their own, such as baggage allowance, preferredseats, and mileage accumulation standards, to meet the different needs of passengers.
 In response to the development of cross-border e-commerce, for air cargo transport, we strengthen
cooperation with express delivery companies and inter-airline cooperation to expand the air-bridge
service transport for e-commerce postal services, providing more diversified products throughcooperation to achieve mutual benefit and common prosperity in the aviation network.
 Through the development of the CEMS system, continuing to review and correct to comply with the
CORSIA management measures and operational procedures, and continuing to promote the TCFD project
to deepen carbon management operations and enhance resilience to the climate change. Continuing to
pay attention to the development of SAF related policies to respond to the international trend of carbon
reduction and sustainable energy that are growing in seriousness as early as possible.

Operational Highlights

1035.2.2 Production Procedures of Main Products
A. Major Products and Their Main Uses
Major ProductsPassenger services
Cargo services
In-flight sales

Main Uses
International passenger air transport and scheduled, non-scheduled, and charter flights.
International cargo, courier, mail, and package transport.
Providing passengers with in-flight duty free sales services.

B. Major Products and Their Production Processes

The Company is a member of the airline industry and not a manufacturer, so there is no production
process.

5.2.3 Supply Status of Main Materials

CAL is a member of the airline industry, not a manufacturer. Therefore, there is no need for production
raw materials. Aviation fuel makes up the largest proportion of operating costs. In addition to aviationfuel supplied at Taiwan Taoyuan Airport by CPC Corporation and Formosa Petrochemical Corporation,
the Company also purchases fuel from large oil companies around the world at the various destinations
served, so fuel supplies are very fragmented.

5.2.4 Major Suppliers and Clients

A. Major Clients in the Last Two Calendar Years

CAL is a member of the airline industry and clients are members of the general public.

B. Major Suppliers in the Last Two Calendar Years

CPC Corporation, Formosa Petrochemical Corporation, and Chevron Corporation, etc.
Unit: NT$ thousands
2018

Amount%12.00 None

CPC
Corporation

17,197,546

5,372,889

3.50 None

ChevronCorporation

5,117,227

3.33 None Petrochemical%

CPC
Corporation
Formosa
Petrochemical
Corporation

18,413,016

ChevronCorporation

Other
Net Total

127,600,944
153,504,076

Formosa

81.17
100.00

Corporation

Other
Net Total

CompanyName

Amount%11.33 None

CPC
Corporation

3,337,695

10.32 None

5,126,545

3.38 None

ChevronCorporation

1,024,781

3.17 None

4,939,381

3.25 None Petrochemical

857,008

2.65 None

124,493,760 82.04
151,757,232 100.00

Formosa

Corporation

Other
Net Total

Relation with
Issuer3CompanyName

AmountRelation with
Issuer2

2020 (as of March 31)

Relation with
IssuerItem

1

CompanyName

201927,116,778 83.86
32,336,262 100.00

Reasons for changes:
Fuel is the Company’s primary operating expense. Overall, purchases have remained stable.

5.2.5 Production in the Last Two Years

Unit: thousand kilometers
Year

2018
Capacity and Traffic
58,043,562
Available Seat Kilometers (ASK)46,256,379
Revenue Passenger Kilometers (RPK)
79.69%
Load Factor (%)
8,290,378
Freight Available Ton Kilometers (FATK)
5,914,889
Freight Revenue Ton Kilometers (FRTK)
71.35%
Load Factor (%)
13,498,780
Available Ton Kilometers (ATK)
10,065,315
Revenue Ton Kilometers (RTK)
74.56%
Load Factor (%)
Note 1: The above data includes scheduled flights, charter flights, and extra flights.
Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

104 Operational Highlights

2019
58,590,098
47,462,113
81.01%
8,012,739
5,370,078
67.02%
13,269,365
9,627,913
72.56%

Rate of Increase(Decrease)
0.94%
2.61%
1.32 ppt-3.35%-9.21%-4.33 ppt
-1.70%-4.35%-2.00 ppt

Reasons for Changes:
In 2019, the Company had new transportation capacity of passenger transport put into the market, andthe available seat kilometer (thousand) and the revenue passenger kilometer (thousand) increased
compared with 2018; in response to the decrease in demand for cargo transport, the FTK (thousand) of
FRTK (thousand) also decreased compared with 2018.

5.2.6 Shipments and Sales in the Last Two Years
Item

RPK/FRTK2018

Unit: thousand kilometers; NT$ thousands

Amount

RPK/FRTK

2019

AmountPassenger Revenue

46,256,379

108,345,648

47,462,113

111,413,435

Cargo Revenue

5,914,889

49,847,065

5,370,078

43,793,256-

12,518,894-

13,237,469

170,711,607
Note 1: The above data includes scheduled flights, charter flights, and extra flights.
Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

-

168,444,160

Other Operating Revenue
Total

Reasons for Changes:
The sales volume of the Company’s passenger transportation business in 2019 has increased compared
to 2018, mainly due to the introduction of additional passenger transportation capacity into the market
in 2019, which led to the increase in the Revenue Passenger Kilometer (RPK) and sales;however, due tothe continued downturn of the cargo transport market in 2019 and the slowdown in international tradedemand, the cargo transport sales in the entire year of 2019 has declined.

5.3 Human Resources
Year

Male
Number of
FemaleEmployees
Total
Average Age
Average Years of Service
PhDs
Master’s Degrees
Education
Bachelor’s Degrees
Senior High School
Below Senior High School

2018

2019
6,379
6,030
12,409
41.10
13.90
0.10%
10.94%
82.71%
5.94%
0.31%

APR 25, 2020
6,302
5,937
12,239
41.40
14.00
0.09%
11.10%
82.63%
5.89%
0.29%

6,048
5,126
11,174
42.44
15.00
0.10%
11.99%
81.83%
5.77%
0.31%

5.4 Environmental Protection Expenditure
5.4.1 Total Losses and Penalties: None.
5.4.2 Company Countermeasures to Future Environmental Protection Issues

A. ISO 14001 Environmental Management System and ISO 50001 Energy Management
SystemIn order to integrate environmental protection operations into the daily operational risk
management operations of the enterprise, China Airlines has introduced a number of international
standard management systems (ISO 14064-1, ISO 14001, ISO 50001) since 2009, and has establishedand improved the environmental management operation mechanism of the enterprise, covering risk
issues such as greenhouse gases, environmental management and energy management. The
Company has formulated management strategies and action measures for relevant risks andopportunities identified in various aspects of the environment.
(1)Management system operations
In 2017, we completed the revision of the ISO 14001: 2015 standard, incorporating the “life cycle
thinking,” “stakeholder engagement,” “risk and opportunity management” and other aspects into
the operation of the Corporate Environmental Management System (EMS). Following that, in
2019, we further developed ISO 50001:2018 version transferring operation, strengthening theidentification and operation control of energy use, comprehensively reviewing and optimizing

Operational Highlights

105

energy performance indicators, to fit with the international enterprise benchmark mode of
thinking on sustainable development and governance.
(2)Value chain and outstation environment management
In order to fully grasp the global operational risks, the Company has initiated outstation
risk/opportunity investigation and evaluation operation since 2018, strengthening the grasp ofinternational environmental protection control trends, and entrenching the identification andhandling of environmental energy-related risks and opportunities in operation. In 2019, we
further focused on the current operational status of various issues of concern, and used best-casesharing to assist each station in seeking room for continuous improvement and implementing
related operations.
In addition to strengthening its own environmental sustainability management capacity, theCompany also actively strengthens the sustainability value of the overall industrial chain. In 2018,
it started the value chain environmental management operation and asked Group partners to set
up environmental protection seeds, and by holding environmental/energy/carbon management
workshop to promote Group partners’ understanding of the meaning and benefits ofenvironmental/energy/carbon management. In 2019, it further cultivated Group’s corporate
environmental energy risk management capacity through environmental risk/opportunity
investigation and communication meetings(3) Green maintenance operation and pollution prevention
In order to reduce the environmental impact of the Company’s maintenance operations, inaddition to implementing and continuously improving the aforementioned risk management
operations, the EMO (park maintenance) Environmental Management Committee under theCompany’s Corporate Environmental Committee also tracks and inspects on a quarterly basis theresults of the environmental management of the maintenance plant area, in order to comply withenvironmental regulations, international trends, headquarters policies, and corporate
environmental sustainability obligations. Its operating unit performs declaration and fee payment
in accordance with the regulations every year, and operates in accordance with the waterpollution prevention measures plan, waste disposal plan and related permit documents, andactively follows the principles of source reduction, poison reduction, and end-of-pipe recycling,
continuously improving and enhancing environmental performance and ecological benefits.
The Company is the second airline in the world and the first Taiwanese airline to pass certification
for ISO14001 and ISO50001 at the same time. The scope of certification is also the most complete in
the domestic service industry. It has continued to complete the annual third party audit andverification operations for ISO 14001 and ISO 50001 on December 20, 2019.

B. Environmental KPI Controls

The Company has followed the United Nations’ SDGs and set a number of short-, medium-, andlong-term environmental protection and energy conservation objectives, including those for aviationfuel efficiency, ground carbon emissions, water consumption, domestic waste, business waste, andphotocopy paper consumption. The five major environmental management committees and thecarbon management task force develop and implement annual environmental protection KPI, andthe Corporate Environmental Committee chaired by the President conducts the annual audit andreview. The Company completed a total of 72 KPIs in 2019 and reduced carbon emissions by
124,365 tons CO2e. 69 KPIs are further planned in 2020, and it is expected to reduce emissions by
58,106 tons CO2e.

C. Strengthening adaptability to climate risks and opportunitiesIn order to strengthen our

grasp of climate-related risks and opportunities, in 2018, the Company signed the initiative
supporting the international Task Force on Climate-Related Financial Disclosures, TCFD, andlaunched project operations, through interviews, questionnaires, workshops, high-level forums, andother engagement processes, exploring the current or future climate risks and opportunities facedby business operations in different climate scenarios, and their potential impacts and corresponding
costs, to gradually establish the Company’s climate risk and opportunity management mechanism.

D. Solidifying environmental management supervision mechanismThe Company promotes
environmental management supervision mechanisms. Each unit independently implements thefirst-level audit of environmental management; second-level audit of environmental management is

106 Operational Highlights

implemented by the headquarters. The double audit mechanism ensures that environmental
management is implemented in the basic level operations of all units.
The Company has completed the second-level audit in 2019 Q2 and Q4. In addition to the checklist
items, the audit items conducted also included the improvement on the previous audit findings, thedegree of implementation of external stakeholders’ concerns and annual KPI implementation
review.

E. Entrenching environmental education and training for all employees
To implement the corporate environmental and energy policy of “implementing environmental andenergy conservation education to foster employees’ environmental awareness,” as well as toachieve the goal of “environmental protection by all employees,” the Company has set up anannual “environmental protection education campaign” to implement online or in-classenvironmental management education and training in Taiwan. The implementation performance is
as follows:(1)New employee and outstation supervisor environmental education and training implementation
rate is 100%.
(2)The implementation rate of professional knowledge training on environmental/energy/carbon
management system is 100%.
(3)A total of 151 participants in the environmental protection forum for all employees on thetheme of climate change.
(4)A total of 2,229 participants in interactive employee activities.
(5)Published 35 promotional articles on the internal communication platform; set up “green
footprint” stickers on the ground and posters in the headquarters and maintenance park toconvey information on 21 environmental protection measures, and set up plant identification
placards.

F. Carbon Inventory and Reduction Project(1)Annual organization level greenhouse gas emission inventory operations
According to the ISO/CNS 14064-1 standard, the Company has conducted a greenhouse gas
inventory each year since 2009, covering aviation, ground service and office administration
operations, and has conducted third-party verification operations in accordance with therequirements of “Reasonable Assurance”.
The greenhouse gas emissions in 2018 and 2019 were 7,253,363 tons CO2e and 7,082,233 tons
CO2e, respectively, a decrease of approximately 2.36%.
(2)EU ETS (European Emission Trading Scheme) operations
According to the EU regulations, because the CO2e emissions of the Company’s 2019 Intra-EU
Flights were all less than 3,000 metric tons, carbon emissions may be calculated by the
EUROCONTROL tool; the calculation result for 2019 is as follows: CO2e emissions of 988 tons
from 26 flights in total. The carbon credit allocated by the EU to the Company between the
period from 2017 to 2020 is 7,157 metric tons per year. Therefore, in 2019, the Company’s
carbon credit account balance was 23,781 metric tons. We will continue to conduct trading
operations based on market demand and pricing trends.

G. Improving business eco‐efficiency
After obtaining the “Diamond Green Buildings Label” certification in 2017, in the headquarters ofChina Airlines, CAL Park, we continued to promote equipment renewal, optimize the operation
process, and improve the overall energy efficiency of the buildings; In 2019, we further responded
to the government’s green energy policy and completed the installation of 99kW of solar
photovoltaic facilities grid-connected power generation on the rooftop of the simulator training
building. As of December 31, 2019, it had generated 90,000 kWh of electricity and reduced CO2eemissions by approximately 48 tons; Relevant actions have been recognized by the Energy

Operational Highlights

107Conservation Benchmark - Silver Award of the Ministry of Economic Affairs, Bureau of Energy;
Energy Conservation Leadership Award of Taipei City; No. 1 in the Carbon Reduction and Electricity
Conservation Reward Competition of Taoyuan Airport.
Moreover, to reduce the risk of water resources, the Company has successively set up water metersat important water route nodes to track and analyze the flow direction of water resources andwater consumption hot spots, and has promoted water reduction and recycling measures, including:purchasing water conservation label products, promoting water conservation advocacy, setting up a
rainwater recovery system, promoting cooling water recycling and introducing Eco-Shineenvironmentally friendly cleaning solution;The amount of tap water used dropped from 148.22
kilotons in 2018 to 146.49 kilotons in 2019, a decrease of about 1.17%. Data relevant to this has
been disclosed in the Company’s 2019 CSR report and assured by third parties.
In terms of waste management, the Company manages waste based on five main principles: refuse,
reduce, reuse, recycle, and repair. And with the goal of 100% waste resource recovery, the Company
is increasing its waste reuse rate year by year. In addition, considering that waste management inaviation services involves a wide range of businesses, the Company established a waste
management team in 2019. Service and supply planning and quality assurance units, as well as
aviation catering, cabin cleaning, and other suppliers and partners are invited to form a periodical
communication platform, where all parties come together to analyze the trends in international
aviation service waste management and discuss response strategies. Domestic waste output from
employees in 2018 and 2019 were 747,202 kg and 702,966, respectively, showing a decrease of
approximately 5.9%.Data relevant to this has been disclosed in the Company’s 2019 CSR report andassured by a third party.

H. Promote Green Consumption
The Company actively reveals its environmentalism philosophy and implementation performanceirregularly through different platforms, such as social networks and in-flight magazines, with theintention of establishing and promoting the awareness of green consumption.In 2017, in a further
effort to follow international trends, the Company started promoting the voluntary carbon
offsetting program for passengers: the "ECO TRAVEL - Carbon Offsetting" service. Diversified
electronic-friendly service platforms, including the official website, ticket-purchasing system, andtravel reminders, are used to invite passengers to practice "zero-carbon" flying. In 2019, a total of
156 people took part in the carbon offsetting program, in which a total of 258.45 metric tons ofcarbon was offset. Such performance exceeded all other Taiwanese companies in the same industry
during the same period. Other actions to elevate and promote green consumption include:(1) Selecting 12 environmental films to play on airplanes.
(2) Presenting 5 posts about environmental topics and reports on social media.
(3) Interactive educational work, such as promoting closing windows in summer.
(4) Adding environmentalism products in the catalogue of home-delivery duty-free goods, andinclude China Airlines' sustainability logo.
The heating boilers in the engine plant and the electroplate plant of the companies’ repair factory
are inspected yearly against relevant regulations for air pollutant emissions; air pollution control
fees are also reported and paid quarterly (the repair factory uses super diesel, so it is exemptedfrom inspections, but reports are required).

I. Continue to Support International Environmental Protection Research Projects
The Company is working with several environmental protection organizations, including theEnvironmental Protection Administration, National Central University, and the European Union’s
IAGOS-ERI in the implementation of the Pacific Greenhouse Gases Measurement (PGGM) project. In
June 2012, July 2016, and July 2017, IAGOS instruments were installed onto the Company’s B-18806,
B-18317 and B-18316 aircrafts, respectively. Since then, atmospheric gas data have been
automatically collected during flights. The data is observed by important Taiwanese and foreign

108 Operational Highlights

research organizations to gain understanding of the changes in high-altitude gasses. This facilitates
the understanding of environmental quality changes and provides reference material for important
decision-making platforms, such as the UNFCCC. During the period from July 1, 2012 to December
31, 2019, atmospheric data collected from a total of 11,254 flights was collected, contributing to theecosystems on Earth and Taiwan's image in the environmentalism field.

J. Transparent Disclosure of Environmental Protection Responses and Performances
Since 2012, the Company has been publishing its Corporate Social Responsibility (CSR) Report every
year (former titles include the Environmental Sustainability Report and Corporate Sustainability
Report). The Company has also been establishing and updating the CSR network. It publicly andtransparently discloses its sustainability governance strategies, as well as the results andperformances in the environmental, social, and financial aspects of its operations. The reports are
an important tool and channel that facilitates discussions with stakeholders.

5.4.3 Countermeasures

Unit: NT$ thousands
Item

Year
Environmental protection equipment and maintenancecosts (does not include depreciation)
Fees for wastewater equipment regular samplinginspections by inspection agencies and permitting
Waste disposal costs
Aviation noise control fees (paid to the terminal basedon airplane model and number of flights)
Fees for establishment of an environmental control
system and strategic research projectGreen procurement

2019

2020

13,9692021

14,0002022

14,00014,000

123

100

100

100

4,062

4,000

4,000

4,000

188,787

193,318

193,318

193,318

2,541

4,000

4,000

4,000

19,25820,00020,00020,0005.4.4 Effect of Environmental Expenditures on Earnings
Energy-saving equipment and improved management expenditures reduce both Company energy use
and operating costs.

5.4.5 Effect of Environmental Expenditures on Competitiveness
Environmental performance has already become an important benchmark in achieving corporate social
responsibility. With the rise of green consumers, actively investing in environmental improvements canpositively affect our competitive position and improve brand image.

Operational Highlights

109

5.5 Labor Relations

5.5.1 List of employee benefits, training, retirement program, and status of
implementation, and labor-management agreements and protection of
employee rights and interests
A. Good Labor-Management Relations
On May 4, 1988, the China Airlines Union was established. On July 29, 2011, in accordance withrevisions to the Labor Union Act, it was renamed the “China Airlines Employee Union.” In 2002, acollective agreement was signed between labor and management, which is regularly negotiated andrenewed.

B. Retirement Program and Pension Preparations(1) Labor Standards Act Old-Age Pension System
The Labor Pension Reserve Supervisory Committee of the Company was established in June 1987
in compliance with letter Bei-Shi-She-II-Zi No. 43791 from the Taipei City Government. In past
years, the appropriation and payment of pensions in the old system of the Labor Standards Act
were handled according to the Labor Standards Act. In 2019, employees who may claim from theold system pension account accounts for approximately 51.2% of the employees of the Company(56.3% of Company employees are subject to both the new and old systems). The monthly
appropriation rate of old system pensions has been increasing year by year since 2014 and has
risen to 15% since January 2016, reaching the statutory limit. For employees who meet theretirement qualifications of the Labor Standards Act and whose retirement has taken effect, theresponsible unit shall take the initiative to settle the pension, and shall apply to the local
government for expenditure approval and reference or submit to the Taiwan Bank for payment
application according to the relevant regulations of the government; it shall notify the employees
to receive the payment once the check is produced. The deposit of pension reserve funds issupervised by the Labor Pension Reserve Supervisory Committee of the Company. The business
unit regularly holds a pension supervision committee meeting every three months to report theuse of the pension reserve funds to the members, including the estimated result of the next
year’s appropriation, number of retirements of each quarter, and designated pension reserve
funds account balance, and exchange of retirement related issues.
(2) Labor Pension Act New Pension System
According to the Labor Pension Statutes promulgated by the government on June 30, 2004, inorder Zong-Tong-Hua-Zong-(I)-Yi-Zi No. 09300121821, for employees who are subject to thestatutes, new system pensions shall be appropriated on a monthly basis to the Bureau of Labor
Insurance according to the statutes starting from July 2005. In 2019, employees who may claim
from the new system pension account accounts for approximately 67.2% of the employees of theCompany (37.8% of Company employees are subject to both the new and old systems). The new
system pension appropriation rate is 6% per month, and is deposited into the employee's
designated personal pension account at the Bureau of Labor Insurance. After the retirement
conditions are met, the employee shall apply for payment to the Bureau of Labor Insurance.

C. Labor-Management Communications(1) Units within the Company with a relatively large number of employees, such as the maintenancefacility, Ground Services Division, Cabin Crew Division, Flight Operations Division, and Taipei and
Kaohsiung branches hold regular communication meetings.
In addition, elected union representatives attend regular company-wide labor-management
conferences to improve understanding and communication.

110 Operational Highlights

(2) Establish an employee complaint mechanism and channels to ensure proper response:
When employee rights have been violated or a situation is improperly handled, as stipulated in
the Regulations Governing Employee Complaints, employees can lodge a complaint with the
responsible operating unit or the Human Resources Division. If the employee objects to the
response, he or she can file an appeal with the Human Resources Division. Use of employee
complaint channels: a total of 9 written complaints were handled in 2019.

D. Benefits(1) Employee care
Pension appropriation, labor and health insurance, employer liability insurance, group insurance,
employee physical examination, and providing a nursing room.
(2) Employee stock ownership trust
In August 1998, the Company set up an employee stock ownership trust, in which employees arefree to participate. The amount, depending on employee position, is deducted directly from theirmonthly salary. Through the end of 2019, a total of 2,063 employees participated.
(3) Profit sharing
As per the Company charter, if the Company posts a profit in a given year, it must allocate no lessthan three percent as employee bonuses. However, if the Company still has accumulated losses,
it shall first retain a sum of money to make up the deficiency.
(4) Welfare system
The Company’s Employee Welfare Committee was set up in December 1967. As stipulated by law,
the Committee distributes benefits; handles the disbursement of wedding allowances, funeralallowances, disaster allowances, employee children excellence scholarships, birthday bonuses,and birth allowances; arranges visits to nursing homes, holds recreational sports activities,
distributes meals and holiday gift certificates, and offers distress or purchase loans.
(5) Employee leisure
Employee group activity subsidies, employee group travel subsidies, discounted tickets for
current and former employees.
(6) Working environment
Workplace compliance with occupational safety standards, gender equality.

E. Signing of Collective Agreement
In 2019, the Company and the Pilots Union Taoyuan signed a collective agreement for the first time,the effective period being 3 years and 6 months. Since signing the collective agreement with the
China Airlines Corporate Union in 2002, the agreement is extended every 3 years. The two partiesare currently negotiating the extension of the agreement, and the relevant negotiation records havebeen published on the Company’s internal enterprise information network.

F. CounselingTo take care of our colleagues needs and participate in employee personal growth, the Company has
employed professional counselors and psychiatrists to provide counseling services to employees. In
2019, there was a total of 58 counseling visits totaling 58 hours.

G. In addition to promoting employee education and training to enhance staff
knowledge and skills, we also continue to accumulate knowledge and encourage
exchange within the Company to build an organization for learning. Through the
management personnel training program and the “China Airlines Lecture Hall”
training system, the Company holds courses to improve employees’ strategic,
management, professional, and general workplace skills.

Operational Highlights

111

(1) To encourage employees to participate in various classes and self-study opportunities provided
by the ROC Workforce Development Agency under the Ministry of Labor, the self-pay portions of
the costs for such courses will be subsidized by the Company after work-relate courses are
successfully completed by an employee.
(2) Obtained the ROC Ministry of Labor Workforce Development Agency's 2019 training subsidy ofNT$950,000.
(3) Popularize and hold strategic work, management, professional and general skills courses.
 Marketing training:
including marketing strategies, customer operations, freight business and related OJT training,with a total of 174 in-person classes and 158 e-classes, and total of 17,745 people trained.
 Professional technical classes:
including enterprise safety/inspection work, flight services, joint management and EMO, with a
total of 2,069 in-person classes and 265 e-classes, and a total of 72,479 people trained.
 Service:including service quality assurance, introduction to public relations, service business, groundservices operations, and in-flight products, with a total of 533 in-person classes and 316
e-classes, and a total of 26,109 people trained.
 Other:
including investment management unit business, law and insurance, financial, information
technology, and human resources management, with a total of 182 in-person classes and 26
e-classes, and a total of 13,925 people trained.

5.5.2 CAL has established an employee code of conduct or ethical code andarranges pre-employment Employee Rights and Responsibilities classes
for new hires. The main content of the Company’s Employee Code of
Conduct is as follows:
The Company’s Employee Code of Conduct primarily consists of workplace ethics, privacy, occupationalsafety, discrimination and harassment, moral integrity, media and public image, conflict of interest
avoidance, anti-trust and fair competition, exchanging gifts and anti-corruption, CAL asset andintellectual property protections, reporting responsibilities, respect for human rights, and commitment
to environmental protection. The Company includes an assessment and consideration of the foregoing
items of workplace behavior in its annual results; employees unable to respect or who violate theforegoing regulations governing workplace behavior are penalized based on the Company's regulations
governing rewards and penalties, based on the severity of the offense.

5.5.3 Implementation of work environment and employee personal safety
protection measures

The Company has established an Occupational Safety and Health Committee in accordance with law.
The committee is tasked with the objective of preventing occupational hazards and protecting thesafety and health of all employees by reviewing, coordinating, and making recommendations
pertaining to safety and health related matters. The Chairman is served by the President. There is one
vice chairman and one executive secretary under the Chairman. The Committee consists of the head ofdesignated units, occupational safety and health personnel, engineering and technical personnel,
medical personnel, and labor representatives appointed by the labor union as members. Formulate andfollow the Occupational Safety and Health Management Manual; to adapt to trends of global
international labor development, improve the efficiency of safety and health management, andpromote systematic management measures, the Company established an independent safety andhealth management system and obtained ISO45001:2018 and TOSHMS certification on April 20, 2019,
which serve as the management basis of occupational safety and health management system

112 Operational Highlights

certification. Self-management and preventive measures based on the PDCA cycle mode are used toeffectively control occupational disaster risk, improve occupational disease preventive management,
improve occupational safety and health management performance, and actively implement
occupational safety policies; provide safe, healthy and comfortable working environment for
employees, and promote industrial competitiveness; proactively promote the occupational safety andhealth management system; strengthen the promotion of safety and health education at all levels.
Every three years, each person receives at least 3 hours of education and training. Education andtraining for supervisors is held depending on the promotion and transferring of the supervisors. The
members of the Occupational Safety and Health Committee must complete at least three hours ofsafety and health education and training every three years to cultivate the correct attitude towards
safety and health work;assist in the training of safety and health officers at all levels to implement
safety and health work;initiate a safety and health hazard identification proposal system to extend theparticipation in safety and health to all personnel;regularly strengthen the on-the-job training for safety
and health officers of various units, including how to identify hazards in the workplace, risk
classification, how to compose management plans, and occupational accident identification process
and operations; guide the risk assessment of units at all levels and conduct prevention andimprovement to build the concept of corporate community.

5.5.4 Over the most recent year through the date of the publication of thisreport, the estimated value of any losses or potential future losses due tolabor disputes
From 2019 to April 25, 2020, the Company was fined a total of NT$3.12 million by the government
labor authorities for labor disputes or imperfections after labor inspections. As for matters that theCompany is not at fault for, the Company has proposed procedures for administrative remedies
through appropriate channels to protect the Company’s rights and interest.In addition, if labor disputes
turn into petitions and protest activities, they will cause losses that cannot be estimated in the
Company’s operations and reputation. In regard to this matter, the Company will continue to maintaina genial interaction mechanism through diversified communication channels to achieve the goal ofcaring for employees’ welfare and improving the quality of the work environment, and throughcomprehensive improvement of the satisfaction of employees in all categories, eliminating the issues
that may arise from unnecessary labor disputes.

5.6 Major Contracts
Agreement
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease

Counterparty
SASOFIV Aviation Ireland DAC
SASOFIV Aviation Ireland DAC
Zhong Hang Co., Ltd.
AerCap Ireland Ltd.
Bluesky Magical 1001 Leasing Co.
MSN 1272&1278 Aircraft Leasing(Cayman) Ltd.
MSN 1272&1278 Aircraft Leasing(Cayman) Ltd.
AS Air Lease 83 Ireland Ltd.
AS Air Lease 83 Ireland Ltd.
Dianbao Aviation Leasing Ltd.
Wilmington Trust SP Services (Dublin)
Ltd.
Wilmington Trust SP Services (Dublin)
Ltd.
Wilmington Trust SP Services (Dublin)
Ltd.
Avolon Aerospace AOE 73 Ltd.
Avolon Aerospace AOE 78 Ltd.
SMBC Aviation Capital (UK) Ltd.
Jade Aviation (Ireland) AOE 5 Ltd.

Period02/2006-02/2022
02/2007-02/2023
04/2007-04/2019
05/2008-05/2024
11/2010-11/2022

Major Contents
Aircraft Type:A330-300/No.:B-18351
Aircraft Type:A330-300/No.:B-18352
Aircraft Type:A330-300/No.:B-18315
Aircraft Type:A330-300/No.:B-18353
Aircraft Type:A330-300/No.:B-18355

Restrictions-

12/2011-12/2023

Aircraft Type:A330-300/No.:B-18356-

01/2012-01/2024

Aircraft Type:A330-300/No.:B-18357-

10/2012-10/2024
12/2012-12/2024
12/2013-12/2025

Aircraft Type:A330-300/No.:B-18358
Aircraft Type:A330-300/No.:B-18359
Aircraft Type:A330-300/No.:B-18360-

04/2013-04/2021

Aircraft Type:737-800/No.:B-18651-

05/2013-05/2021

Aircraft Type:737-800/No.:B-18652-

06/2013-06/2021

Aircraft Type:737-800/No.:B-18653-

03/2014-03/2022
05/2014-05/2022
06/2014-06/2022
06/2014-06/2026

Aircraft Type:737-800/No.:B-18655
Aircraft Type:737-800/No.:B-18656
Aircraft Type:737-800/No.:B-18657
Aircraft Type:A330-300/No.:B-18361-

Operational Highlights

113

Agreement
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Bills
Bills
Bills
Bills
Bills
Bills
Bills
Bills

Counterparty
FPG Amentum
Oriental Leasing 4 Company Ltd.
Zeus Aircraft Owner 1 Ltd.
Korea Investment & Securities (KIS)Sky High XXXVII Leasing Company Ltd.
Sky High XXXVII Leasing Company Ltd.
Sky High XXXVII Leasing Company Ltd.
Wilmington Trust SP Services (Dublin)
Ltd.
ALC Blarney Aircraft Ltd.
Sky High XXXVII Leasing Company Ltd.
Zeus Aircraft Owner 2 Ltd.
UMB Bank N.A.
Zeus Aircraft Owner 3 Ltd.
Chilli Leasing LLC
Pacific Triangle Leasing Ltd.
BOC Aviation Ltd.
BOC Aviation Ltd.
BOC Aviation Ltd.
BOC Aviation Ltd.
Altitude Aircraft CAL I Ltd.
Altitude Aircraft CAL I Ltd.
Altitude Aircraft CAL I Ltd.
Altitude Aircraft CAL I Ltd.
Altitude Aircraft CAL I Ltd.
First Commercial Bank
Cathay United Bank
Taiwan Cooperative Bank
Taipei Fubon Commercial Bank
Bank of Taiwan
Hua Nan Commercial Bank
Mega International Commercial Bank
Bank of America Corporation
E.SUN Commercial Bank
Hua Nan Commercial Bank
E.SUN Commercial BankKGI Bank
Taishin International Bank
Bank SinoPac
Bank of Taiwan
Bank of Communications
Bank of Communications
Agricultural Bank of Taiwan
Taiwan Business Bank
Mega International Commercial Bank
Hua Nan Commercial Bank
China Construction Bank Corporation
Bank of Taiwan
Bank of Taiwan
International Bills Finance Corp. andsyndicate
China Bills Finance Corporation
Mega Bills
International Bills Finance Corp.
China Bills Finance Corporation
International Bills Finance Corp.
China Bills Finance Corporation andsyndicate
China Bills Finance Corporation andsyndicate

114 Operational Highlights

Period
10/2014-09/2026
10/2014-10/2026
11/2014-11/2026
01/2015-01/2027
05/2015-05/2027
06/2015-06/2027
08/2015-08/2027

Major Contents
Aircraft Type:777-300ER/No.:B-18051
Aircraft Type:777-300ER/No.:B-18052
Aircraft Type:777-300ER/No.:B-18053
Aircraft Type:777-300ER/No.:B-18055
Aircraft Type:777-300ER/No.:B-18001
Aircraft Type:777-300ER/No.:B-18002
Aircraft Type:777-300ER/No.:B-18003

Restrictions-

09/2015-09/2023

Aircraft Type:737-800/No.:B-18658-

10/2015-10/2023
10/2015-10/2027
01/2016-01/2028
03/2016-03/2024
05/2016-05/2028
09/2016-09/2024
09/2016-09/2024
10/2016-10/2024
11/2016-11/2024
01/2017-01/2025
02/2017-12/2025
09/2019-113/09
09/2019-113/09
09/2019-113/09
09/2019-113/09
09/2019-113/09
05/2007-05/2019
08/2007-08/2019
02/2008-02/2020
10/2012-10/2019
12/2014-12/2019
03/2015-03/2020
07/2015-07/2020
01/2016-01/2019
06/2016-06/2019
06/2016-06/2021
02/2020-02/2022
02/2020-02/2022
02/202002/2021
02/2020-02/2023
10/2016-10/2028
11/2016-11/2019
01/2017-01/2029
04/2017-04/2029
04/2017-04/2029
05/2017-08/2019
06/2017-06/2029
11/2017-11/2029
04/2018-04/2030
04/2020-10/2022

Aircraft Type:737-800/No.:B-18659
Aircraft Type:777-300ER/No.:B-18005
Aircraft Type:777-300ER/No.:B-18006
Aircraft Type:737-800/No.:B-18660
Aircraft Type:777-300ER/No.:B-18007
Aircraft Type:737-800/No.:B-18661
Aircraft Type:737-800/No.:B-18662
Aircraft Type:737-800/No.:B-18663
Aircraft Type:737-800/No.:B-18665
Aircraft Type:737-800/No.:B-18666
Aircraft Type:737-800/No.:B-18667
Aircraft Type:A330-300/No.:B-18301
Aircraft Type:A330-300/No.:B-18302
Aircraft Type:A330-300/No.:B-18303
Aircraft Type:A330-300/No.:B-18305
Aircraft Type:A330-300/No.:B-18306
Aircraft Type:A330-300/No.:B-18316
Aircraft Type:747-400F/No.:B-18725
Aircraft Type:A330-300/No.:B-18317
Aircraft Type:737-800/No.:B-18610&B18617
Aircraft Type:747-400F/No.:B-18701
Unsecured Loan
Aircraft Type:747-400F/No.:B-18711
Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan
Aircraft Type:A350-900/No.:B-18901
Unsecured Loan
Aircraft Type:A350-900/No.:B-18902
Aircraft Type:A350-900/No.:B-18905
Aircraft Type:A350-900/No.:B-18905
Unsecured Loan
Aircraft Type:A350-900/No.:B-18906
Aircraft Type:A350-900/No.:B-18903
Aircraft Type:A350-900/No.:B-18907
Partial Credit Guarantee Loan-

12/2015-03/2019

FRCP Joint Underwriting,-04/2016-04/2020
07/2016-07/2020
09/2016-09/2020
04/2020-04/2023
03/2020-03/2025

FRCP
FRCP
FRCP
FRCP
FRCP

-

12/2016-12/2020

FRCP Joint Underwriting,-

10/2017-04/2022

FRCP Joint Underwriting,--Agreement

Counterparty

PeriodMajor Contents

Restrictions

Bills

Mega Bills and syndicate

11/2017-05/2021

FRCP Joint Underwriting,

-

Bills

International Bills Finance Corp. andsyndicate

07/2019-8/2024

FRCP Joint Underwriting,-Surface Rights
Registration
Northern Region Branch of National
Contract ofProperty Administration of the Ministry
Taipei CAL
of Finance
Building

2016/12/31-2026/12/30

Taipei CAL
Building Lease FX Hotels Taiwan
Contract

99/09/01-2026/12/30

Taipei CAL
OEC Freight Worldwide Co., Ltd. of the
Building Lease
OEC Group
Contract

2016/03/01-115/12/31

According to the original contract, it was agreed
that the contract would be renewed for 10
years (the third period); rent is adjusted
according to the government assessed land
value and government published land value ofthe land authority, and is collected at an annual
rent rate of 5%.
Leasing premises:
Part of floor B1 of the CAL Building, which islocated at No. 131, Sec. 3, Nanjing E. Rd., Taipei
City, the area is 169.6 ping (approximately 561
square meters); 1st floor, an area of 142.5 ping
(approximately 471 square meters); 4 floors
from the 10th floor to 13th floor, a total area of
2,145 ping (approximately 7,091 square
meters). The total area of the above-mentioned
is 2,457.1 ping (approximately 8,123 square
meters).
Leasing of 11 parking spaces on the 1st floor
and floor B1.
Leasing premises:
Entire area of the 7th floor of the CAL Building,which is located at No.131, Sec. 3, Nanjing E.
Rd., Taipei City; the total area is 543.54 ping
(approximately 1,797 square meters); part offloor B1, an area of 15.25 ping (approximately
50 square meters); 1 parking space on floor B1
and 12 parking spaces on floor B2.
Leasing premises:
One parcel of land at Jinzhong Section, Luzhu
District, Taoyuan City with parcel number of705, and one parcel of land used for road facing
Nankan Road with parcel number 705-1 andtotal area of 8,382.05 ping (27,709.21 square
meters).
Leasing premises:
CAL Building, which is located at No.81,
Zhonghua 3rd Rd., Qianjin Dist., Kaohsiung City
Floor B1, an area of 115.91 ping (approximately
471 square meters); 1st floor, an area of 101.89
ping (approximately 337 square meters);
double layer of 24.07 ping (approximately 80
square meters); 11 floors from 2nd floor to
12th floor, total area of 1,083.94 ping
(approximately 3,583 square meters);
penthouse of 35.45 ping (approximately 117
square meters). The total area of theaforementioned is 1,361.26 ping
(approximately 4,500 square meters).

-

-

-

In
accordancewithnotarized
text

Nankan CAL
Park Land
Lease
Contract

Costco President Taiwan Inc.

Inception of the lease:2012/08/30
Period of leasing: 20 years
since the leasing start date.

Kaohsiung
CAL Building
Lease
Contract

FX Hotels Taiwan

2012/12/31-2032/12/30

CAL Park
Building Lease CAL Park Co., Ltd.
Contract

2019/01/01-2021/12/31
The contract will be
automatically renewed for 1
year upon expiration of thisperiod and contract renewal
shall be made every two
years.

Leasing premises:
Administration Center Building of the corporate
headquarters, Crew Center Building, Flight
Training Center Building, Basement (Parking
Lot). The total area is 25,140 ping
(approximately 83,107 square meters).

-

2019/03/01-2020/11/30

Operating space requirements and interface
management for China Airlines Group’s
stationing in the terminal 3 area of the Taoyuan
International Airport.

-

Engineering
consulting
company
commissioned T.Y.Lin Taiwan Consulting Engineers. inc.
technical
service
category-

Operational Highlights

115

Financial Information
6.1 Five-Year Financial Summary
6.2 Five-Year Financial Analysis
6.3 Consolidated Financial Statements for the YearsEnding December 31, 2019 and 2018, andIndependent Auditors’ Report
6.4 Parent Company Only Financial Statements for theYears Ending December 31, 2019 and 2018 andIndependent Auditors’ Report
6.5 Audit Committee’s Review Report

116 Financial Information

VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Consolidated Condensed Balance Sheet – Based on IFRS
Year

Item

Unit: NT$ thousands

Financial Summary for the Last Five Years (Note 1)

Current assets

2015 (Note 3)
45,642,615

2016 (Note 4)
47,338,201

2017 (Note 5)
47,411,834

2018 (Note 6)
52,827,560

2019 (Note 7)
51,822,342

Property, plant and equipment

129,628,866

140,136,737

153,617,531

163,107,718

145,886,971

2020 (As of March 31)(Note 2)59,527,646
142,531,989

Intangible assets

1,009,678

1,137,115

1,019,345

1,210,796

1,182,692

1,151,247

Other assets

45,645,150

35,888,706

23,850,922

12,990,508

94,155,974

92,025,311

221,926,309

224,500,759

225,899,632

230,136,582

293,047,979

295,236,193

68,220,452
70,728,977

68,605,724
68,605,724

60,289,113
61,482,783

60,949,892
62,086,170

76,351,527-

82,993,316
Not yet allocatedTotal assets
Current
liabilities

Before distribution
After distribution

Non-current liabilities
BeforeTotal
distribution
liabilities
After distribution
Equity attributable toshareholders of the parent

93,149,314

98,027,837

106,453,000

109,139,606

156,564,335

156,248,299

161,369,766

166,633,561

166,742,113

170,089,498

232,915,862

239,241,615

163,878,291

166,633,561

167,935,783

171,225,776-

Not yet allocated58,269,896

55,783,817

57,023,237

57,081,572

56,553,772

52,453,446

Capital stock

54,708,901

54,708,901

54,709,846

54,209,846

54,209,846

54,209,846

Capital surplus

798,415

799,932

799,999

1,241,214

2,488,907

2,484,998

2,872,235
363,710206,092
206,092

1,664,405
470,735

1,615,661
479,383(1,297,842)-(5,072,909)
Not yet allocatedRetainedearnings

Before distribution
After distribution

Other equity interest(66,283)

112,264(107,641)

58,223

1,196,233

862,386

Treasury shares(43,372)(43,372)(43,372)(43,372)(43,372)(30,875)

Non-controlling interest
Total
equityBefore distribution
After distribution

2,286,647

2,083,381

2,134,282

2,965,512

3,578,345

3,541,132

60,556,543
58,048,018

57,867,198
57,867,198

59,157,519
57,963,849

60,047,084
58,910,806

60,132,117-

55,994,578
Not yet allocatedNote 1: 2015-2019 annual financial information was verified by Deloitte & Touche.
Note 2: As of the date of printing of this annual report, Q1 2020 financial information has not yet been reviewed by Deloitte & Touche.
Note 3: The 2015 Earnings Distribution Proposal resolution was passed by the Shareholders’ General Meeting held on June 24, 2016. As required by law, theCompany appropriated a legal reserve of NT$287,224,000 and special reserve of NT$76,486,000 and distributed cash dividends totaling
NT$2,508,525,000.
Note 4: The 2016 Deficit Compensation Proposal was passed at the shareholder meeting held on June 22, 2017, with legal reserve bonds of NT$81,132,000 andreversal of special reserve of 76,486,000 making up the shortfall.
Note 5: For the matter of 2017 surplus earnings distribution, after approved by the resolution of the general meeting on June 27, 2018, the legal reserve
appropriated was NT$145,831,000, the special reserve appropriated was NT$118,810,000 and the cash dividend distributed was NT$1,193,670,000.
Note 6: For the matter of 2018 surplus earnings distribution, after approval by the resolution of the general meeting on June 25, 2019, the legal reserve
appropriated was NT$ 114,493,000, the cash dividend distributed was NT$1,136,278,000, and reversal of special reserve of 105,843,000.
Note 7: The 2019 deficit make-up plan was approved by the resolution of the 10th meeting of the 21st Board of Directors on March 18, 2020, but has yet to beapproved at the shareholders’ general meeting.

Financial Information

1176.1.2 Consolidated Condensed Statement of Comprehensive Income – Based on
IFRS
Item

Unit: NT$ thousands; EPS (net) = NT$Year

Financial Summary for the Last Five Years (Note 1)
2015

2016

2017

Revenue

145,056,217

141,079,107

Gross profit

20,268,374

Operating profit

2020 (As of March 31)(Note 3)

2018

2019

156,121,785

170,711,607

168,444,160

18,005,906

21,972,411

17,207,531

16,686,928

220,868

8,129,197

4,564,687

8,826,160

4,022,383

2,665,821(2,970,856)

32,557,130

Non-operating income and expenses(994,312)(2,684,836)(5,302,197)(941,134)(2,762,638)(835,626)

Pretax profit (loss)

7,134,885

1,879,851

3,523,963

3,081,249(96,817)(3,806,482)

Income from operations of continued
segments - after tax

5,926,210

710,940

2,490,792

2,272,684(675,002)(3,810,565)

-

-

-

-

-

-

Net income (loss)

5,926,210

710,940

2,490,792

2,272,684(675,002)(3,810,565)

Other comprehensive income(income/loss after taxes)

1,269,760(681,669)(1,113,176)(578,363)

462,758(333,828)

7,195,970

29,271

1,377,616

1,694,321(212,244)(4,144,393)

5,763,714

571,540

2,208,066

1,790,361(1,199,798)(3,773,333)

162,496

139,400

282,726

482,323524,796(37,232)

Comprehensive income attributable to
Shareholders of the parent

7,072,042

26,103

1,240,677

1,258,035(647,085)(4,107,180)

Comprehensive income attributable tonon-controlling interest

123,928

3,168

136,939436,286

434,841(37,213)

1.06

0.10

0.40

0.33

(0.22)(0.70)

Income from discontinued operations

Total comprehensive gain (loss) for
the year
Net income attributable toshareholders of the parent
Net income attributable tonon-controlling interest

Earnings (Loss) per share

Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche.
Note 2: As of the date of printing of this annual report, the Q1 2020 financial information has not yet been reviewed by Deloitte & Touche.

118 Financial Information

6.1.3 Condensed Balance Sheet – Based on IFRS (Parent Company Only)

Unit: NT$ thousands

Year

Item

Financial Summary for the Last Five Years (Note 1)
2016 (Note 4)2017 (Note 5)2018 (Note 6)2015 (Note 3)2020 (As of March 31)(Note 2)2019 (Note 7)

Current assets
Property, plant and equipment

34,477,533
131,178,428

37,904,039
118,446,472

39,908,492
129,121,632

37,933,696
142,265,548

42,932,859
149,029,054-

Intangible assets
Other assets

649,61451,594,035

990,30751,802,032

1,115,101
41,394,218

989,327
30,729,421

979,708
21,972,600-

Total assets

217,899,610

209,142,850

211,539,443

211,917,992

214,914,221-

59,079,846

64,725,525

64,339,805

54,925,364

55,179,834-

Current
liabilities

Beforedistribution
After distribution

59,079,846

67,234,050

64,339,805

56,119,034--

110,155,489

86,147,429

91,415,821

99,969,391

102,652,815-

Beforedistribution

169,235,335

150,872,954

155,755,626

154,894,755

157,832,649-

After distribution

169,235,335

153,381,479

155,755,626

156,088,425--

48,664,275

58,269,896

55,783,817

57,023,237

57,081,572-

52,491,666-

Non-current liabilities
Total
liabilities

Equity attributable toshareholders of the parent
Capital stock

54,708,901

54,708,901

54,709,846

54,209,846

Capital surplus
BeforeRetained
distribution
earnings
After distribution

480,462

798,415

799,932

799,999

1,241,214-(3,870,736)

2,872,235

206,092

1,664,405

1,615,661-(2,358,783)

363,710206,092

470,735--

Other equity interest
Treasury shares(1,905,698)(43,372)(66,283)(43,372)

112,264(43,372)(107,641)(43,372)

58,223(43,372)

-

-

-

-

-

-

-

48,664,275

58,269,896

55,783,817

57,023,237

57,081,572-

48,664,275

55,761,371

55,783,817

55,829,567--

Non-controlling interest
BeforeTotal
distribution
equityAfter distribution

Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche.
Note 2: The Company has not prepared an individual financial statement for Q1 2020.
Note 3: The 2015 Earnings Distribution Proposal resolution was passed by the Shareholders’ General Meeting held on June 24, 2016. As required by law, theCompany appropriated a legal reserve of NT$287,224,000 and special reserve of NT$76,486,000 and distributed cash dividends totaling
NT$2,508,525,000.
Note 4: The 2016 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 22, 2017, using a legal reserve of
NT$81,132,000 and reversal of special reserve of 76,486,000 to cover the deficit.
Note 5: For the matter of 2017 surplus earnings distribution, after approved by the resolution of the general meeting on June 27, 2018, the legal reserve
appropriated was NT$145,831,000, the special reserve appropriated was NT$118,810,000, and the cash dividend distributed was NT$1,193,670,000.
Note 6: For the matter of 2018 surplus earnings distribution, after approval by the resolution of the general meeting on June 25, 2019, the legal reserve
appropriated was NT$ 114,493,000, the cash dividend distributed was NT$1,136,278,000, and reversal of special reserve of 105,843,000.
Note 7: The 2019 deficit make-up plan was approved by the resolution of the 10th meeting of the 21st Board of Directors on March 18, 2020, but has yet to beapproved at the shareholders’ general meeting.

Financial Information

1196.1.4 Condensed Statement of Comprehensive Income – Based on IFRS (Parent
Company Only)
Unit: NT$ thousands; EPS (net) = NT$

Year

Item

Financial Summary for the Last Five Years (Note 1)2020 (As of March 31)(Note 2)

Revenue2015
133,441,725

2016
127,524,864

2017
139,815,211

2018
150,264,792

2019
146,372,401

Gross profit
Operating profit

17,623,801
7,885,097

15,275,980
4,475,707

17,966,397
7,358,114

12,649,836
1,847,567

11,364,235
80,235-Non-operating income andexpenses(1,047,275)(2,938,456)(4,269,911)

468,064(1,267,561)-

6,837,822

1,537,251

3,088,203

2,315,631(1,187,326)-

5,763,714

571,540

2,208,066

1,790,361(1,199,798)

-

-

-

-

-

-

-

5,763,714

571,540

2,208,066

1,790,361(1,199,798)-

Pretax profit (loss)
Income from operations ofcontinued segments - after tax
Income from discontinued
operations
Net income (loss)
Other comprehensive income(income/loss after tax)
Total comprehensive gain (loss)
for the tear
Net income attributable toshareholders of the parent-

1,308,328(545,437)(967,389)(532,326)

552,713

7,072,042

26,103

1,240,677

1,258,035(647,085)

-

1.06

0.10

0.40

0.33

(0.22)-

Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche.
Note 2: The Company has not prepared an individual financial statement for Q1 2020.

6.1.5 Condensed Balance Sheet – Based on ROC GAAP (Parent Company Only):
Not Applicable.
6.1.6 Condensed Statement of Comprehensive Income – Based on ROC GAAP
(Parent Company Only): Not Applicable.
6.1.7 Auditors’ Opinions from 2015 to 2019Year

Accounting Firm

Name of CPA

Audit Opinion

2015

Deloitte & Touche

Huang, Jui-chan; Chen, Li-Chi

Qualified Opinion (Note1)

2016

Deloitte & Touche

Yang, Chen-Hsiu; Chen, Li-Chi

Unqualified Opinion

2017

Deloitte & Touche

Yang, Chen-Hsiu; Chen, Li-Chi

Unqualified Opinion

2018

Deloitte & Touche

Yang, Chen-Hsiu; Huang, Jui-chan

Unqualified opinions and other matters (Note2)

2019

Deloitte & Touche

Huang, Jui-chan; Cheng, Shiuh-Ran

Unqualified opinions and other matters (Note2)

Note1: In 2015, the Company began implementing the revised Regulations Governing the Preparation of Financial Reports by Securities
Issuers and the 2013 version of IFRS, International Accounting Standards, IFRIC and SIC Interpretations recognized by the Financial
Supervisory Commission. Therefore, the aforementioned standards and interpretations have been applied retroactively to affected
sections of the previous period’s financial statement.
Note 2: The financial statements and related information of some subsidiaries have not been audited by Deloitte & Touche since 2018; they
have been audited by other accountants. The information on how the Company’s equity-accounted investments and overall gains
are affected is explained in the paragraphs for "other matters".

120 Financial Information

6.2 Five-Year Financial Analysis

6.2.1 Consolidated Financial Analysis – Based on IFRSYear

Item (Note 3)
Financial
structure (%)
Solvency (%)

Operatingperformance

Debt ratio

Cash flow
Leverage

2016

2017

2020 (As of March 31)(Note 2)

2019
79.48

81.03

107.81103.73148.54148.91

78.64
59.46

86.67
67.50

67.87
54.57

71.73
60.60

265.4017.67

369.0218.40

338.0518.30

103.7918.13(334.02)
16.71

21.49
-

20.66
-

19.84
-

19.95
-

20.13
-

21.84
-

-

-

-

-

-

-

1.07

1.05

1.06

1.08

1.09

0.90
0.44
(4.29)

74.22

118.57111.24Current ratio
Quick ratio

66.90
53.06

69.00
53.16

Interest earned ratio (times)
Accounts receivable turnover (times)

496.25
16.98

Average collection period
Inventory turnover (times)
Accounts payable turnover (times)
Average days in sales

2018
73.91

72.71

Ratio of long-term capital toproperty, plant, and equipment

Property, plant, and equipment
turnover (times)

Profitability

Financial Summary for the Last Five Years (Note 1)

2015

73.81

Total assets turnover (times)
Return on total assets (%)

0.64
3.28

0.63
0.80

0.69
1.60

0.75
1.48

0.64
0.76

Return on stockholders' equity (%)
Pre-tax income to paid-in capital (%)

10.63
13.04

1.20
3.44

4.26
6.44

3.81
5.68

(1.12)(0.18)(26.25)(28.09)Profit ratio (%)
Earnings per share (NT$)

4.09
1.06

0.50
0.10

1.60
0.40

1.33
0.33

(0.40)(0.22)(11.70)(0.70)Cash flow ratio (%)
Cash flow adequacy ratio (%)

46.60
233.2525.71
303.1747.35
351.5844.34
366.9449.15
518.35(32.48)399.31

Cash reinvestment ratio (%)
Operating leverage

10.56
3.21

4.83
4.99

8.82
3.16

8.17
6.00

12.24
14.20

(9.02)(1.94)(3.95)
Financial leverage
1.28
1.40
1.18
1.52
0.78
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)
1. Degree of operating leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was
implemented to recognize depreciation. This caused the decrease in variable costs, and in turn resulted in the increase in the degree of operating leverage.
2. Degree of financial leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was
implemented to recognize the increase in interest expenses. This resulted in the negative value of the degree of operating leverage.
3. Due to the start of IFRS 16 Leases implementation in 2019, items such as right-of-use asset and lease liabilities were added. This increased the ratios related
to the financial structure and cash flow from the previous year; the current ratio and quick ratio decreased from the previous year.Also, factors such as the
China-US trade war, protests over the Hong Kong extradition bill, and limits on Chinese tour groups caused a decline in profits and affected profitability andratios related to degrees of leverage.The reduction in interest protection multiples was also affected by IFRS 16 and the decrease in profits.

Financial Information

1216.2.2 Financial Analysis – Based on IFRS (Parent Company Only)
Financial Summary for the Last Five Years (Note 1)

Year
Item (Note 3)
Financial structure(%)
Solvency (%)

Operatingperformance

Profitability

Cash flow
Leverage2015
Debt ratio
Ratio of long-term capital to fixed
assetsCurrent ratio

2016

2017

2018

2020 (As of March 31)(Note 2)

2019

72.14

73.63

73.09

73.44

78.97

-

121.93114.00110.35107.18153.31

-

58.56

62.03

69.06

77.81

60.28

-

Quick ratio
Interest earned ratio (times)

44.54
495.4345.82
246.0349.03
350.5657.87
292.02

45.87
60.78

-

Accounts receivable turnover(times)

15.56

15.92

16.62

16.57

16.72

-

Average collection period
Inventory turnover (times)

23.46
-

22.92
-

21.96
-

22.46
-

21.83
-

-

-

-

-

-

-

-

Fixed assets turnover (times)
Total assets turnover (times)

1.07
0.62

1.03
0.61

1.03
0.66

1.03
0.70

1.05
0.61

-

Return on total assets (%)
Return on stockholders' equity (%)

3.36
10.78

0.75
1.00

1.54
3.91

1.33
3.14

0.51
(2.11)-

Pre-tax income to paid-in capital (%)
Profit ratio (%)

12.50
4.32

2.81
0.45

5.64
1.58

4.27
1.19

(2.19)(0.82)-

Earnings per share (NT$)
Cash flow ratio (%)

1.06
47.38

0.10
26.71

0.40
47.41

0.33
43.61

(0.22)
48.16-

Cash flow adequacy ratio (%)
Cash reinvestment ratio (%)

232.9310.74

309.014.94

357.868.48

381.097.68

557.30
11.34

-

3.15
1.28

4.85
1.38

3.46
1.21

11.25
3.45

372.72(0.03)-

Accounts payable turnover (times)
Average days in sales

Operating leverage
Financial leverage

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)
1. Degree of operating leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was
implemented to recognize depreciation. This caused the decrease in variable costs, and in turn resulted in the increase in the degree of operating leverage.
2. Degree of financial leverage: Mainly due to the decrease in the operating margin in 2019 compared with the same period of the previous year, IFRS 16 was
implemented to recognize the increase in interest expenses. This resulted in the negative value of the degree of operating leverage.
3. Due to the start of IFRS 16 Leases implementation in 2019, items such as right-of-use asset and lease liabilities were added. This increased the ratios related
to the financial structure and cash flow from the previous year; the current ratio and quick ratio decreased from the previous year.Also, factors such as the
China-US trade war, protests over the Hong Kong extradition bill, and limits on Chinese tour groups caused a decline in profits and affected profitability andratios related to degrees of leverage.The reduction in interest protection multiples was also affected by IFRS 16 and the decrease in profits.
Note 1: 2015-2019 annual financial information was verified by Deloitte & Touche.
Note 2: As of printing of this annual report, Q1 2020 consolidated financial information has not yet been reviewed by Deloitte & Touche. The Company has not prepared
an individual financial statement for Q1 2020.
Note 3: The calculations of the above financial ratios utilize the formulas listed below:
1. Financial structure(1) Debt ratio = total liabilities / total assets(2) Ratio of long-term capital to property, plant, and equipment = (total shareholders' equity + non-current liabilities) / net property, plant, and equipment
2. Solvency(1) Current ratio = current assets / current liabilities(2) Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities(3) Interest earned ratio (times) = earnings before interest and taxes / interest expenses
3. Operating performance(1) Accounts receivable turnover (including accounts receivable and notes receivable arising from business activities) = net sales / average accounts
receivable (including accounts receivable and notes receivable arising from business activities)(2) Average collection period = 365 / average accounts receivable turnover(3) Inventory turnover = cost of goods sold / average inventory(4) Accounts payable turnover (including accounts payable and notes payable arising from business activities) = cost of goods sold / average accounts
payable (including accounts payable and notes payable arising from business activities)(5) Average inventory turnover days = 365 / inventory turnover ratio(6) Property, plant, and equipment turnover = net sales / net property, plant, and equipment(7) Total asset turnover = net sales / average total assets
4. Profitability(1) Return on total assets = [net income + interest expense x (1 - effective tax rate)] / average total assets(2) Return on stockholders’ equity = net income / average stockholders’ equity(3) Net margin = net income / net sales(4) Earnings per share = (net income attributable to owners of the parent – preferred stock dividends) / weighted average number of shares outstanding
5. Cash flow
(1) Cash flow ratio = net cash flows from operating activities / current liabilities(2) Cash flow adequacy ratio = five year sum of net cash flows from operating activities / five year sum of (capital expenditures + increase in inventory + cash
dividends)(3) Cash flow cash reinvestment ratio = (net cash flows from operating activities – cash dividends) / (gross property, plant, and equipment + long-term
investments + other non-current assets + working capital)
6. Leverage(1) Operating leverage = (net sales – variable operating costs and expenses) / operating profit(2) Financial leverage = operating profit / (operating profit – interest expenses)

122 Financial Information

6.2.3 Consolidated Financial Analysis – Based on ROC GAAP: Not Applicable.
6.2.4 Financial Analysis – Based on ROC GAAP (Parent Company Only): Not
Applicable.

6.3 Consolidated Financial Statements for the Years Ended
December 31, 2019 and 2018, and Independent Auditors’ Report:
Please refer to Appendix 1.
6.4 Parent Company Only Financial Statements for the Years Ended
December 31, 2019 and 2018, and Independent Auditors’ Report:
Please refer to Appendix 2.

Financial Information

1236.5 Audit Committee’s Report
Audit Committee Report
The Board of Directors shall create and send (1) the 2019 consolidated financial statement andindividual financial statement that have been jointly audited by Deloitte CPAs Huang, Jui-Chan andCheng, Shiuh-Ran, who released an official unqualified opinion by March 18, 2020, and (2) the 2019business report and Earnings Distribution Statement, after having been found to have nodiscrepancies by this audit committee and, thereupon, issue a report in accordance with the items
stipulated in Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

China Airlines

Convener of the audit committee: Chang, Hsieh Gen-Sen

March 18, 2020

124 Financial Information

Review of Financial
Conditions, Financial
Performance, and Risk
Management
7.1 Analysis of Financial Status
7.2 Analysis of Operation Results
7.3 Analysis of Cash Flow
7.4 Major Capital Expenditure Items
7.5 Investment Policy in Last Year, Main Causes for Profits
or Losses, Improvement Plans and the Investment
Plans for the Coming Year
7.6 Analysis of Risk Management

Review of Financial Conditions, Financial Performance, and Risk Management

125VII. Review of Financial Conditions, Financial
Performance, and Risk Management

7.1 Analysis of Financial Status (Consolidated)

Analysis of changes in assets, liabilities, and equity over the past two years:
Item

Year

2019

Unit: NT$ thousands
Difference

2018

Amount%Current assets

51,822,342

52,827,560(1,005,218)(1.90)

Property, plant and equipment

145,886,971

163,107,718(17,220,747)(10.56)

Intangible assets

1,182,692

1,210,796(28,104)(2.32)

Other assets

94,155,974

12,990,508

81,165,466

624.81

Total assets

293,047,979

230,136,582

62,911,397

27.34
25.27

Current liabilities

76,351,527

60,949,892

15,401,635

Non-current liabilities

156,564,335

109,139,606

47,424,729

43.45

Total liabilities

232,915,862

170,089,498

62,826,364

36.94

Capital stock

54,209,846

54,209,846--

Capital surplus

2,488,907

1,241,214

1,247,693

100.52Retained earnings(1,297,842)

1,615,661(2,913,503)(180.33)

Other equity

1,196,233

58,223

1,138,010(1,954.57)

Treasury shares(43,372)(43,372)--

3,578,345
612,833
20.67
2,965,512
60,132,117
85,033
0.14
Total equity
60,047,084
Analysis of changes in financial ratios:
1. Other assets: Mainly due to the start of IFRS 16 Leases implementation in 2019, a total of NT$71.034 billion was added in right-of-use assets.
2. Liabilities: Mainly due to the start of IFRS 16 Leases implementation in 2019, a total of NT$18.143 billion was added in lease liabilities.The leaseagreement valued in US dollars is used as a hedging instrument to avoid future exchange rate fluctuations in passenger and cargo incomes;
financial liabilities for hedging purposes increased by NT$50.998 billion.
3. Capital surplus: In 2019, parts of the shares held by subsidiary company Tigerair Taiwan were sold. The relevant gain on disposal isrecognized under capital reserves and non-controlling interest.
4. Other equity: Mainly due to the changes in the fair value of financial assets and hedging instruments measured by fair value throughother comprehensive income.
5. Non-controlling interest: In 2019, parts of the shares held by subsidiary company Tigerair Taiwan were sold. The relevant gain on disposal
is recognized under capital reserves and non-controlling interest.
Future response actions: The above changes do not significantly affect the Company.
Non-controlling interests

126 Review of Financial Conditions, Financial Performance, and Risk Management7.2 Analysis of Financial Performance (Consolidated)
Financial Performance Analysis Table

Year

Unit: NT$ thousands
Difference
Amount%(2,267,447)(1.33)

20192018

Revenue

168,444,160

170,711,607

Cost

151,757,232

153,504,076(1,746,844)(1.14)

Gross profit

16,686,928

17,207,531(520,603)(3.03)

Operating expenses

14,021,107

13,185,148

835,959

6.34

Operating income (loss)

2,665,821

4,022,383(1,356,562)(33.73)Non-operating income and expenses(2,762,638)(941,134)(1,821,504)(193.54)(96,817)

3,081,249(3,178,066)(103.14)

Item

Pretax profit (loss)
Income tax expense

578,185

808,565(230,380)(28.49)Net income (loss)(675,002)

2,272,684(2,947,686)(129.70)

462,758(578,363)

Other comprehensive income(212,244)

1,041,121

180.01(1,906,565)(112.53)

Total comprehensive gain (loss) for the year
1,694,321
Analysis of changes in financial ratios:
1. Operating income, pretax profit, and net income for the period: All profits in 2019 decreased from the previous year mainly due to factors
such as the China-US trade war, protests over the Hong Kong extradition bill, and limits on Chinese tour groups.
2. Non-operating income and expenses: In 2019, the implementation of IFRS 16 Leases started and interest expenses was added under leaseliability. This caused an increase of NT$1.96 billion in financial costs compared with the previous year.
3. Other comprehensive income (net): Mainly due to the changes in the fair value of financial assets and hedging instruments measured byfair value of other comprehensive profit and loss cases.
4. Total comprehensive income for the period: The combined effects of the above descriptions 1, 2, and 3.

7.3 Analysis of Cash Flow (Consolidated)
7.3.1 Cash Flow Analysis for the Current Year
Year

Item
Cash and Cash Equivalents, Beginning of Year201924,937,537

2018
22,585,332

Unit: NT$ thousands
Difference
Amount%2,352,205
10.41

Net Cash Flow from Operating Activities

37,526,612

27,026,957

10,499,655

Net Cash Flow from Investing Activities(16,053,122)

4,226,490

20.84

Net Cash Flow from Financing Activities(20,279,612)(17,614,558)(4,386,909)(13,227,649)(301.53)(328,710)

3,993.56

Exchange Rate Adjustment(336,941)

Cash and Cash Equivalents, End of Year

(8,231)

28,459,528

24,937,537

38.85

3,521,991

14.12
Analysis of change in cash flow in the current year:
1. The difference in cash flow from operating activities was mainly due to the new implementation of IFRS 16 Leases in 2019. The“rights-of-use assets” item was added, causing the increase in depreciation compared with the previous year.
2. The difference in cash flow from investment activities was mainly due to factors such as the payments received from selling parts of theshares held by subsidiary company Tigerair Taiwan in 2019.
3. The reasons for the difference in cash flow from financing activities were mainly the issuance of corporate bonds and long-term loan
amount in 2019, which were both lower than the previous year.

7.3.2 Remedy for Cash Deficit and Liquidity Analysis: None.
7.3.3 Cash Flow Analysis for the Coming YearThe cash balance at the beginning of the year was around NT$20.6 billion and estimated net cash flow fromoperating activity for the year is NT$23.6 billion. However, the Company’s operations have been affected by the
COVID-19 pandemic that started at the end of January 2020. Assuming that the pandemic will start to ebb in June, itis estimated that the financing needs of the year will increase by NT$12 billion to NT$35.6 billion. After the
COVID-19 outbreak, the Company quickly used credit to increase cash levels, and simultaneously planned to apply
for mortgage loans and obtain mid- and long-term funds from the issuance of corporate bonds. A total of NT$45.3
billion (Note) has been used as funds to respond to the pandemic. Also, depending on the development of thepandemic, other financing tools will be used to obtain funds and keep the end-of-period cash balance at NT$30.3
billion.
Note: In 2020, the Company was received additional NT$20 billion loan with 80% credit guarantees fromgovernment.

Review of Financial Conditions, Financial Performance, and Risk Management1277.4 Major Capital Expenditure Items (Parent Company Only)
Major capital expenditures primarily include purchases of new airplanes as part of operational expansion,
which does not have a significant impact on the Company’s financial operations.

7.5 Investment Policy in the Last Year, Main Causes for Profits or
Losses, Improvement Plans and Investment Plans for the ComingYear

In order to support our primary airline operations and enhance competitiveness of the CAL Group,
investments are primarily in airline industry-related companies. Currently, these include air transport,
ground services, logistics and warehousing, air cargo terminals, airline catering, laundry, information
networks, aeronautics, tourism services, and investing and leasing industries to create a comprehensive
air service network and wide-ranging services. Calculated under the equity method, reinvestment
revenues for 2019 totaled NT$1.812 billion.
In the coming year, the Company will continue to carry out NORDAM Asia’s hangar construction. We will
also evaluate various potential investment possibilities in aspects such as passenger transport, cargotransport, aircraft maintenance, and aviation training.

7.6 Analysis of Risk Management
7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation
on Corporate Finance, and Future Response Measures
A. Impact of changes in interest rates, foreign exchange rates, and inflation on Company income
Although changes in interest and foreign exchange rates do have a level of impact on Company
income, effective control on the impact is limited.
B. Response measures to changes in interest rates, foreign exchange rates, and inflation
To prevent changes in interest rates, foreign exchange rates, and inflation from creating risks to theCompany’s overall finances, we hold regular meetings of the Board of Directors Risk Committee, andremain aware of economic and financial developments both in Taiwan and overseas to develop a
hedging strategy, evaluate performance of derivatives, and set an appropriate hedge ratio. These
controls help prevent changes by utilizing financial hedging instruments in the financial environmentand oil prices from creating systemic financial risks and enable CAL to achieve proper risk
management.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with
Respect to High-risk, High-leveraged Investments, Lending orEndorsement Guarantees, and Derivatives Transactions
A. The Company does not engage in high-risk, highly-leveraged investments.
B. The Company has developed the Operational Procedures for Lending Funds to Others andOperational Procedures for Endorsements/Guarantees, and risks of such operations are controlled
through strict assessment. Therefore, loans and endorsements/guarantees do not lead to profits orlosses for the Company.

C. Company derivative products include forward foreign exchange and foreign exchange options
contracts and oil options contracts, which are primarily to hedge against the risk of fluctuations in oil
prices, interest rates, and foreign exchange rates. Transactions are performed in accordance with theCompany’s Operational Procedures for Derivatives Trading and are regularly evaluated to ensure
effective risk controls.

7.6.3 Future Research & Development Projects and Corresponding Budget:
Please refer to page 96.

128 Review of Financial Conditions, Financial Performance, and Risk Management7.6.4 Effects of and Response to Changes in Policies and Regulations Relating toCorporate Finance and Sales: None.
7.6.5 Effects of and Response to Changes in Technology and the Industry
Relating to Corporate Finance and Sales:
1. Information Security and Governance System
To continuously improve the information security governance system, strengthen protection
capabilities, and cultivate a positive information security awareness among staff, all of the Company’s
information operations are to comply with international information security standards as well as
Taiwan’s information security law. Relevant security policies and operating procedures are formulated,
and they are implemented in daily business operations. Also, information security management
review meetings are held periodically to assess and reflect on the appropriateness of the relevant
policies and procedures. In order to improve its information security governance system andorganization operations, and to avoid being subjected to internal or external deliberate or accidental
threats, an information security promotion team was established. The team is responsible for jobs
including the formulation of the Company’s information security policies, the implementation of
information security training, assessing information and intelligence of information security,
emergency notification/handling contingencies. In addition, the deputy general manager of theInformation Management Department, who is also the convener, is responsible for supervising theCompany’s information security governance system planning, promotion, and implementation. The
deputy general manager also reports the status of information security implementation to the Boardof Directors every year.

2. Information Security Management Mechanism
The major directions of the Company's information security strategy have been focused on three
aspects, including information security governance, daily maintenance and operation, andinfrastructure protection, in which there are contained risk management, legal compliance, andcorporate policies; the strategy fully enhances the Company's information security protection
capabilities from internal systems to external regulations, and from the level of personnel to that oforganization. In each stage of system development and maintenance, weakness identification andrepair are performed with various testing technologies to ensure the safety of service usage. In

Review of Financial Conditions, Financial Performance, and Risk Management129

response to various external attack methods, such as DDoS, APT, and social engineering attacks, theCompany has adopted relevant defense mechanisms. Every year, the Company commissions external
information security experts to assist in penetration testing and information security assessment. The
Company also regularly stays informed of information security issues and plans responses accordingly.
In addition, the Company performs information security incident reporting and carries out response
drills on its own. These are performed to examine the effectiveness of defense and the ability torespond to incidents, with the hope of being able to immediately detect incidents and complete thehandling. Per examination by the Information Management Division in 2019, neither the monitoring
or warning information from the defense system, which detects threats to information security, wasconfirmed to be a security incident caused by hacker intrusion or virus infection. In order to enhance
employees' awareness of information security, every employee in the Company receives basic
information security training so that they understand information security risks and the discipline andprinciples of self-management. Every year, information security policies and goals are promoted toevery internal company employee through different methods, including education and training,internal meetings, and announcements.
3. Information Security Verification and Audit
The Company's core information system obtained the ISO/IEC 27001: 2013 certification for ISMS in
2019, and the credit card processing system obtained the PCI DDS certification in December 2018. In
addition, in order to ensure the security of transaction data and transmission accuracy, message
confidentiality, integrity, usability, and security design in data transmission and processing measures
are strengthened. The Company also complies with the Cyber Security Management Act to strengthen
security control mechanisms. The information security promotion team performs at least one internal
audit every year to not only confirm that employees are complying with these standards and theCompany's requirements for management procedures, but also to effectively apply and maintain the
management system.
4. Personal Information Protection Management System
The Company places great importance on customer privacy and regards it as a basic service principle.
In addition to complying with international laws and different foreign laws related to personal
information, in 2014 the Company established the Personal Information Management Committee andestablished the personal information management system. The system explains the standards for thecollection and usage of customer data, passengers' personal information rights, revision of privacy
protection/declaration of security, and the commitment to maintaining data confidentiality. In order
to comply with the General Data Protection Regulation (GDPR) put into effect by the European Union
on May 25, 2018, the role of data protection officer (DPO) has been established in the Company.
Externally, on the website of China Airlines, we publicly disclose relevant privacy protection policies
and statements. Internally, we revise SOPs, hold personal data event drills on an annual basis,comprehensively strengthen employee data protection notions and code of conduct througheducation and training, finalize a personal data auditing system, and continue to take inventory ofannual personal data work. Report the implementation results and improvement measures of thepersonal data management system to the Board of Directors every year, and maintain customer
privacy in accordance with high standards.

130 Review of Financial Conditions, Financial Performance, and Risk Management7.6.6 The Impact of Changes in Corporate Image on Corporate Risk
Management, and the Company’s Response Measures
The Company continues to improve its navigational matters and aircraft maintenance, guard flight safety,
and implement various service details in the SOP+ spirit; actively invest in social welfare and fulfill the
responsibilities of corporate citizenship; incorporate environmental management into our operational
focuses. If there is any untrue or negative news, message, or incident that affects the Company’s image,
we will respond immediately and explain and clarify to the public, and post explanations on our website
or social media platform if necessary, to reduce the negative effects.
For example, in the ongoing case of the controversy over chartered flights carrying duty-free cigarettes,
in the future, the Company will not allow the pre-sale of duty-free cigarettes but will operate in the samemanner as that in ordinary flights. The number of cigarettes loaded will be limited to the total number ofpassengers who can carry them. We have also established a mechanism to control the number ofduty-free products on chartered flights, to accurately carry out loading of duty-free goods within thelimits of aircraft space and load, and complete the delivery of goods on board the aircraft.

7.6.7 Expected Benefits from, Risks Relating to, and Response to Merger andAcquisition Plans: None.
7.6.8 Expected Benefits from, Risks Relating to, and Response to Factory
Expansion Plans: None.
7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing
Sources and Excessive Customer Concentration: None.
7.6.10 Effects of, Risks Relating to, and Response to Large Share Transfers or
Changes in Shareholdings by Directors or Shareholders with
Shareholdings of over 10%: None.
7.6.11 Effects of, Risks Relating to, and Response to the Changes inManagement Rights: None.
7.6.12 Litigation or Non-litigation Matters
Any major litigation, non-litigation, or administrative disputes involving the Company that are alreadyfinalized or still pending.
Disputed
AmountLitigants
Current Status(NT$)
Litigation
1. In 2002, the Civil Aeronautics
More than Plaintiff: China This case has gone through the firstfor
Administration (CAA) unilaterally
1.2 billion Airlines
and second instance trials. The court
refundingterminated an aircraft rental contract
Defendant: Civil agreed that there was an
overpayme
with the Company for six aircraft,
Aeronautics
overpayment of rent in this case andnt onresulting in early termination of the
Administration that the amount of overpayment isaircraftcontract, which changed the nature
NT$258,073,030. However, due torentalof the lease and the rent calculation
incorrect logic used in the calculation,basis and resulted in rent
it mistakenly recognized that the
overpayment by the Company.
Company had offset NT$363,027,179
2. In 2010, the CAA resolved that thein the final rent payment, so it was
Civil Aeronautics Administration
judged that the Company had noshould pay the Company more thanreason to request the CAAC to return
NT$1.5 billion and in 2015 thethe overpayment of rent. In order toSupreme Court revoked thefully protect the rights and interests ofarbitration judgment, which resulted
the Company and investors, thein the Company filing a civil lawsuit
Company filed all appeals in the third
against the CAA to recoup the
instance on November 27, 2019. They
aforementioned rent overpayment.
are now being adjudicated.

No. Case Name
1

Summary

Review of Financial Conditions, Financial Performance, and Risk Management1317.6.13 Other Major Risks:
1.CAL fully understands the importance of risk management and the potential for interaction
between different types of risk. We established the Risk Committee directly under the supervisionof the Board of Directors to improve risk management and require subordinate units to control foreach major risk category.
The CAL risk management organization and units responsible for implementation:
Type of Risk

Operating Risk

Safety Risk

Financial Risk

Responsible
Department

Risk Management Measures

The operating environment for the aviation industry is ever changing. Major political andeconomic events as well as unexpected internal or external incidents can have a huge
Corporate
impact on company operations. The Corporate Development Office analyses potential
Development
political, economic, aviation industry, and internal Company situations that could affect the
OfficeCompany and proposes concrete response plans to reduce their impact on China Airlines’
strategic direction and annual business plan.
Safety is the most basic principle and core value of China Airlines' business operation, as
well as our responsibility and commitment to each customer. According to the Safety
Management System (SMS), the Company constructs safety risk management. Aiming at
Corporateinternal and external operation risks, such as navigation, maintenance, air service, andSafety Office ground operation, the Company maintains operational risk within the acceptable range
through continuous hazard identification and risk management, and proposes
improvement measures to effectively enhance the overall safety performance of theCompany.
The domestic and global economy affects the operating results of the Company. Primary
operating costs for airlines include interest rate, exchange rate, and fuel, and influence byoutside factors can result in significant volatility. Therefore, the Finance Division utilizes
Finance Div.
financial hedging instruments to fix the above factors within a certain range, regularly
monitors financial risk, and establishes relevant strategies and measures to effectively
manage financial risk.

2. By the end of January 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei
province in China became a pandemic. The Company has complied and continues to comply withthe travel alerts issued by the Taiwan Centers for Disease Control and has cancelled flights between
several countries like China, Hong Kong, Japan and Korea. Other flights have flexible capacity
depending on the demand. So far, the air transport services for passengers have been severely
affected. In addition to adjusting the operation, the Company also takes measures about funding
assistance, human resources, reducing expenditure, and asks the government for help in threemain areas including guarantee for its operation, relief from the burden, and a recovery plan.

7.7 Other Important Matters: None.

132 Review of Financial Conditions, Financial Performance, and Risk Management

Special Disclosure
8.1 Summary of Affiliated Companies
8.2 Private Placement Securities in the Most Recent
Years
8.3 The Shares in the Company Held or Disposed of by
Subsidiaries in the Most Recent Years
8.4 Special Notes
8.5 Situations with Major Impacts on Shareholder
Equity or Share Prices

Special Disclosure

133

VIII. Special Disclosure

8.1 Summary of Affiliated Companies

8.1.1 Basic information of Affiliated Companies
A. Affiliated Companies Chart

Dec 31, 2019

China Airlines

100%

100%

100% 100% 100% 100% 100% 93.99% 93.93% 69.45% 55% 54%

53.67% 51%

49%47.35% 25%

2.5%
2.5%

1.08%

100%

Taiwan Airport Service (Samoa)

Delica International

Dynasty Hotel of Hawaii

Dynasty Properties

51%

Note: The affiliates listed above are companies in which the company has invested and has a 50% or higher voting share, or the means tocontrol, either directly or through a subsidiary company. China Pacific Laundry Services, China Pacific Catering Services, and Nordam
Asia are joint ventures.

134 Special Disclosure

Global Sky Express

Taiwan Airport Service

Taoyuan International Airport
Services

100%

Nordam Asia

100%

China Pacific Catering Services

Kaohsiung Airport Catering
Services

Taiwan Air Cargo Terminal

China Pacific Laundry
Services

Tigerair Taiwan

Sabre Travel Network

Mandarin Airlines

Cal Hotel

CAL Park

Yestrip

Dynasty Aerotech

CAL-Asia Investment

CAL-Dynasty

Taiwan Aircraft Maintenanceand Engineering

7.72%

49%

B. Basic information of Affiliated Company
Company

Date
Founded

1. CAL-Dynasty International, Inc.

07/01/1991

1A Dynasty Properties Co., Ltd.

08/15/1973

1B Dynasty Hotel of Hawaii, Inc.

12/10/1973

2. CAL-Asia Investment Inc.

06/29/1995

3. Dynasty Aerotech InternationalCorp.

05/11/1989

4. Yestrip Co., Ltd.

01/18/2001

5. CAL Park Co., Ltd.

09/06/2006

6. CAL Hotel Co., Ltd..

01/03/2007

7. Taiwan Aircraft Maintenance andEngineering Co., Ltd.

01/16/2015

8. Mandarin Airlines, Ltd.

04/29/1991

9. Sabre Travel Network (Taiwan) Ltd.

10/09/1990

10. Tigerair Taiwan Co., Ltd.

04/21/2014

11. China Pacific Laundry Services Ltd.

09/08/1997

12. Taiwan Air Cargo Terminal Ltd.

12/22/1999

13. Kaohsiung Airport Catering
Services Ltd.
13A Delica International Co., Ltd.
14. China Pacific Catering Services
Ltd.
15. NORDAM Asia Ltd.
16. Taoyuan International Airport
Services Co., Ltd.
17. Taiwan Airport Service Co., Ltd.
17A Taiwan Airport Service (Samoa)
Co., Ltd.

Dec 31, 2019/Unit: NT$ thousands
Address

200 Continental Blvd. Suite #101 El Segundo,
CA90245, U.S.A.
200 Continental Blvd. Suite #101 El Segundo,
CA90245, U.S.A.
1830 Ala Moana Blvd. Honolulu, Hawaii 96815,
U.S.A.
Mandar House, 3rd Floor, P.O. Box 2196, Johnson’sGhut, Tortola, VG1110, Virgin Islands, British
No.6, Hangqin S. Rd., Dayuan District, Taoyuan City

Capital(Note)

Principal Activities

785,135 Holding & investing
15,015

Real estate investing, property
leasing

120,120 Hotel service
215,386 Holding & investing
77,270Aviation ground handlingservice, cleaning service

10F, No.9, Section 3, Nanjing E Rd., Zhongshan
District, Taipei City
No.1, Hangzhan S. Rd., Dayuan District, Taoyuan
City
No.1-1, Hangzhan S. Rd., Dayuan District, Taoyuan
City1,500,000

No.15, Hangqin S. Rd., Dayuan District, Taoyuan
City1,350,000 Aircraft maintenance and repair

No.3, Alley 123, Lane 405, Dunhua N. Rd.,
Songshan District, Taipei City
15F, No.57, Fuxing N. Rd., Songshan District, Taipei
City
No.1, Hangzhan S. Rd., Dayuan District, Taoyuan
City
No.7, Lane 54, Sande Street, Luzhu District,Taoyuan City
No.10-1, Hangqin N. Rd., Dayuan District, Taoyuan
City

16,000 Travel service
Real estate leasing, parking lot
management

465,000 Hotel business

2,001,825 Civil air transport
138,618 IT service & GDS
2,000,000 Civil air transport
250,000 Laundry service
2,500,000 Air cargo and storage service

09/27/1999

No.2-10, Zhongshan 4th Rd., Xiaogang District,Kaohsiung City

400,500 Catering service

05/24/2016

No.2-10, Zhongshan 4th Rd., Xiaogang District,Kaohsiung City

20,000 Catering service

08/19/1994

No.22, Lane 156, Section 2, Haishan Rd., Luzhu
District, Taoyuan City

861,000 Catering service

12/07/2017

No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City

77,500 Aircraft maintenance and repair

11/08/1978

No.15, Hangqin N. Rd., Dayuan District, Taoyuan
City

700,000

Aviation ground handlingservice

07/19/1966

3F, No.340, Dunhua N. Rd., Songshan District,Taipei City435,600

Aviation ground handlingservice

03/22/2004

TrustNet Chambers, Lotemau Centre, P. O. Box1225, Apia, Samoa

176,486 Holding & investing

8F-3, No.186, Section 4, Nanjing East Rd., Songshan
10,000 Air freight forwarder
District, Taipei City
Note: Capital was calculated using the exchange rate at the end of 2019: 1TWD=0.0333 USD, 3.6156 JPY, 0.2323 CNY.
18. Global Sky Express Ltd.

09/29/1994

Special Disclosure

135

C. Overall Description of the Industries in which Affiliated Companies (Including
Subsidiaries and Other Invested Companies) Operate
China Airlines’ affiliated companies can be divided into seven categories, each of which is highly
dependent on the Company’s operations, and include airlines, ground services, air transport support,
aerospace technology, logistics and warehousing, tourism and leisure, and investment holdings andleasing. The categories are described below:
Classification

Description

Airlines

Mandarin Airlines provides domestic and international passenger and cargo air transport services to further
capitalize on our competitive advantage in the cross-strait market. Tigerair Taiwan is tasked with operating in the
Asian low-cost carrier market to develop new business opportunities.

Ground Handling
Services

Ground services at Taiwan Taoyuan and Taitung Airports are provided by Taoyuan International Airport Services Co.,
Ltd., while those for Kaohsiung Airport and all other domestic airports are serviced by Taiwan Airport Service Co.,
Ltd. Overseas, the Company has invested in Jardine Aviation Services in Hong Kong, which serves as China Airlines’
ground handling agent in Hong Kong. Cleaning and repair ground services are provided by Dynasty Aerotech
International Corp.

Air Transport Support

The Company has invested in domestic airline reservation system operations and maintenance provider Sabre Travel
Network (Taiwan) Ltd. Overseas, the Company has invested in Singapore’s Everest Company.
In-flight catering services are provided for northern Taiwan by China Pacific Catering Services Ltd. and by Kaohsiung
Airport Catering Services in the South. Delica International Co., Ltd. is the subsidiary of Kaohsiung Airport Catering
Services.
China Pacific Laundry Services Ltd. provides laundry services for textiles and clothing used aboard aircraft andgeneral laundry services for the hospitality industry.

Logistics andWarehousing

Domestically, Taiwan Air Cargo Terminal Ltd. is responsible for providing warehousing services at Taiwan Taoyuan
Airport and Kaohsiung International Airport. In Mainland China, the Company made indirect investments in Arport
Air Cargo Terminal (Xiamen) Co., Ltd. and Arport Air Cargo Service (Xiamen) Co., Ltd.
Logistics services are provided domestically by invested companies Global Sky Express Ltd. and Chung Hwa Express
Corp. Overseas, the Company has indirectly invested in Hong Kong’s Eastern United International Logistics.

Aerospace
Technology

In the aerospace technology industry in Taiwan, the Company has invested in Taiwan Aircraft Maintenance andEngineering Ltd., which is responsible for all aspects of maintenance and repair services for Boeing 777 and 737 andAirbus A320 and A350 models; NORDAM Asia provides thrust reverser and composite material maintenance services
in the Asian region; overseas, the Company invests in Xiamen Taiko Landing Gear Co. in Mainland China, which
provides and maintains landing gear, and HAECO Composite Structures (Jinjiang) Co. Ltd., which provides composite
material maintenance. In Hong Kong, the Company invests in the China Aircraft Services Ltd., which provides aircraft
maintenance capacity.

Tourism and Leisure

Domestic investments include Yestrip and CAL Hotel Co., Ltd.. Overseas investments include an indirect investment
in Dynasty Hotel of Hawaii, Inc. in the USA and investment in Japan’s Dynasty Holidays.

Investment Holdings
and Leasing BusinessGroup

Established CAL-Dynasty International, Inc., which makes indirect investments in Chinese and American companies
engaged in real estate investments and leasing management. CAL-Asia Investment Inc. and Taiwan Airport Service(Samoa) Co., Ltd. are engaged in general investment holdings.

136 Special Disclosure

D. Directors, Supervisors, and Presidents of Affiliated Companies
Company

Title

Dec 31, 2019
Units: Shares; %Name

1. CAL-Dynasty International, Inc. Chairman
Hsieh, Su-Chien (Note 1)
Director
Wang, Chen-Min (Note 1)
Director (President) Lee, Hsien-Kuang (Note 1)
1A Dynasty Properties Co., Ltd. Chairman (President) Lee, Hsien-Kuang (Note 2)
Director
Hsieh, Su-Chien; Chang, Cheng-Hao (Note 2)
1B Dynasty Hotel of Hawaii,
Chairman
Lee, Hsien-Kuang (Note 2)
Inc.
Director
Chang, Cheng-Hao (Note 2)
Director (President) Pan, Wen-Tsung (Note 1)
2. CAL-Asia Investment Inc.
Chairman
Hsieh, Su-Chien (Note 1)
Director
Chang, Young (Note 1)
Director (President) Wang, Chen-Min (Note 1)
3. Dynasty Aerotech International
ChairmanChao, Lin (Note 1)
Corp. (Note 3)
DirectorLiu, Der-Chuan; Sun, Jia-Min; Chen, Wei-Tau (Note 1)
Supervisor
Chen, I-Chieh (Note 1)
Director (President) Lu, Yung-Nan (Note 1)
4. Yestrip Co., Ltd.
Chairman
Chou, Ling-wen (Note 1)
DirectorTong, Huai-Ming; Peng, Pao-Chu (Note 1)
Supervisor
Huang, Hui-Na (Note 1)
President
Lo, Chun-Ying (Nominated by China Airlines)
5. CAL Park Co., Ltd.
Chairman
Hsieh, Su-Chien; (Note 1)
Director
Chen, Wei-Tau (Note 1)
Supervisor
Fang, Juo-Ling (Note 1)
Director (President) Chang, Young (Note 1)
6. CAL Hotel Co., Ltd.
Chairman
Hsieh, Su-Chien; (Note 1)
Wang, Chen-Min; Kao, Shing-Hwang; Wang, Houng; Hong,Director
Tsu-Kuang (Note 1)
Supervisor
Fang, Juo-Ling; Chen, I-Chieh (Note 1)
President
Eric Rimbeuf
7. Taiwan Aircraft Maintenance
ChairmanWang, Houng (Note 1)
and Engineering Co., Ltd.
Chang, Young; Sun, Jia-Min; Lee, Jung-Hu; Wang, Chen-Min
Director(Note 1)Supervisor
Fang, Juo-Ling; Yen, Yang (Note 1)
President
Tsai, Chih Hung (Nominated by China Airlines)
8. Mandarin Airlines, Ltd.
Chairman
Hsieh, Su-Chien (Note 1)
Chang, Young; Kao, Shing-Hwang; Wang, Houng; Wang,
Director
Chen-Min; Peng, Pao-Chu (Note 1)
Supervisor
Chen, I-Chieh
Director (President) Tsao, Jyh-Fen (Note 1)
9. Sabre Travel Network (Taiwan)
ChairmanWu, Wen-Kuo (Note 1)
Ltd.
Director
Chung, Ming-Jyh; Tong, Huai-Ming; Peng, Pao-Chu (Note 1)
Director
Alan Chen (Representing Sabre Travel Network Asia Pacific)
Supervisor
Ho, Hui-Fen
President
Ouyang, Yinchi (Nominated by China Airlines)
10. Tigerair Taiwan Co., Ltd.
Chairman
Chang, Horng-Jong (Note 1)
Chang, Young; Wang, Chen-Min; Chang, Cheng-Hao; Chen,
Director
I-Chieh; Chen, Han-Ming (Note 1)
Director
Hsiao, Po Jen; Hsu, Yang Che; Jao, Shih-Chen; Yen, Sin-Hui
Independent
Chen, I-Heng(Independent director undertaking public
Director
welfare); Fan, Hung-Shu; Yang, David
President
Chang, Horng-Jong
11. China Pacific Laundry Services Chairman
Hong, Tsu-Kuang (Acting) (Note 1)
Ltd.
DirectorChu, Te-Hsiu; Chung, Wan-Chun (Note 1)
Director
Chan, Derrick (Representing Hendriz Holding)
Director
Yeung, Maggie (Representing Heathlee Int’l)Supervisor
Xu, Martin (Representing Merton Lake)
Supervisor
Chen, I-Chieh
President
Lo, Tao-Wei (Nominated by China Airlines)
12. Taiwan Air Cargo Terminal
ChairmanChen, Chong-Yi (Note 1)
Ltd.
Deputy Chairman
Chen, Charles C.Y. (Representing Eyon Industrial Co.)
Director
Wang, Chen-Min; Chang, Cheng-Hao; Liu, Der-Chuan (Note 1)
Director
UPS

Shareholding
Shares2,614,500(USD10, share)

%
100

5,000
(USD100, share)100

400,000

100(USD10, share)
7,172,346(USD1, share)

100

77,270100

1,600,000

100

150,000,000

100

46,500,000

100

135,000,000

100

188,154,025

93.99

13,021,042

93.93

609,000

4.39

138,906,275

69.45

13,750,000

55

3,750,000
3,750,000
3,750,000

15
15
15

135,000,000

54

6,000,000

2.40

20,000,000

8Special Disclosure

137Company

13. Kaohsiung Airport Catering
Services Ltd.

Title
Director
Supervisor
Supervisor
President

Michael Shea (Representing Hsin Feng Corp.)
Ho, Hui-Fen
Chen, Jyi-Fu (Representing Express Container Terminal Corp.)
Lin, Hsiao-Feng (Nominated by China Airlines)

Chairman

Chang, Young (Note 1)

Director

Supervisor
President

Chung, Wan-Chun; Wang, Wei (Note 1)
Lin, Jyh-Jong; Tsai, Ta-Wei (Nominated by Uni Airways
Corporation)Han, Lan-Ping (Nominated by Evergreen International
Corporation)
Yen, Yang
Lee, Ho-Yuan
Lee, Ho-Yuan (Nominated by Kaohsiung Airport Catering
Services)
Lin, Jyh-Jong (Nominated by Kaohsiung Airport Catering
Services)
Tokuyama, Keiichi; Tokuyama, Keisuke (Nominated by F. TEC
Co., Ltd)
Lai, Li-Chao; Araki, Osamu
Eguchi, Kenichi

Chairman

Yeh, Chu-Lan (Note 1)

Director
Director
Supervisor
Supervisor
President
ChairmanHong, Tsu-Kuang; Chung, Wan-Chun (Note 1)
Wong, Andy; Yau Algernon (Representing Aldeburgh Limited)
Fang, Juo-Ling
Xu, Martin (Representing Deli Holdings Limited)
An, Long-Chi (Nominated by China Airlines)
T. Hastings Siegfried (Nominated by The NORDAM Group)

Deputy Chairman
Director

Wang, Houng (Note 1)
Li, Chih-Wei (Note 1)
J.Terrell Siegfried, Jamie Lane (Nominated by the NORDAM
Group)
Ralph McDavidWang, Wei

Director
Supervisor
Supervisor
President
13A. Delica International Co.,
ChairmanLtd
Director
Director

14. China Pacific Catering
Services Ltd.

15. NORDAM Asia Ltd.

Director
Supervisor
Supervisor
16. Taoyuan International Airport
ChairmanServices Co., Ltd.
Director (President)

Director
Supervisor
Chairman

Chang, Young (Note 1)

Director (President)
DirectorPeng, Long-Min (Note 1)
Chang, Cheng-Hao (Note 1)
Chung, Ting-Chun (Representing juridical person shareholder
Rih Hsin Asset Management Company)
Chang, Chieh-Tang (Representing Goldsun Building Materials)
Fang, Juo-Ling
Chen, Yao-Ming

Director

Director
Director
Supervisor
Supervisor
17A Taiwan Airport Service(Samoa) Co., Ltd.
18. Global Sky Express Ltd.

Kuo June-Tsung (Representing Motc)
Lee, Chih-Chiang (Note 1)
Hsieh, Su-Chien; Chang, Young; Wang, Houng; Chu, Te-Hsiu(Note 1)
Chen, Yen-Po; Chang, Chang-Chi; Li, Hung-Sheng; Lee,
Chun-Hsiung (Representing Motc)
Hung, Ngai (Representing UPS)
Li, Mi; Li, Shen-Yi

Director

17. Taiwan Airport Service
Co., Ltd.

Name

Authorized Signatory Chang, Young (Representing Taiwan Airport Service Co.)
Chairman
Director
Director
Director
Director
Director
Director
Supervisor
Supervisor
Supervisor
President

Li, Chung-Hui
Liu, Der-Chuan; Shann, Da-Sin; Chang, Cheng-Hao (Note 1)
Pao, Hsueh-Chao
Huang, Nan-Sheng
Wei, Ching-Li
Hsiao, Yu-Hsin
Chung, Mei-Chih (Representing Leader Mutual Freight System)
Huang, Hui-Na
Yeh, Chien-Tien
Chiang, Ming-Fang (Representing Morrison Express)
Hwang, Chun-Chyuan (Nominated by China Airlines)

Note 1: Representative of juridical person shareholder China Airlines.
Note 2: Representative of juridical person shareholder CAL-Dynasty International, Inc.

138 Special Disclosure

Shareholding
Shares7,000,000%
2.80

15,000,000

621,494,637

53.67

16,178,945

40.40

10,0000.02

1,020,000

51

980,000

49

43,911,000

51

21,045,500

24.50

21,045,500

24.50

3,952,500

51

3,797,500

49

31,500,000

45

34,300,000

49

4,200,000

6

20,626,644

47.35

9,405,300

21.59

7,405,200

17

5,876,976(USD1, share)
50,000250,000
40,00050,00020,00020,00020,000100

10,00050,000

1
5

5
25
4
5
2
2
2

E. Affiliated Company Business Overview

Dec 31, 2019
Unit: NT$ thousands; EPS=NT$

Capital

Total
Assets

1. CAL-Dynasty International, Inc.

785,135

1,451,427

174,881

1,276,546

1A Dynasty Properties Co., Ltd.

15,015745,297

238,802506,496

1B Dynasty Hotel of Hawaii, Inc.

120,120524,683

96,567428,116

215,386

559,5620

559,562

77,270210,237

114,567

95,670Company

2. CAL-Asia Investment Inc.
3. Dynasty Aerotech International
Corp.

Total
Liabilities

Total
EquityOperating
Revenue

Operating
Income (Loss)

Profit(Loss)

363,339

51,974

41,262

15.78

101,661

28,191

19,4683,893.54

262,051

20,698

14,20435.51

0(1,189)30,8204.30

400,060

22,08917,008220.12

EPS (Dollars)

4. Yestrip Co., Ltd.

16,00067,653

42,48025,17331,652

(684)

(480)

(0.30)

5. CAL Park Co., Ltd.

1,500,000

5,429,229

3,923,450

1,505,779

345,569

66,268

1,163

0.008

6. CAL Hotel Co., Ltd..

465,000

769,916

291,890478,026

617,826

22,166

16,7870.36

1,350,000

3,515,478

2,593,492

921,986

31,717(178,019)(206,151)(1.53)

2,001,825

7,557,633

5,948,601

1,609,032

8,607,182

118,378

204,018

1.02

138,618

612,793

122,840

489,953

388,315

236,096

195,34714.09

2,000,000 13,337,093 10,534,749

2,802,344

9,513,321

1,087,316

808,718

4.04

7. Taiwan Aircraft Maintenance andEngineering Co., Ltd.
8. Mandarin Airlines, Ltd.
9. Sabre Travel Network (Taiwan)Ltd.
10. Tigerair Taiwan Co., Ltd.
11. China Pacific Laundry Services
Ltd.
12. Taiwan Air Cargo Terminal Ltd.
13. Kaohsiung Airport Catering
Services Ltd.
13A Delica International Co., Ltd.
15. China Pacific Catering Services
Ltd.
16. NORDAM Asia Ltd.
17. Taoyuan International Airport
Services Co., Ltd.
18. Taiwan Airport Service Co., Ltd.
18A Taiwan Airport Service(Samoa) Co., Ltd.
19. Global Sky Express Ltd.

250,000

383,41076,962306,448257,661

33,761

27,3271.09

2,500,000

4,980,713

2,169,708

2,811,005

2,030,229

361,916

271,552

1.09

400,500

1,419,764

476,446

943,318

2,186,765

360,827

292,632

7.31

20,00015,646219

15,427

0

(1)

(4)

0.003

861,000

2,995,989

1,425,262

1,570,727

3,072,795

632,111

511,121

5.94

77,50077,314

145

77,169

0

(152)

(144)

(0.02)

700,000

2,890,698

1,386,116

1,504,582

3,430,485

342,970

291,5224.16

435,600

1,415,951

832,774

583,177

1,117,038

158,607

156,861

3.60

176,486

347,5510347,551

0(11)

23,1073.93

10,00036,442

7,266

29,176

121,543

7,987

6,392

6.39

Note 1: Capital, total assets, total liabilities, total equity were calculating using the exchange rate at the end of 2019.
Note 2: Operating revenue, operating profit, and income for the period were calculated using the 2019 quarterly average exchange rates.
Note 3: Exchange rates at the end of 2019 were 1TWD=0.0333 USD, 3.6156 JPY, 0.2323 CNY.
Note 4: Quarterly average exchange rates in 2019 were as following:
Q1: 1TWD=0.0325USD, 3.5784JPY, 0.2196CNY.
Q2: 1TWD=0.0321USD, 3.5542JPY, 0.2183CNY.
Q3: 1TWD=0.0321USD, 3.4490JPY, 0.2235CNY.
Q4: 1TWD=0.0326USD, 3.5453JPY, 0.2304CNY.

(2) Affiliated Company Consolidated Financial Statements: Information required
to be disclosed regarding affiliated company consolidated financial
statements is included in Appendix 1 Consolidated Financial Statements. The
Company will no longer prepare a separate consolidated financial statement
for affiliated companies.
(3) Relationship Report: China Airlines is not the subsidiary of any company, so a
relationship report is not required.

Special Disclosure1398.2 Private Placement Securities in the Most Recent Years: None.
8.3 Shares in the Company Held or Disposed of by Subsidiaries in the
Most Recent Years:
Company

Dynasty
AerotechInternational
Corp.
Mandarin
Airlines, Ltd.

Capital77,270,000

2,001,825,000

Date of
SourceStake inAcquisition orof Funds Subsidiary(%)
Disposal

EquityFund

EquityFund

100%

93.99%

Number of
Shares andValue of
StocksAcquired

APR 25, 2020
Units: NT$; shares; %Number of
Number of Shares
Amount of
Shares andand Value of Stock
Company
Investment
Value ofHeld as of theEndorsement
Gain/Loss
StocksPrinting Date of this /Guarantee of
Disposed ofReportSubsidiary

02/20/2020

-

152

220

02/21/2020-

300,000

485,539

02/25/2020-

300,000

398,925

02/26/2020-

214,000

270,365

-

-

-

-

0 shares0-2,074,628 shares
14,585,000-

Note: No subsidiary has a Company stock pledge nor has the Company lent money to any subsidiary.

8.4 Special Notes: None.
8.5 Situations with Major Impact on Shareholder Equity or Share
Prices:8.5.1 Change in the chairman of the board, general manager, or one-third or
more of the directors of the Company.
On April 2, 2019, the Company dismissed Mr. Ho, Nuan-Hsuan as juridical person director
representative of the China Aviation Development Foundation in the Company. The Board of
Directors of the Company elected Mr. Hsieh, Su-Chien as the new Chairman and concurrently
as the President.

8.5.2 Signing of major memoranda, strategic alliances or other plans forbusiness cooperation or major contracts
A.On January 21, 2019, the Company approved the listing plan of its subsidiary, Tigerair Taiwan,
by a resolution of the Board of Directors. Since its establishment in 2014, Tigerair Taiwan has
developed into a Low Cost Carrier (LCC) with a stable business model and sound financial
structure. Considering the benefits of convenient fund raising in the future, financial
autonomy and equity value enhancement, the Board of Directors resolved to carry out thelisting plan of Tigerair Taiwan.
In order to meet the requirements of listing review standards, the Board of Directors
deliberated and resolved on May 8, 2019 to sell equity shares of Tigerair Taiwan held by theCompany, and submitted it to the Shareholders' Annual General Meeting for deliberation
and resolution on June 25 of the same year.
B. On June 19, 2019, the Company began negotiations with Airbus (France) to purchase
A321neo aircrafts. In order to lock-in the delivery time, the Company signed a memorandumof agreement and continued to discuss business conditions.
C. On December 31, 2019, the Company renewed its housing and land lease contract with
Taiwan Air Cargo Terminal Ltd.

140 Special Disclosure

8.5.3 Lawsuits, non-contentious matters, administrative actions, administrative
disputes, injunctive procedures, or compulsory enforcement matters
A. The Taoyuan Union of Pilots announced that it would go on strike at 6:00 a.m. on February 8
and that the strike would last until February 14. Under the witness of the Executive Yuan, theMinistry of Labor, the Ministry of Transportation and Communications, and the Taoyuan City
Government, the Company reached an agreement with the Taoyuan Union of Pilots throughthe labor-management conference and signed the collective agreement. The union
immediately announced the termination of the strike. The compensation for customers’
losses and various derivative expenses was preliminarily estimated to be around NT$154
million. According to the fifth appeal of the Agreement between the two parties, it waspromised that the full salary of the 13th month will be changed to a flight safety bonus. The
amount of the bonus was agreed to at the negotiation meeting on February 21. It wasestimated that the annual expenditure will increase by around NT$190 million.
B. The Department of Labor of the Taoyuan City Government performed a labor inspection. On
February 25, 2019, June 21, 2019, and December 4, 2019, the Company was fined NT$1
million in each instance because female worker nighttime work had not been approved by
the labor union, which was in violation of Article 49, Paragraph 1 of the Labor Standards Act.
C. On October 2, 2019, the Department of Finance of the Taoyuan City Government imposed afine of NT$6 million on the Company for violating Article 46, Paragraph 1 of the Tobacco andAlcohol Administration Act. The Company will implement and follow relevant laws andregulations and strengthen the legal education of its employees

8.5.4 Lawsuits, non-contentious matters, administrative actions, administrative
disputes, injunctive procedures, or compulsory enforcement matters
A. On July 26, 2019, the Company cooperated with the inspection and investigation unit to
conduct investigation on the sale of duty-free cigarettes on chartered flights of theCompany.
B. In response to the COVID-19 pandemic, the Company and its group members have improved
their pandemic prevention measures and adjusted the service content of catering andsupplies for mainland-Taiwan air routes and Hong Kong-Macau-Taiwan air routes startingfrom January 28, 2020; The main consideration is to reduce personnel contact and reduce
the unnecessary use of re-used products and use disposable products instead. At the sametime, we also encourage passengers to bring their own products, such as environmental
protection cups, to reduce the risk of infection. And in addition to the normal disinfection
procedures for all cross-strait, Hong Kong and Macao flights arrival to Taiwan, thedisinfection of the dining trays, handrails and overhead luggage cabinets in the cabin are
carried out to maintain the health of passengers and crew members.

Special Disclosure

141

142
Opinionwith the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports andWe conducted our audits in accordance with the Regulations Governing Auditing and Attestationof Financial Statements by Certified Public Accountants and auditing standards generally acceptedin the Republic of China. Our responsibilities under those standards are further described in the
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of ourreport. We are independent of the Group in accordance with The Norm of Professional Ethics for
Certified Public Accountant of the Republic of China, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Hsieh, Su-Chien

March 18, 2020

-1-

Basis for Opinion

By

CHINA AIRLINES, LTD.

Very truly yours,-2-

Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements for the year ended December 31, 2019. These
matters were addressed in the context of our audit of the consolidated financial statements as awhole, and in forming our opinion thereon, and we do not provide a separate opinion on thesematters.

Key Audit Matters

In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, andits consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers, and International Financial Reporting Standards (IFRS), International AccountingStandards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued
into effect by the Financial Supervisory Commission of the Republic of China.

affiliates.

subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements ofstatements of affiliates has all been disclosed in the consolidated financial statements of parent and

Financial Statements.” Relevant information that should be disclosed in the consolidated financial

and subsidiary companies as provided in International Financial Reporting Standard 10 “Consolidated

all the same as the companies required to be included in the consolidated financial statements of parent

We have audited the accompanying consolidated financial statements of China Airlines, Ltd. andits subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance
sheets as of December 31, 2019 and 2018, and the consolidated statements of comprehensive
income, changes in equity and cash flows for the years then ended, and the notes to theconsolidated financial statements, including a summary of significant accounting policies.
(collectively referred to as the “consolidated financial statements”)

The Board of Directors and Shareholders
China Airlines, Ltd.

The companies required to be included in the consolidated financial statements of affiliates in accordanceConsolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2019 are

INDEPENDENT AUDITORS’ REPORTDECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES(Appendix 1)

143

We understood and tested the effectiveness of the information system related to the process ofpassenger revenue.

We sampled several flight tickets, which were flown and recognized as revenue, to verify
whether the boarding date matched the date recorded on the tickets, from advanced sales
tickets.

2.

3.

1.

-3-

We understood and tested the effectiveness of the information system related to the calculationof lease liabilities.

The main audit procedures that we performed included the following:

China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes, fifteen
A330-300 planes, fifteen 737-800 planes, ten A320-200 planes, six ERJ190 planes and three
ART72-600 planes for operation. Because the lease term of aircraft is higher and the amount ofrental is higher, the percentage of right-of-use assets and lease liabilities of the aircraft in the
consolidated balance sheets is high. The parameters and lease terms are determined by the
management, and the calculation of the lease liabilities will affect the carrying amount anddepreciation expense of the right-of-use assets and lease liabilities (including financial liabilities forhedging) relating to aircrafts. Therefore, we identified initial application of IFRS 16 - Aircrafts as a
key audit matter.

In accordance with IFRS 16 “Leases”, aircraft leases initially classified as finance leases under IAS
17 should be recognized as Right-of-use assets and lease liabilities in the consolidated balances
sheet. As of December 31, 2019, the carrying amount of Right-of-use assets and lease liabilities(including financial liabilities for hedging) relating to aircraft leases are NT$62,052,701 thousand
and NT$60,114,778 thousand, respectively. Refer to Notes 4 and 21 to the accompanying
consolidated financial statements for related detailed information.

Initial Application of IFRS 16 (Leases) - Aircraft

We understood and tested the internal control related to the process of revenue from passenger,
including manual and automatic control.

1.

The main audit procedures that we performed included the following:

Since relevant sales can only be recognized as passenger revenue when passengers actuallyboarded, confirmation from each passenger holding the ticket who actually boarded involves acomplicated process; therefore, we identified passenger revenue recognition as a key audit matter.

In accordance with IFRS 15 “Revenue from Contracts with Customers”, passenger sales areaccounted for as contract liabilities before relevant transportation services are provided. After
providing the related services, contract liabilities are reclassified to passenger revenue. For the year
ended December 31, 2019, passenger revenue was NT$111,413,435 thousand. Refer to Notes 4 and
27 to the accompanying consolidated financial statements for related detailed information.

Passenger Revenue Recognition

The key audit matters in the audit of the consolidated financial statements of the Group are statedbelow:We selected one of the rental payments schedule of the aircraft from the lease calculation
system, to recalculate amount of the lease liabilities balance and financial cost andamortization of right-of-use, and related carrying amount. Also, we selected several aircraft
lease contracts from the carrying amounts of aircraft lease liability, and checked if there wasany difference between rental in the aircraft rental payment schedule and lease term in thecontracted rentals. And we checked if the lease term used the rental payment schedule wasconsistent with the contract.

-4-

Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditors’ report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with the auditing standards
generally accepted in the Republic of China will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Those charged with governance, including the audit committee and supervisors, are responsible foroverseeing the Group’s financial reporting process.

In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends toliquidate the Group or to cease operations, or has no realistic alternative but to do so.

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with the Regulations Governing the Preparation of Financial Reports by
Securities Issuers, and International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC)
endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China,
and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or
error.

Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements

We have also audited the parent company only financial statements of China Airlines, Ltd. as ofand for the years ended December 31, 2019 and 2018 on which we have issued an unmodified
opinion.

Other Matter Parent Company Only Financial Statements

As of December 31, 2019, total assets of these subsidiaries amounted to NT$13,337,093 thousand
dollars, representing 4.55% of the total assets. For the year ended December 31, 2019, revenue
from these subsidiaries amounted to NT$9,513,321thousand dollars, representing 5.65% of thetotal revenue.

We did not audit some subsidiaries which were included in the consolidated financial statements.
The financial statements and disclosed information were audited by other independent auditors, andour audit opinion is based solely on the audit report of other independent auditors.

Other Matter Audit by Other Independent Auditors

2.

144

Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditors’ report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Group to cease to continue as a going concern.

2.

3.

4.

Obtain sufficient and appropriate audit evidence regarding the financial information of entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision, and performance of the groupaudit. We remain solely responsible for our audit opinion.

-5-

From the matters communicated with those charged with governance, we determine those mattersthat were of most significance in the audit of the consolidated financial statements for the year
ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our
auditors’ report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.

We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.

We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.

6.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.

1.

As part of an audit in accordance with the auditing standards generally accepted in the Republic ofChina, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:

Notice to Readers-6-

For the convenience of readers, the independent auditors’ report and the accompanying
consolidated financial statements have been translated into English from the original Chineseversion prepared and used in the Republic of China. If there is any conflict between the English
version and the original Chinese version or any difference in the interpretation of the two versions,the Chinese-language independent auditors’ report and consolidated financial statements shallprevail.

The accompanying consolidated financial statements are intended only to present the consolidated
financial position, financial performance and cash flows in accordance with accounting principles
and practices generally accepted in the Republic of China and not those of any other jurisdictions.
The standards, procedures and practices to audit such consolidated financial statements are thosegenerally applied in the Republic of China.

March 18, 2020

Deloitte & Touche
Taipei, Taiwan
Republic of China

The engagement partners on the audit resulting in this independent auditors’ report are Jui-Chan
Huang and Shiuh-Ran, Cheng.

145

The accompanying notes are an integral part of the consolidated financial statements.

TOTAL

Total equity

NON-CONTROLLING INTERESTS (Note 26)

Total equity attributable to owners of the Company

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 20 and 26)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficits)
Total retained earnings
Other equity
Treasury shares

-7-

1
21
100

$ 293,047,979

20

56,553,772
3,578,345-

466,416
12,967(1,777,225)(1,297,842)
1,196,233(43,372)

60,132,117

19
1

54,209,846
2,488,907

79

232,915,862$ 230,136,582

60,047,084

2,965,512

57,081,572

351,923
118,810
1,144,928
1,615,661
58,223(43,372)

54,209,846
1,241,214

170,089,498

109,139,606

53

156,564,335

Total non-current liabilities

60,949,892

221
560
1,594,487
532,815
14,146,198
164,181
321,075
19,546,455
4,445,900
15,709,487
633,398
3,855,115

Total liabilities

26

76,351,527$

28,473,710
60,686,148
1,903,665
8,473,464
188,447
2,945
8,803,382
607,845

3
1
5
1
7
3
5
1

380,000
11,7498,618,506
1,495,606
542,015
13,187,972
374,178
2,340,873
360,393
21,060,773
10,000,000
14,148,892
3,830,570$ 230,136,582

177,309,022

82
100

132,191
2,200,149
163,107,718
2,075,345
1,210,796
5,152,070
3,430,753

52,827,560$ 24,937,537
206,001
3,856,660
32,906
10,038,528
9,043
879,191
18,9488,654,710
46,154
4,147,882

2018
Amount

1
50
24
1
2
4

18

10
1
3
3
1

%

15
8
18
1
3
5
3
-

$

$ 293,047,979

241,225,637

209,221
105,586
2,223,793
145,886,971
71,033,617
2,075,068
1,182,692
5,337,626
13,171,063

51,822,342$ 28,459,528
512,192
2,355,095
9,626
8,520,834
10,348774,206
54,6898,470,113
2,655,711

2019
Amount42,420,205
22,052,625
53,514,891
2,236,311
10,011,464
557,142
15,801,724
9,435,035
534,938

NON-CURRENT LIABILITIES
Derivative financial liabilities for hedging - non-current (Notes 3, 4, 21 and 33)
Bonds payable - non-current (Notes 4, 20, 27 and 32)
Loans and debts - non-current (Notes 19, 32 and 35)
Contract liabilities - non-current (Notes 4 and 23)
Provisions - non-current (Notes 4 and 24)
Deferred tax liabilities (Notes 4 and 29)
Lease liabilities - non-current (Notes 3, 4, 21 and 25)
Capital lease obligations - non-current (Notes 4, 21, 32 and 35)
Accrued pension costs (Notes 4, 5 and 25)
Other non-current liabilities (Note 32)

Total current liabilities

CURRENT LIABILITIESShort-term debts (Note 19)
Financial liabilities at fair value through profit or loss - current (Notes 4, 5, 7 and 32)
Financial liabilities for hedging - current (Notes 4, 21 and 32)
Notes and accounts payable (Note 32)
Accounts payable - related parties (Notes 32 and 33)
Other payables (Notes 22 and 32)
Current tax liabilities (Notes 4 and 29)
Lease liabilities - current (Notes 3, 4 and 21)
Provisions - current (Notes 4 and 24)
Contract liabilities - current (Note 23)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 20, 27 and 32)
Loans and debts - current portion (Notes 19, 32 and 35)
Capital lease obligations - current portion (Notes 4, 21, 32 and 35)
Other current liabilities (Note 33)

LIABILITIES AND EQUITY

TOTAL

Total non-current assets

NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 8 and 32)
Financial assets at amortized cost (Notes 4 and 9)
Investments accounted for using the equity method (Notes 4 and 14)
Property, plant and equipment (Notes 4, 5, 15 and 35)
Right-of-use assets (Notes 4, 21 and 35)
Investment properties (Notes 4 and 16)
Other intangible assets (Notes 4 and 17)
Deferred income tax asset (Notes 4, 5 and 29)
Other assets - non-current (Notes 18, 21, 32 and 34)

Total current assets

CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6, 19 and 33)
Financial assets at fair value through profit or loss - current (Notes 4, 7 and 32)
Financial assets at amortized cost (Notes 9 and 32)
Financial assets for hedging - current (Notes 4 and 32)
Notes and accounts receivable, net (Notes 4, 10 and 32)
Notes and accounts receivable - related parties (Notes 32 and 33)
Other receivables (Notes 4 and 32)
Current tax assets (Notes 4 and 29)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4, 5 and 12)
Other assets - current (Notes 6 and 18)

ASSETSCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

100

26

1

25

1
1
-

24
-

74

47

12
26
1
4
4
-

27

1
6
9
2
7
2

100

77

1
71
1
1
2
1

23

11
2
4
4
2

%

-8-

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:(Loss) gain on hedging instruments subject tobasis adjustment (Notes 4, 27 and 33)
Unrealized gain on investments in equity
instruments designated as at fair value throughother comprehensive income (Note 8)
Remeasurement of defined benefit plans (Notes 4
and 26)
Share of other comprehensive loss of associates
and joint ventures accounted for using theequity method (Notes 4, 15 and 31)
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 28)

NET (LOSS) INCOME--(32,102)145,166(607,042)

-

-

-

-

-

-

(781,793)

79,392(17,705)(675,002)

578,185

INCOME TAX EXPENSE (Notes 4, 5 and 29)(2,762,638)

Total non-operating income and loss

(96,817)-332,305

PRETAX PROFIT (LOSS)(2)(473,812)(3,340,119)(2)-

718,988

2

8

10

90

100

%

NON-OPERATING INCOME AND LOSS
Other income (Notes 4, 8 and 27)
Other gains and losses (Notes 10, 12, 14, 15, 27
and 31)
Finance costs (Notes 9, 27 and 32)
Share of the profit of associates and joint ventures(Note 14)2,665,821

14,021,107

OPERATING EXPENSES (Notes 4, 25 and 27)
OPERATING PROFIT

16,686,928

151,757,232$ 168,444,160

GROSS PROFITCOSTS (Notes 4, 9, 11, 17, 24, 25, 27 and 34)

REVENUE (Notes 4, 27 and 34)

2019
AmountCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

-

-

-

-

1

1

2

-

-

(1)

1

2

8

10

90

100

%

187,881(672,413)(Continued)(33,242)(851,866)

930

23,8842,272,684

808,565

3,081,249(941,134)

367,246(534,848)(1,379,985)

606,453

4,022,383

13,185,148

17,207,531

153,504,076$ 170,711,607

2018
Amount146-(268,871)
1,069,800$$(0.22)(0.22)(212,244)

$
-

-

-

(1)
1

-

-9-

The accompanying notes are an integral part of the consolidated financial statements.

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 30)
Basic
Diluted(647,085)
434,841$(675,002)$

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests(1,199,798)
524,796$

NET INCOME ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests(212,244)--

1,411,623

462,758-%(72,952)$$

TOTAL COMPREHENSIVE (LOSS) INCOME FOR
THE YEAR

Other comprehensive gain (loss) for the year,
net of income tax

Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 27)
Gain on hedging instruments not subject to basis
adjustment (Notes 4, 27 and 33)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 28)

2019
AmountCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

$

$

$

$

$

$

$
$

-

-

-

-

1

1
-

1

1
-

1

%

(Concluded)

0.33
0.32

1,694,321

1,258,035
436,286

2,272,684

1,790,361
482,323

1,694,321(578,363)(17,858)
94,05085,341

26,5672018
Amount

-

-

-

-

-

-

Changes in capital surplus from dividends distributed tosubsidiaries

Net income for the year ended December 31, 2018

Other comprehensive income (loss) for the year ended
December 31, 2018, net of income tax

Total comprehensive income for the year ended
December 31, 2018

Gain or loss on non-controlling interest

Treasury shares acquired

-

-

-

-

-

-

-

-

Changes in capital surplus from dividends distributed tosubsidiaries

Actual disposal of interests in subsidiaries

Net profit (loss) for the year ended December 31, 2019

Other comprehensive income (loss) for the year ended
December 31, 2019 net of income tax

Total comprehensive income (loss) for the year ended
December 31, 2019

Cash dividends from subsidiaries paid to non-controllinginterests

Non-controlling interests arising from acquisition ofsubsidiaries

Loss of control of subsidiaries

The accompanying notes are an integral part of the consolidated financial statements.

$ 54,209,846-

Appropriation of 2018 earnings
Legal reserve
Special reserve
Cash dividends - $0.20960737 per share

BALANCE AT DECEMBER 31, 2019-54,209,846-

Basis adjustment to loss on hedging instruments

BALANCE AT DECEMBER 31, 2018

Cash dividends from subsidiaries paid to non-controllinginterests(500,000 )-Appropriation of 2017 earnings
Legal reserve
Special reserve
Cash dividends - $0.2181820086 per share

Treasury shares retired--

Basis adjustments to gain on hedging instruments

54,709,846-$ 54,709,846

Issuance of convertible bonds

BALANCE AT JANUARY 1, 2018 AS RESTATED

Effect of retrospective application and retrospective
restatement

BALANCE AT JANUARY 1, 2018

Share Capital

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

147

$

$

466,416-

2,488,907

-

-

-

-

-

-

-

114,493--351,923

-

-

-

-

-

-

-

-

145,831---206,092-

206,092-$$

Legal Reserve

-

-

-

-

-

1,247,087

606

-

-

1,241,214-

30,607

-

-

-

-

-

630

-

-

409,978

799,999-

799,999

Capital Surplus$$

12,967

-

-

-

-

-

-

-

-

(105,843 )--

118,810

-

-

-

-

-

-

-

-

118,810
-

-

-

-

-

-

Special Reserve

Retained Earnings

-

-

-

(1,777,225 )(577,427 )(1,199,798 )--(114,493 )
105,843(1,136,278 )-

1,144,928

-

-

-

-

1,144,866(645,495 )

1,790,361-(145,831 )(118,810 )(1,193,670 )--

1,458,373

60

1,458,313$ (1,777,225 )$UnappropriatedEarnings(Accumulated
Deficits)$$- 10 -(54,707 )

8,368

-

-

(53,411 )(53,411 )

-

-

-

-

-

(9,664 )

-

-

-

-

25,322

25,322

-

-

-

-

-

(34,986 )-(34,986 )Exchange
Differences on
Translating
Foreign Operations

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(1,774 )1,774

Unrealized Gain
(Loss) on
Available-for-saleFinancial Assets

Equity Attributable to Owners of the Company$$

107,262105--

64,53864,538

-

-

-

-

-

42,619

-

-

-

-

268

268

-

-

-

-

-

42,35142,351-Other Equity
Unrealized Gain on
Financial Asset atFair Value
Through Other
Comprehensive
Income

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

74,429(74,429 )Cash Flow Hedges$$

1,143,678---

1,119,013

1,119,013

-

-

-

-

(603 )

25,268----87,57987,579---12,118-(74,429 )(74,429 )-Gain (Loss) on
Hedging
Instruments$$(43,372 )

-

-

-

-

-

-

-

-

-

-

(43,372 )-469,393(469,393 )

-

-

-

-

-

-

-

-

(43,372 )-(43,372 )Treasury Shares
Held by
Subsidiaries$ 56,553,772

8,473

-

-

(647,085 )

552,713(1,199,798 )

1,247,087

606(1,136,278 )(603 )

57,081,572--(469,393 )-

1,258,035(532,326 )

1,790,361

630(1,193,670 )

12,118409,978

57,063,874

40,637$ 57,023,237

Total

$

$

3,578,345(24,957 )(416,438 )

611,841

434,841(89,955 )524,796

7,546

-

-

-

2,965,512(171,019 )--

565,963436,286(46,037 )482,323

-

-

-

-

2,134,282-

2,134,282

Non-Controlling
Interests

Total Equity$ 60,132,117(16,484 )(416,438 )

611,841(212,244 )

462,758(675,002 )

1,254,633

606(1,136,278 )(603 )

60,047,084(171,019 )-(469,393 )

565,963

1,694,321(578,363 )

2,272,684

630(1,193,670 )

12,118409,978

59,198,156

40,637$ 59,157,519

148
$

$

2018

- 11 -

CASH FLOWS FROM OPERATING ACTIVITIES(Loss) Income before income tax
Adjustments for operating activities:
Depreciation expenses
Amortization expenses
Expected credit loss recognized on trade receivables
Net gain on fair value changes of financial assets and liabilities held
for trading
Interest income
Dividend income
Share of profit of associates and joint ventures(Gain) loss on disposal of property, plant and equipment
Gain on disposal of investments accounted for using the equity
methodLoss on disposal of non-current assets held for saleImpairment loss on non-current assets held for saleImpairment loss recognized on property, plant, equipment
Loss on inventories and property, plant and equipment
Net (gain) loss on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized on sale - leasebacks
OthersAmortization of unrealized gain on sale-leasebacks
Changes in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities mandatorily classified as at fair value throughprofit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash generated from operations
Interest received
Dividends received
19,325,083
191,979
49,824(11,168)(330,710)(9,603)(367,246)
270,597(450,195)
368,992
75,43750,000623,022298,787
1,379,985
3,386,052(13,888)269,682(9,359)(1,304,948)
253,540(100,400)(288,941)
15,763
993,434(97,753)535,2113,256,101(3,310,089)
73,958(205,340)
2,698
28,001,754
301,465
228,636(Continued)(27,580)(417,446)(21,422)(332,305)(32,460)(7,656)
10,462572,026(59,987)
3,340,119
4,608,924
103,775(1,484)(278,741)
11,5281,564,298
66,538(49,138)(118,317)
548,156(14,326)(224,931)(832,288)
1,847,286(2,799,314)
202,815(149,678)(5,155)40,230,615
401,190355,3113,081,249

32,601,400
198,237
24,096(96,817)- 12 -EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESNet cash used in financing activities

CASH FLOWS FROM FINANCING ACTIVITIESPayments for buy-back of ordinary shares
Decrease in short-term debts
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds from long-term borrowings
Repayments of long-term borrowings and capital lease obligations
Repayments of the principal portion of lease liabilities
Proceeds from guarantee deposits received
Refunds of guarantee deposits received
Proceeds from sale - leasebacks
Dividends paid to owners of the Company
Cash dividends paid to non-controlling interests

Net cash used in investing activities

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of amortized cost financial assets
Disposal of amortized cost financial assets
Proceeds from disposal of non-current assets held for sale
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in long-term lease receivable
Increase in computer software costs
Decrease in restricted assets
Proceeds from disposal of associates accounted for using the equity
methodProceeds from acquisition of joint ventures accounted for using theequity method
Net cash outflow on disposal of subsidiaries (Note 31)
Acquisition of subsidiaries (Note 30)

Net cash generated from operating activities

Interest paid
Income tax paid

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

2019

CHINA AIRLINES, LTD. AND SUBSIDIARIESCHINA AIRLINES, LTD. AND SUBSIDIARIES

136,769(35,525)(17,413)-(336,941)(17,614,558)

380,000
3,500,000(4,445,900)
9,078,690(17,819,750)(11,692,310)
180,360(149,198)
4,905,660(1,135,672)(416,438)(8,231)(Continued)(4,386,909)(469,393)(120,000)
10,512,000(2,700,000)
18,285,457(28,587,288)
126,578(70,204)(1,193,040)(171,019)(20,279,612)-

1,866,474(16,053,122)(3,460,496)
1,621,546
688,427(4,608,600)
333,284(265,335)
391,487(14,991,412)(785)(184,223)
59,72627,026,957$ (1,319,690)(185,208)2018(2,089,871)
3,447,202
35,692(3,316,078)
71,194(440,443)
218,547(15,658,898)(172,639)
38,63637,526,612$ (3,124,960)(335,544)

2019

149

24,937,537

3,521,991$ 28,459,528$- 13 -

The accompanying notes are an integral part of the consolidated financial statements.

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

NET INCREASE IN CASH AND CASH EQUIVALENTS
22,585,332

2,352,205(Concluded)$ 24,937,537

$

2018

- 14 -The Group elected to apply the guidance of IFRS 16 in determining whether contracts are, or contain, alease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as
containing a lease under IAS 17 and IFRIC 4 are not be reassessed and accounted for in accordancewith the transitional provisions under IFRS 16.

Definition of a lease

IFRS 16 provides a comprehensive model for the identification of lease arrangements and theirtreatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4“Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer
to Note 4 for information relating to the relevant accounting policies.

IFRS 16 “Leases”

Except for the following, the initial application of the amendments to the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by
the FSC did not have material impact on the Group’s accounting policies:a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports
by Securities Issuers (FSC) and the International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)
endorsed and issued into effect by the FSC

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

The consolidated financial statements of the Company and its subsidiaries (collectively referred to as the“Group”) were approved by the Company’s board of directors on March 18, 2020.

2. APPROVAL OF FINANCIAL STATEMENTS

The major shareholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of December 31, 2019 and 2018, CADF and NDF
both held 44.03% of the Company’s shares.

China Airlines, Ltd. (the “Company”) was founded in 1959 and its shares have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine aircraft
maintenance; (c) major maintenance of flight equipment; (d) communications and data processing services
to other airlines; (e) the sale of aircraft parts, equipment and the entire aircraft; and (f) leasing of aircraft.

1. GENERAL INFORMATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

2019

CHINA AIRLINES, LTD. AND SUBSIDIARIESCHINA AIRLINES, LTD. AND SUBSIDIARIES

150- 15 -The Group does not reassess sale and leaseback transactions entered into before January 1, 2019 todetermine whether the transfer of an underlying asset satisfies the requirements in IFRS 15 to beaccounted for as a sale. Upon initial application of IFRS 16, the aforementioned transitional provision
for a lessee is applied to the leaseback portion. In addition, for asset accounted for as a sale and afinance lease under IAS 17, the Group continues to amortize any gains on sales over the lease term.

If the Group determines that a sale and leaseback transaction does not satisfy the requirements of IFRS
15 to be accounted for as a sale of an asset, it is accounted for as a financing transaction. If it satisfies
the requirements to be accounted for as a sale of an asset, the Group recognizes only the amount of any
gain or loss which relates to the rights transferred to the buyer-lessor. Prior to the application of IFRS
16, the leaseback portion is classified as either a finance lease or an operating lease and accounted for
differently.

For leases classified as finance leases under IAS 17, the carrying amount of right-of-use assets and leaseliabilities on January 1, 2019 was determined as the carrying amount of the leased assets and financelease payables as of December 31, 2018.

Lease liabilities were recognized on January 1, 2019 for leases classified as operating leases under IAS
17. Lease liabilities are measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at
an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease
payments. The Group applies IAS 36 to all right-of-use assets.

The Group recognizes right-of-use assets, or investment properties if the right-of-use assets meet thedefinition of investment properties, and lease liabilities for all leases on the consolidated balance sheets
except for those whose payments under low-value and short-term leases are recognized as expenses ona straight-line basis. On the consolidated statements of comprehensive income, the Group presents thedepreciation expense charged on right-of-use assets separately from the interest expense accrued onlease liabilities; interest is computed using the effective interest method. On the consolidated statementsof cash flows, cash payments for the principal portion of lease liabilities are classified within financing
activities; cash payments for the interest portion are classified within operating activities. Prior to theapplication of IFRS 16, payments under operating lease contracts, including property interest qualified
as investment properties, were recognized as expenses on a straight-line basis. Cash flows for operatingleases were classified within operating activities on the consolidated statements of cash flows. Leased
assets and finance lease payables were recognized on the consolidated balance sheets for contracts
classified as finance leases.

The Group as lessee$ 67,420,164
633,775

Discounted amount using the incremental borrowing rate on January 1, 2019
Add: Finance lease payable on December 31, 2018
Add: Adjustments as a result of a different treatment of extension and termination
options
Add: Other
Less: Derivative financial instruments for hedging$ 36,296,387- 16 -$

Total effect on liabilities

634,425

633,775
90
560
-

$

Lease liabilities - current
Lease liabilities - non-current
Finance lease payables
Accrued rent payable
Financial liabilities for hedging - current
Financial liabilities for hedging - non-current

861,045
1,089,690
163,107,718$ 165,058,453$

Total effect on assets

Prepayments for leases
Refundable deposits
Right-of-use assets
Property, plant and equipment

As OriginallyStated on
January 1, 2019

(861,045)(25,617)78,499,374(30,682)

3,924,776
32,371,611(633,775)(90)
5,947,449
35,972,059$ 77,582,030$$ 77,582,030$

Adjustments
Arising from
InitialApplication

1,064,073
78,499,374
163,077,036

3,924,776
32,371,611
5,948,009
35,972,059$ 78,216,455$$ 242,640,483$

Restated on
January 1, 2019

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16
is set out as follows:

The Group does not make any adjustments to leases in which it is a lessor and accounts for those leases
under IFRS 16 starting from January 1, 2019.

The Group as lessor

Lease liabilities recognized on January 1, 2019

$ 78,030,370

Undiscounted amount on January 1, 2019

8,191,127
1,970,829(41,919,508)$ 78,030,370

The future minimum lease payments of non-cancellable operating leasecommitments on December 31, 2018

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on
January 1, 2019 was 2.58%. The difference between the (i) lease liabilities recognized and (ii) operatinglease commitments on December 31, 2018 is explained as follows:151

Effective Date
Announced by IASB

Current assets include:

As of the date the consolidated financial statements were authorized for issue, the Group is
continuously assessing the possible impact that the application of other standards and interpretations
will have on the Group’s financial position and financial performance and will disclose the relevant
impact when the assessment is completed.

Unless stated otherwise, the above New IFRSs are effective for annual reporting periods
beginning on or after their respective effective dates.

January 1, 2021
January 1, 2022

To be determined by IASB

- 17 -

The consolidated financial statements have been prepared in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by
the FSC.

Statement of Compliance

4. SIGNIFICANT ACCOUNTING POLICIESThe application of new IFRSs in issue but not yet endorsed and issued into effect by the FSC would nothave any material impact on the Group’s accounting policies. As of the date the consolidated financial
statements were authorized for issue, the Group is continuously assessing the possible impact that theapplication of other standards and interpretations will have on the Group’s financial position andfinancial performance and will disclose the relevant impact when the assessment is completed.

Note:

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IAS 1 “Clarify the Classification of Liabilities as
Current or Non-current”

New IFRSs

Effective Date
Announced by IASB (Note)c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Current and Non-current Assets and Liabilities

Note 3: The amendment is applied for the annual period beginning after January 1, 2020.

- 18 -

The consolidated financial statements incorporate the financial statements of the Company and the entities
controlled by the Company. Income and expenses of subsidiaries acquired or disposed of during the period
are included in the consolidated statements of profit or loss and other comprehensive income from theeffective dates of acquisitions up to the effective dates of disposals, as appropriate. When necessary,adjustments are made to the financial statements of subsidiaries to bring their accounting policies into linewith those used by the Company. All intra-group transactions, balances, income and expenses are
eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to theowners of the Company and to the non-controlling interests even if this results in the non-controllinginterests having a deficit balance.

Basis of Consolidation

Assets and liabilities that are not classified as current are classified as non-current.

3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12
months after the reporting period. Terms of a liability that could, at the option of the counterparty, resultin its settlement by the issue of equity instruments do not affect its classification.

2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement torefinance, or to reschedule payments, on a long-term basis is completed after the reporting period andbefore the consolidated financial statements are authorized for issue; and

1) Liabilities held primarily for the purpose of trading;Current liabilities include:3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period.

2) Assets expected to be realized within 12 months after the reporting period; and1) Assets held primarily for the purpose of trading;3) Level 3 inputs are unobservable inputs for an asset or liability.

2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fairvalue measurement inputs are observable and based on the significance of the inputs to the fair value
measurement in its entirety, are described as follows:

The consolidated financial statements have been prepared on the historical cost basis except for financial
instruments which are measured at fair value.

Basis of Preparation

Note 2: Business combinations that began after January 1, 2020 and acquisition of assets after the
aforesaid date are subjected to the amendment.

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.

Amendments to IFRS 3 “Definition of Business”
January 1, 2020 (Note 1)
Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 2)
Reform”
Amendments to IAS 1 and IAS 8 “Definition of Materiality”
January 1, 2020 (Note 3)

New IFRSs

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

152- 19 -On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s
foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences are recognized in other comprehensive income (attributed to the owners of theCompany and non-controlling interests as appropriate).

Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.

b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:In preparing the consolidated financial statements of the Group, transactions in currencies other than the
Company’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailingat the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured athistorical cost in a foreign currency are not retranslated. Non-monetary items measured at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value wasdetermined.

Foreign Currencies

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated
as the difference between (i) the aggregate of the fair value of the consideration received and any
investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the
assets (including any goodwill) and liabilities and any non-controlling interests of the former subsidiary attheir carrying amounts at the date when control is lost. The Group accounts for all amounts recognized inother comprehensive income in relation to that subsidiary on the same basis as would be required had theGroup directly disposed of the related assets or liabilities.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control
over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of theGroup and the non-controlling interests are adjusted to reflect the changes in their relative interests in thesubsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and thefair value of the consideration paid or received is recognized directly in equity and attributed to the ownersof the Company.

- 20 -

Under the equity method, investments in an associate and a joint venture are initially recognized at cost andadjusted thereafter to recognize the Group’s share of profit or loss and other comprehensive income of theassociate and joint venture. The Group also recognizes the changes in the Group’s share of equity of
associates and joint venture attributable to the Group.

The Group uses the equity method to account for its investments in associates and joint ventures.

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor
an interest in a joint venture. A joint venture is a joint arrangement whereby the Group and other parties
that have joint control of the arrangement and the rights to the net assets of the arrangement.

Investments in Associates and Joint Ventures

Non-current assets classified as held-for-sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.

Non-current assets are classified as held-for-sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.

Non-current Assets Held for Sale

Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sales and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.

Inventories

If the initial accounting for a business combination is incomplete by the end of the reporting period inwhich the combination occurs, the Group reports provisional amounts for the items for which theaccounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement
period, or additional assets or liabilities are recognized, to reflect new information obtained about facts andcircumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognized as of that date.

When a business combination is achieved in stages, the Group’s previously held equity interest in an
acquiree is remeasured to fair value at the acquisition date, and the resulting is recognized in profit or lossor other comprehensive income. Amounts arising from interests in the acquiree prior to the acquisition datethat have previously been recognized in other comprehensive income are recognized on the same basis as
would be required if those interests were directly disposed of by the Group

Where the consideration the Group transfers in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value and considered as part of the consideration transferred in a business combination.
Changes in the fair value of the contingent consideration that qualify as measurement period adjustments
are adjusted retrospectively, with the corresponding adjustments being made against goodwill or gains on
bargain purchases. Measurement period adjustments are adjustments that arise from additional information
obtained during the measurement period about facts and circumstances that existed as of the acquisition
date.

Business Combinations

153- 21 -

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation methods are reviewed at the end of eachreporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

Freehold land is not depreciated.

Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes and are expected to be used for more than
one period. The cost of an item of property, plant and equipment shall be recognized as an asset if, and only
if, it is probable that future economic benefits associated with the item will flow to the Group and the costof the item can be measured reliably. Property, plant and equipment are stated at cost less recognizedaccumulated depreciation and recognized accumulated impairment loss.

Property, Plant and Equipment

The Group discontinues the use of the equity method from the date on which its investment ceases to be an
associate and a joint venture. Any retained investment is measured at fair value at that date and the fairvalue is regarded as its fair value on initial recognition as a financial asset. The difference between theprevious carrying amount of the associate and the joint venture attributable to the retained interest and its
fair value is included in the determination of the gain or loss on disposal of the associate and the joint
venture. The Group accounts for all amounts previously recognized in other comprehensive income inrelation to that associate and the joint venture on the same basis as would be required had that associate
directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment
in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group
continues to apply the equity method and does not remeasure the retained interest.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset
by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deductedfrom the carrying amount of the investment. Any reversal of that impairment loss is recognized to theextent that the recoverable amount of the investment subsequently increases.

When the Group’s share of losses of an associate and a joint venture equals or exceeds its interest in thatassociate and joint venture (which includes any carrying amount of the investment accounted for using theequity method and long-term interests that, in substance, form part of the Group’s net investment in theassociate and joint venture), the Group discontinues recognizing its share of further losses. Additional
losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, orconstructive obligations, or made payments on behalf of that associate and joint venture.

When the Group subscribes for additional new shares of an associate and joint venture at a percentage
different from its existing ownership percentage, the resulting carrying amount of the investment differsfrom the amount of the Group’s proportionate interest in the associate and joint venture. The Group records
such a difference as an adjustment to investments with the corresponding amount charged or credited tocapital surplus - changes in the Group’s share of equity of associates and joint ventures. If the Group’s
ownership interest is reduced due to the subscription of additional new shares of the associate and joint
venture, the proportionate amount of the gains or losses previously recognized in other comprehensive
income in relation to that associate and joint venture is reclassified to profit or loss on the same basis as
would be required had the investee directly disposed of the related assets or liabilities. When the adjustment
should be debited to capital surplus, but the capital surplus recognized from investments accounted forusing the equity method is insufficient, the shortage is debited to retained earnings.

Any excess of the cost of acquisition over the Group’s share of net fair value of the identifiable assets andliabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included
within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of net
fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, isrecognized immediately in profit or loss.

- 22 -

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the Group uses the estimated cash flows discounted by the future pre-tax discount rate, and thediscount rate reflects the current market time value of money and the specific risks to the asset for estimatedfuture cash flows not yet adjusting to the market.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which theasset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable andconsistent basis; otherwise, corporate assets are allocated to the smallest group of cash-generating units on areasonable and consistent allocation basis.

Impairment of Tangible and Intangible Assets Other Than Goodwill

Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, andamortization methods are reviewed at the end of each reporting period, with the effects of any changes inthe estimates being accounted for on a prospective basis. The residual value of an intangible asset with afinite useful life shall be assumed zero unless the Group expects to dispose of the intangible asset before theend of its economic life.

Intangible Assets

Any gain or loss arising on the derecognition of investment properties is calculated as the difference
between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss inthe period in which the property is derecognized.

Depreciation is recognized using the straight-line method. The estimated useful lives and residual values arereviewed at the end of each reporting period.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.

Investment properties are properties held to earn rentals or for capital appreciation. Investment properties
also include land held for a currently undetermined future use.

Investment Properties

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. Assets are depreciated over the shorter of the lease term and their useful lives using the straight-line
method.

154

The financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and- 23 -

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash
equivalents, trade receivables, other receivables and other financial assets, are measured atamortized cost, which equals the gross carrying amount determined using the effective interest
method less any impairment loss. Exchange differences are recognized in profit or loss.

ii. The contractual terms of the financial asset give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal amount outstanding.

i.

- 24 -The Group derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.

3) Derecognition of financial assets

The impairment loss of all financial assets is recognized in profit or loss by a reduction in theircarrying amounts through a loss allowance account, except for investments in debt instruments thatare measured at FVTOCI, for which the loss allowance is recognized in other comprehensive
income and the carrying amounts of such financial assets are not reduced.

Financial assets that meet the following conditions are subsequently measured at amortized
cost:b) Financial assets at amortized cost

Expected credit losses reflect the weighted average of credit losses with the respective risks of a
default occurring as the weights. Lifetime ECL represents the expected credit losses that will result
from all possible default events over the expected life of a financial instrument. In contrast,
12-month ECL represents the portion of lifetime ECL that is expected to result from default eventson a financial instrument that are possible within 12 months after the reporting date.

The Group always recognizes lifetime expected credit losses (ECLs) for trade receivables and otherreceivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has
been a significant increase in credit risk since initial recognition. If, on the other hand, the credit
risk on a financial instrument has not increased significantly since initial recognition, the Groupmeasures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

The Group recognizes a loss allowance for expected credit losses on financial assets at amortizedcost (including trade receivables), as well as contract assets.

2) Impairment of financial assets

Dividends on these investments in equity instruments are recognized in profit or loss when theGroup’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of an investment.

Investments in equity instruments at FVTOCI are subsequently measured at fair value withgains and losses arising from changes in fair value recognized in other comprehensive income
and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit orloss on disposal of the equity investments; instead, they will be transferred to retained earnings.

On initial recognition, the Group may make an irrevocable election to designate investments inequity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if an equity
investment is held for trading or if it is contingent consideration recognized by an acquirer in abusiness combination.

c) Investments in equity instruments at FVTOCI

Cash equivalents include time deposits with original maturities within 3 months from the date ofacquisition, which are highly liquid, readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. These cash equivalents are held for the
purpose of meeting short-term cash commitments.

Interest income is calculated by applying the effective interest rate to the gross carrying amountof a financial asset.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses
arising on remeasurement recognized in profit or loss. Fair value is determined in the manner
described in Note 33.

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified
or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include
investments in equity instruments which are not designated as at FVTOCI and debt instrumentsthat do not meet the amortized cost criteria or the FVTOCI criteria.

a) Financial assets at FVTPL

Financial assets are classified into the following categories: Financial assets at FVTPL, financial
assets at amortized cost, and investments in equity instruments at FVTOCI.

1) Measurement category

All regular purchases or sales of financial assets are recognized and derecognized on a trade date basis.
All regular purchases or sales of financial assets are buy or sell of financial assets in the period set byregulation or market convention.

a. Financial assets

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issuance of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of thefinancial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized
immediately in profit or loss.

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual
provisions of the instruments.

Financial Instruments

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit
is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amountthat would have been determined had no impairment loss been recognized for the asset or cash-generating
unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

155- 25 -

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to theequity component are recognized directly in equity. Transaction costs relating to the liability component
are included in the carrying amount of the liability component.

The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized and includedin equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which case,the balance recognized in equity will be transferred to capital surplus - share premiums. When theconversion option remains unexercised at maturity, the balance recognized in equity will be transferred
to capital surplus - share premiums.

On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The component parts of compound instruments (i.e. convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.

d. Convertible bonds

The difference between the carrying amount of a financial liability derecognized and theconsideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in
profit or loss.

2) Derecognition of financial liabilities

Except for financial liabilities at FVTPL, all financial liabilities are measured at amortized costusing the effective interest method.

1) Subsequent measurementc. Financial liabilities

Repurchase of the Group’s own equity instruments is recognized in and deducted directly from equity.
No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.

Equity instruments issued by the Group entity are recognized at the proceeds received, net of direct
issue costs.

Debt and equity instruments issued by the Group entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of afinancial liability and an equity instrument.

b. Equity instruments

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognized in other comprehensive income is recognized in profit or loss.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gain orloss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event, the timing of the recognition in profit or loss depends on the natureof the hedging relationship. When the fair value of a derivative financial instrument is positive, thederivative is recognized as a financial asset; when the fair value of a derivative financial instrument isnegative, the derivative is recognized as a financial liability.

The Group enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options swaps and fuel swaps.

Derivative financial instruments- 26 -

The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.

The Group recognizes provisions when the Group has a present obligation (legal or constructive) arisingfrom past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.

Provisions

Starting from 2018, the Group discontinues hedge accounting only when the hedging relationship ceases tomeet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or
exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized inother comprehensive income from the period in which the hedge was effective remains separately in equity
until the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur, thegain or loss accumulated in equity is recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period as when the hedged item affects profit or loss. If a hedge of a forecasted transaction
subsequently results in the recognition of a non-financial asset or a non-financial liability, the associatedgains and losses that were recognized in other comprehensive income are removed from equity and areincluded in the initial cost of the non-financial asset or non-financial liability.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.

The Company enters into some derivative transactions that aim to manage interest rates, foreign exchange
rates, fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging
transactions are defined as cash flow hedges. When entering into hedging transactions, the Company has
prepared official documents that describe the hedging relationship between hedging instruments and items
which have been hedged, the objective of risk management, the hedging strategy, and the way to evaluate
the effectiveness of the hedging instrument.

Hedge Accounting

e.

156

When applying IFRS 15 during 2018, the Group recognizes revenue by applying the following steps:

Identifying the contract with the customer;
Identifying the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; andRecognize revenue when the Group satisfies a performance obligation.

Minimum lease payments are apportioned between finance expenses and reductions of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case, they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are
incurred.

The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of alease, except for short-term leases and low-value asset leases accounted for applying a recognition
exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

- 27 -

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed
payments, in-substance fixed payments, variable lease payments which depend on an index or a rate,
residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option, and payments of penalties for terminating a lease if the lease term reflects suchtermination, less any lease incentives payable. The lease payments are discounted using the interest rate
implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, theGroup uses the lessee’s incremental borrowing rate.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to theearlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. However, if
leases transfer ownership of the underlying assets to the Group by the end of the lease terms or if the costsof right-of-use assets reflect that the Group will exercise a purchase option, the Group depreciates theright-of-use assets from the commencement dates to the end of the useful lives of the underlying assets.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of leaseliabilities adjusted for lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives
received. Right-of-use assets are subsequently measured at cost less accumulated depreciation andimpairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets arepresented on a separate line in the consolidated balance sheets.

- 28 -

This transaction does not actually dispose of the assets. The accounting treatment used is to treat thetransaction as if it did not occur, and the assets are continuously recognized at the book value of theasset before sale.

1) Financial leases

For a sale and leaseback transaction, if it meets the condition whereby all the risks and rewards ofownership of the leased asset are essentially transferred to the lessee, the sale and leaseback transaction
is classified as a finance lease. If part of the significant risks and rewards of ownership of the leased
asset remain with the lessor (i.e. the buyer), the sale and leaseback transaction is classified as an
operating lease.

b. Sales and leasebacks

Assets held under finance leases are initially recognized as assets of the Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.

The Group as lessee

The Group as lessee

a. Financial leases

Leasing

2019

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

2018

Passenger and cargo revenue are recognized as revenue when the passengers and goods are actually carried.
When the tickets are sold, due to the fact that the fulfillment obligations of the shipment have not been met,
the relevant amount of revenue is first recorded as contract liabilities until passengers actually board.

Shipping service revenue







For sale and leaseback transactions, if the transfer of an asset satisfies the requirements of IFRS 15 to beaccounted for as a sale, the Group recognizes only the amount of any gain or loss which relates to the rights
transferred to the buyer-lessor, and adjusts the off-market terms to measure the sale proceeds at fair value.
If the transfer does not satisfy the requirements of IFRS 15 to be accounted for as a sale, it is accounted for
as a financing transaction.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods
in which they are incurred.

When an aircraft lease contracts expires and the leased item will be returned to the lessor, the Group willassess if there are existing obligations exist and if it is required to recognize a provision when signing thelease contract.

Revenue Recognition

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, withinterest expense recognized over the lease terms. When there is a change in a lease term, a change in theamounts expected to be payable under a residual value guarantee, a change in the assessment of an option topurchase an underlying asset, or a change in future lease payments resulting from a change in an index or arate used to determine those payments, the Group remeasures the lease liabilities with a corresponding
adjustment to the right-of-use-assets. Lease liabilities are presented on a separate line in the consolidatedbalance sheets.

Aircraft lease contracts

157- 29 -Net defined benefit liabilities (assets) represent the actual deficit in the Group’s defined benefit plans.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined
contribution retirement benefit plan are determined using the projected unit credit method. Service cost(including current service cost and past service cost) and net interest on the net defined benefit
liabilities (assets) are recognized as employee benefits expense in the period in which they occur.
Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest),
is recognized in other comprehensive income in the period in which it occurs. Remeasurement
recognized in other comprehensive income is reflected immediately in retained earnings and will not bereclassified to profit or loss.

Payments to the defined contribution retirement benefit plan are recognized as expenses whenemployees have rendered services entitling them to the contributions.

b. Retirement benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related services.

a. Short-term employee benefits

Employee Benefits

In the event that lease incentives are received when entering into operating leases, such incentives
are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction ofrental expense on a straight-line basis, except where another systematic basis is more representativeof the time pattern in which economic benefits from the leased asset are consumed.

Operating lease payments are recognized as expenses on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases arerecognized as expenses in the period in which they are incurred.

2) The Group as lessee

Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the lessee’s
benefit from the use of the leased asset.

1) The Group as lessor

c. Operating leases

If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If the selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of the selling pricewhich is above fair value shall be deferred and amortized over the period of the lease.

2) Operating leases- 30 -

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the shareholders approve the retention of these earnings.

The Group’s current tax liabilities are calculated by the tax rate was legislated or substantially legislated
at the balance sheet date.

The current tax liabilities are based on current taxable profit. Since part of the income and expenses aretaxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the consolidated statements ofcomprehensive income.

a. Current tax

Income tax expense represents the sum of the current tax and deferred tax.

Taxation

The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Group’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the granted share options are vested immediately.

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.

Share-based Payment Arrangements

The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member rewards and operates a “Tigerclub Member
Privilege Program” to provide members with accumulated ticket reward bonuses, which can be used tooffset the payments for airfare, luggage fees, priority check-ins, and ordering of meals in flight cabins. A
portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
Company should recognizes this deferred revenue as revenue only when the Company has fulfilled its
obligations on the granting of rewards or when the period for converting the mileage to rewards has
expired.

Frequent Flyer Programs

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period
in which they are incurred.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets which are substantially ready for their intended use or sale through a fairly long period) are added tothe cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Borrowing Costs

158- 31 -In the application of the Group’s accounting policies as disclosed in Note 4, management is required tomake judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered relevant. Actual results may differ from these estimates.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY

The overhaul costs of an owned or leased aircraft that meet the criteria for fixed asset capitalization are
capitalized as replacements for aircraft and engines and are depreciated on a straight-line basis over the
expected annual overhaul cycle.

Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.

Maintenance and Overhaul Costs

Current and deferred taxes are recognized in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity, in which case, the current and deferredtaxes are also recognized in other comprehensive income or directly in equity, respectively.

c. Current and deferred taxes for the year

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period inwhich the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that havebeen enacted or substantively enacted by the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which theGroup expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates and interests in joint ventures, except where the Group is able to control thereversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future. Deferred tax assets arising from deductible temporary differences associatedwith such investments and interests are only recognized to the extent that it is probable that there will be
sufficient taxable profit against which to utilize the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.

Deferred tax is recognized on temporary differences between the carrying amounts of assets andliabilities in the consolidated financial statements and the corresponding tax bases used in thecomputation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences. Deferred tax assets are generally recognized for all deductible temporary differences,
unused loss carryforwards and unused tax credits for purchases of machinery, equipment andtechnology, research and development expenditures, and personnel training expenditures to the extent
that it is probable that taxable profit will be available against which those deductible temporary
differences can be utilized.

b. Deferred tax

16,565,821
4,202,818

483,951
7,206,938

15,784,323
969,875

413,1397,770,200

2018$ 24,937,537$

December 31$ 28,459,528

$

2019

- 32 -

Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

2018
0%-1.9%0.59%-3.55%
0.63%-3.30%

December 31
0%-1.9%0.59%-3.55%
0.47%-0.7%

2019

The market rate intervals of cash in banks and cash equivalents at the end of the reporting period were as
follows:

Cash on hand and revolving funds
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

6. CASH AND CASH EQUIVALENTS

The present value of defined benefit obligations at the end of the reporting period are calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgment and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may have amaterial impact on the amount of defined benefit obligations.

Defined Benefit Obligations

Flight equipment is depreciated on a straight-line basis at rates that can be used to write down their cost to
their estimated residual values at the end of their useful lives. The estimates of the useful lives and residual
values of the flight equipment are made by the Group on the basis of past experience and fleet operation
performance in the industry. Due to changes in the fleet plan, the board of directors of the Company has
decided to change the expected useful lives of four 747-400 (GE) from 20 to 16-17 years since January 1,
2018 in order to meet the economic benefits and number of years of consumption. It is estimated that the
depreciation expense will increase by approximately NT$770 million annually.

Depreciation of Property, Plant and Equipment - Flight Equipment

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.

Key Sources of Estimation Uncertainty

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised if the revisions affect only that
period or in the period of the revisions and future periods if the revisions affect both current and future
periods.

159$

11,749$221$ 206,001-$ 512,192$
206,001434
511,758$

2018

NTD/USD

2019.01.02-2019.01.31

21,746$ 132,191

26,865$ 209,2212018$ 110,445

December 31$ 182,356

2019

NTD30,923/USD1,000

NTD570,571/USD19,000- 33 -

These investments in equity instruments are not held for trading. Instead, they are held for medium- tolong-term strategic purposes. Accordingly, the management elected to designate these investments in equity
instruments as at FVTOCI as it believes that recognizing short-term fluctuations in these investments’ fairvalues in profit or loss would not be consistent with the Group’s strategy of holding these investments forlong-term purposes.

Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

Non-current

Investments in Equity Instruments

8. FINANCIAL ASSETS AT FVTOCI

Buy forward contracts

December 31, 20182020.01.15-2020.07.31

105,586

$

-

$

$

8,520,834

8,440,254(218,665)
8,221,589

9,667,010(227,306)
9,439,704

598,8242018$ 10,038,528$

December 31
299,245

2019- 34 -The Group applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience
with the debtors and an analysis of the debtors’ current financial position, adjusted for general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as theforecasted direction of economic conditions at the reporting date. As the Group’s historical credit loss
experience does not show significantly different loss patterns for different customer segments, the loss
allowance based on the past due status is not further distinguished according to the different segments of theGroup’s customer base.

The average credit period was 7 to 55 days. In determining the recoverability of a trade receivable, theGroup considered any change in the credit quality of the receivable since the date credit was initiallygranted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Group’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position. The Group adopted a policy of
only dealing with entities that are rated the equivalent of investment grade or higher and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Credit rating information is obtained from independent rating agencies where available or, if not available,
the Group uses other publicly available financial information or its own trading records to rate its major
customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored andthe aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure
is controlled by counterparty limits that are reviewed and approved by the risk management committee
annually.

Accounts receivable
Less: Allowance for impairment loss

NTD/USD

Notes receivable

Buy forward contracts

Notional Amount(In Thousands)

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Accounts receivable

Maturity Date

$

2018

$ 3,856,660

December 31$ 2,355,095

2019

The interest rates for time deposits with original maturities of more than 3 months ranged from 0.60% to1.30% and 0.40% to 1.36% as of 2019 and 2018.

Time deposits with original maturities of more than 1 year

Non-current

Time deposits with original maturities of more than 3 months

Current

9. FINANCIAL ASSETS AT AMORTIZED COST

December 31, 2019

Currency

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Derivative financial instruments (not under hedge accounting) foreign exchange forward contracts

Financial liabilities held for trading

Financial assets mandatorily classified at FVTPL
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates

Financial assets - current

2019

December 31

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)

160$ 7,851,502$ 1,423,565

91,679(6,021)

97,700$$99,702(3,796)

103,498

3.67%

31 to 60 Days

$

$

6.16%

31 to 60 Days

96,376(17,340)

113,716$$

59,773(16,642)

76,41521.78%

61 to 90 Days$$

15.25%

61 to 90 Days$$

$ 9,439,704(227,306)$ 9,667,010

Total$ 8,221,589(218,665)$ 8,440,254

Total$ 8,654,710$ 8,470,113- 35 -The operating costs recognized for the years ended December 31, 2019 and 2018 included losses from$ 7,847,082
556,365
227,975
23,2882018$ 227,306$ 7,578,125
571,601
283,933
36,4542019$ 218,665

Balance at December 31, 2018

$ 181,868
49,824(2,975)(1,411)-

December 31$ 227,306
24,096(32,717)(3)(17)

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
Others5,162(201,466)

206,628

97.5%

Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses
Loss of control of subsidiaries

11. INVENTORIES

5,374(185,162)

190,536

Over 90 Days$$

97.18%

Over 90 Days

For the Year Ended December 31
2019
2018

The movements of the loss allowance of trade receivables were as follows:

Amortized cost

(856)

(4,546)0.06%$ 1,424,421

0.06%$ 7,856,048

Up to 30 Days

Gross carrying amount
Loss allowance (lifetime
ECLs)

Not Past Due

Expected credit loss rate

December 31, 2018

$ 1,330,621(2,019)$ 6,697,539(8,123)

Amortized cost

$ 1,332,640$ 6,705,662

Gross carrying amount
Loss allowance (lifetime
ECLs)

0.15%

Up to 30 Days

0.12%

Not Past Due

Expected credit loss rate

December 31, 2019

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

The Group writes off a trade receivable when there is information indicating that the debtor is experiencing
severe financial difficulty and there is no realistic prospect of recovery. For accounts receivable that havebeen written off, the Group continues to engage in enforcement activity to attempt to recover thereceivables which are due. Where recoveries are made, these are recognized in profit or loss.

$

2019
-

2018
$ 46,154

December 31

54
20
49

In-flight catering
Travel businessAirport services
Airport services
Forwarding and storage of air cargo
Real estate management
Hotel businessAirport supporting service and investment

59

48
25
100
100
100

94

48
25
100
100
100

51
49

54

59

94

100
100
100
94

100
100
100
94

100
100
100

100

A holding company, real estate and hotel
services
General investment
Cleaning of aircraft and maintenance ofmachine and equipment
Travel business
Real estate lease and international trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft
Air cargo and storage

100
100

100
100

77
100

Air transportation
Aircraft maintenance

Main Businesses and Products

Proportion of ownership is considered from the perspective of the Group.

Taiwan Air Cargo Terminal(Note)
Kaohsiung Catering Services,Ltd.
Dynasty Holidays
Taoyuan International Airport
Services
Taiwan Airport Services (Note)
Global Sky Express
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)

Mandarin Airlines

CAL-Asia Investment
Dynasty Aerotech International
Corp.
Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)

Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance
And Engineering Co., Ltd.
CAL-Dynasty International

Investee Company

Proportion of
Ownership (%)
December 31
2019
2018

- 36 -

Except that the Company has control over Taoyuan International Airport Service, Taiwan Airport Service

Note:

Cal-Dynasty
International
Taiwan Airport Services

China Airlines, Ltd.

Investor Company

Subsidiary included in the consolidated financial statements:

13. SUBSIDIARIESIn 2019 and 2018, the Company recognized impairment losses of $0 thousand and $75,436 thousand,respectively. In 2019 and 2018, the Company recognized disposal losses of $10,462 thousand and $368,992
thousand, respectively. The fair value was determined by transactions of the related market, and the
proposed sale price was based on the current status of the aircraft. The fair value is classified as level 3.

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft
according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original
book value which was higher than the expected sale price and which was recognized as an impairment loss.
However, the actual loss shall be identified by the actual sale price.

Long-term equity investments held for sale - Asian Compressor
Technology Services

12. NON-CURRENT ASSETS HELD FOR SALE

inventory write-downs of $327,919 thousand and $371,275 thousand, respectively.

161

461,263
10,004446,161
248,350
42,717$ 1,208,495

$

2019

497,362442,891
233,417
44,193$ 1,217,863

$

2018

$ 2,200,149$ 2,223,793

December 31$ 1,217,863
982,2862018$ 1,208,495
1,015,298

December 31- 37 -At the end of the reporting period, the proportion of ownership and voting rights in associates held by

China Aircraft Services
Kaohsiung Catering Services
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

Unlisted companies

a. The amount of investment in associates were as follows:

Investments in associates
Investments in jointly controlled entities

2019

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

In order to prepare the listing of Tigerair Taiwan Co., Ltd. and comply with the rules relating to theexamination for public listing, the release of the shares of Tigerair Taiwan Co., Ltd. held by the Company
and Mandarin Airlines was resolved in the shareholders’ meeting of the Company on June 25, 2019, and in
the shareholders’ meeting of Mandarin Airlines on June 27, 2019. The shares shall be subscribed by all
shareholders of the Company and Mandarin Airlines on the basis of the percentage of shareholdings. For
the subscribed shares that the original shareholders waived or for the undersubscribed portion, the chairman
was authorized to contact specific persons to subscribe. The subscription price was set at $41 per share. In
October 2019, the stock price was fully paid and the shares were completely delivered and transferred. The
proceeds from disposal were $1,866,474 thousand, and the related gain on disposal was $1,254,633
thousand and recognized in the capital surplus account.

The board of directors of the Company decided to sell part of the equity of Dynasty Holidays to H.I.S.
Taiwan Co., Ltd. on January 21, 2019, and completed the transaction on January 31, 2109. After the sale ofthe equity, the Group’s holding of the issued share capital decreased from 51% to 20%. Dynasty Holidays
was classified as an associate since the Group lost control of the subsidiary. Therefore, the relevant assets
and liabilities were not consolidated in the current period, and only the profit and loss from January 1, 2019
to January 31, 2019 was consolidated. For the information about the disposal of the subsidiary, please refer
to Note 31.

The Group paid $243,743 thousand on March 7, 2018 to acquire an additional 18% of the issued sharecapital of Kaohsiung Catering, Ltd. (Kaohsiung Catering). The Group’s holding of the issued share capitalof Kaohsiung Catering exceeds 50%; therefore, Kaohsiung Catering is listed as a subsidiary because theGroup has control over the investee. For the disclosure of the Group’s acquisition of Kaohsiung Catering,please refer to Note 30.

and Global Sky Express, the others are investees that the Company had more than 50% of their voting
shares. The above financial information of the subsidiaries for the years ended December 31, 2019 and2018 of these subsidiaries was reported according to reports that were not reviewed by independent
auditors.

20%
20%
28%
28%
35%

$

$ 83,177$ 10,365
15
21,53525,146
3,387$ 60,448

6,402
15,113
22,57132,1966,895

2018

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

- 38 -The investments in jointly controlled entities were as follows:b. Investments in jointly controlled entities

801,071
168,547
37,813
7,867$$

December 31$ 1,015,298

$

2019

982,286

805,157
166,901
2,358
7,870

2018

The financial statements used as a basis of the amounts of and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2019 and 2018 were all independently audited,
except those of China Aircraft Services and Eastern United International Logistics (Holding) Ltd.
However, the management determined that there would have been no significant adjustments had thisinvestee’s financial statements been independently audited.

Other comprehensive income of associates accounted for using the equity method in 2019 and 2018 areboth losses in the amounts of $0 thousand.

China Aircraft Services
Kaohsiung Catering Services
Dynasty Holidays
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

2019

20%
51%
28%
28%
35%

Proportion of Ownership andVoting Rights
December 31
2019
2018

The investment income of associates accounted for using the equity method were as follows:

Note:Dynasty Holidays was list as an associate on January 1, 2019.

China Aircraft Services
Dynasty Holidays (Note)
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

Name of Associate

the Group were as follows:

162
51%
55%
49%
51%

51%
55%
49%
51%

$ 267,413
16,695(41)
2$ 284,069$ 256,899
15,030(70)(2)$ 271,857- 39 -For details on services, major business offices and the country where the above associates and jointly
controlled entities are registered, refer to Table 6, “Names, Locations, And Other Information of
Investees Over Which the Company Exercises Significant Influence”, and Table 7, “Investments In
Mainland China”, following these notes to consolidated financial statements.

The financial statements used as a basis of the amounts of and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2019 and 2018 were all independently audited,
except of NORDAM Asia Limited. However, the management determined that there would have beenno significant adjustments had this investee’s financial statements been independently audited.

Other comprehensive income of associates accounted for using the equity method in 2019 and 2018 arelosses in the amounts of $(32,101) thousand and $(33,242) thousand, respectively.

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

For the Year Ended December 31
2019
2018

Details of investment income attributable to investment in jointly controlled entities were as follows:

To expand the Group’s catering business, Kaohsiung Catering entered into a joint venture agreementwith a Japanese brand company to invest in Delica International Co, Ltd., with the Japanese brandcompany having the right to make decisions on operations, and therefore, the Group does not havecontrol.

To enhance the Group’s maintenance capabilities, the Company established a joint venture with the USNORDAM Aerospace Group in December 2017, planning to provide thrust reversers and composite
repair services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business disputation with their cooperative
partner, so their company operation was not impacted. As a result, NORDAM Asia suspended its
operation from October 5, 2018 to October 4, 2019 and resumed business on October 4, 2019. The
Company increased the capital of NORDAM Asia by $35,525 thousand in November 2019.

The Group entered into a joint venture agreement with the Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe majority power in the board of directors to pose a motion for veto, and therefore the Group does nothave control.

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled
entities held by the Group were as follows:
Proportion of Ownership andVoting Rights
December 31
2019
2018

Balance at January 1,
2019
Depreciation expense
Disposals
Reclassification
Net exchange difference
Loss of control ofsubsidiaries
Balance at December 31,
2019
Balance at December 31,
2019, net value

Accumulated depreciationand impairment

1,002,499

$

$

$

-

1,002,499$-

Balance at December 31,
2019

1,015,564(13,065)

1,015,564

$

$

-

-

$

$

Balance at January 1,
2019
Additions
Disposals
Reclassification
Net exchange difference
Loss of control ofsubsidiaries

Cost

Balance at December 31,
2018
Balance at December 31,
2018, net value

Balance at January 1,
2018
Depreciation expense
Disposals
Impairment loss
Reclassification
Net exchange difference$

1,015,564

Accumulated depreciationand impairment

76,704

922,626
16,234

Balance at December 31,
2018$

Balance at January 1,
2018
Additions
Disposals
Reclassification
Net exchange difference
Gain of acquisitions
through businesscombinations

Cost

Freehold Land

$

$

$

$

$

$

$

$

$

$

9,055,523(7,028,540)-(6,574,873)(466,943)
1,014
12,262

16,084,063-

13,993,585
209,413(1,130)1,906,078(23,883)

7,418,712(6,574,873)(6,137,495)(433,450)
10,049(13,977)

13,993,585

220,318

13,698,308
57,998(11,803)(227)
28,991

Buildings

15. PROPERTY, PLANT AND EQUIPMENT- 40 -$ 130,191,522$ (141,886,170)-$ (123,507,657)(18,571,992)
14,899,562(14,706,083)-$ 272,077,692-$ 259,695,130
2,248,856(20,698,042)
30,831,748-$ 136,187,473$ (123,507,657)$ (136,594,765)(15,960,477)
19,814,544(50,000)
9,283,041-$ 259,695,130

229,384$ 263,427,144
2,684,337(20,307,375)
13,661,640-

FlightEquipment

25,805,008-

26,187,556(1,811,222)
1,428,463
211-(4,474)25,805,008(668,721)(25,131,813)-

11,170,186

$

$

-

-

2,112

$ (14,634,822)(741,852)
79,866
15,294,696
-

$

$

$

$ (14,634,822)$ (14,142,872)(2,023,924)
1,532,046
(72 )

$

$

Equipment
under FinanceLeases(9,972,982)(906,953)
292,136(11,655)(2,543)

17,917,780

26,985

16,230,011
1,868,212(313,727)
103,296
3,003

16,846,835(2,158)17,917,780
864,223(393,058)(1,537,494)(2,458)7,315,783$

5,637,427$ (11,209,408)

1,727$ (10,601,997)(921,246)
355,222(45,103)
1,989

$

$

$

$ (10,601,997)

$

$

$

Others$ 145,886,971$ (160,124,118)

3,839$ (155,319,349)(20,702,033)
15,335,664
543,510
14,251$ 306,011,089(6,632)$ 318,427,067
3,322,492(21,760,951)
6,068,519(39,406)$ 163,107,718$ (155,319,349)$ (166,848,114)(19,324,804)
21,648,775(50,000)
9,271,386(16,592)$ 318,427,067

553,391$ 320,465,645
4,610,547(22,444,127)
15,193,172
48,439

Total

163

15-25 years
7-20 years
10-20 years
6-8 years
3-10 years
7-12 years
3-15 years
5-12 years

5 years
3-5 years
3-5 years

25 years
3-13 years
3-15 years

45-55 years
10-25 years$ 2,075,068$ 2,075,345

2018$ 4,608,600- 41 -The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to others. The buildings are depreciated on a straight-line basis over 55 years.

Carrying amount
Investment properties

2019

2018
$ 4,610,547(1,947)

December 31$ 3,316,078

Purchase of property, plant and equipment paid

16. INVESTMENT PROPERTIES$ 3,322,492(6,414)

December 31

Increase in property, plant and equipment
Capitalized interest paid

2019

The Group generated the following non-cash investment activities related to the purchase of property, plantand equipment in 2019 and 2018:

Based on the particularity of risk in the aviation industry, all of the Group’s assets such as aircraft, realestate, and movable property are adequately insured to diversify the potential risk related to operations.

Refer to Note 35 for the carrying amounts of property, plant and equipment pledged by the Group.

Regarding changes in fleet composition, current and forecasted market value, and other technical factors,
the Group recognized impairment losses on aircraft equipment in 2018 of $50,000 thousand. The fair value
was determined based on aircraft conditions and market estimates.

Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset:

Computer
Software Cost

$ 2,406,163

Balance at December 31, 2019

186,197
186,197$

186,197

186,197
-

-

$

$

$

(7,322)(7,045)(277)(7,045)(6,766)(279)$ (1,409,668)$ (1,212,783)(198,237)
1,357
(5)

$ (1,212,783)(10,036)(540)(7)$ (1,020,257)(181,943)

Accumulated
Amortization

$

$

$

$

Accumulated- 42 -

The above other intangible assets are amortized on a straight-line basis over 2-16 years.

$ 2,237,382
172,639(3,858)-$ 2,237,382

686
12,871-$ 2,039,602
184,223-

Balance at January 1, 2019
Additions
Amortization expenses
Disposal of subsidiaries
Effects of exchange rate changes

Balance at December 31, 2018

Balance at January 1, 2018
Additions
Amortization expenses
Acquisitions through businesscombinations
Reclassification
Effects of exchange rate changes

Relationship
Between
Clients$ 2,082,390

Balance at December 31, 201917. OTHER INTANGIBLE ASSETS$ 2,082,390-$ 2,082,390

Balance at December 31, 2018
Balance at January 1, 2019
Depreciation expense$ 2,082,390-

Balance at January 1, 2018
Depreciation expense

Cost

All of the Group’s investment properties were held under freehold interest.

$ 1,182,692$ 1,210,796
172,639(198,237)(2,501)(5)$ 1,210,796

176,847
12,331(7)$ 1,019,345
184,223(181,943)

Net Value$ 2,075,068$ 2,075,345(277)$ 2,075,345$ 2,075,624(279)

Net Value

The above fair value valuation was performed by independent qualified professional valuers, and the future
income evaluated by management was based on market transactions.

The fair value of the investment properties held by the Group was $2,506,230 thousand as of both
December 31, 2019 and 2018, respectively. In addition, management assessed that there is no significant
difference in the fair value of December 31, 2019 and 2018.

164
2,655,711$

529,963
1,603,400
1,089,690
100,141
19,33588,2243,430,753$$ 13,171,063

4,147,882

556,860
3,028,808
18,623
543,591

$

$

$

2018

8,863,861
2,819,575
1,261,611
64,213
19,103
142,700$

296,759
1,690,368
14,618653,966$

2019

December 31

Interest rates

Less: Current portion

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountb. Long-term borrowings

Interest rates

Bank loans - unsecured

a. Short-term debts

19. BORROWINGS- 43 -

0.55%-1.73%

0.92%-1.46%$ 60,686,148

9,354,457
36,330,211$ 53,514,891

$

2018

-

30,770,000
59,03376,395,635
15,709,487

1,929,827
34,064,099

December 31

-

2018

31,730,000
60,14367,663,783
14,148,892

$

2019

0.95%-1.07%$

December 31$ 380,000

2019

The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A350-900, ATR72-600, A321neo, A320neo and B777F aircrafts. For details on the aircraft purchase
contracts, refer to Note 36.

Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersNon-current

Temporary payments
Prepayments
Restricted assets
OthersCurrent

18. OTHER ASSETS

2008.2.262030.4.25

2018
2007.5.242030.4.25

December 31

Seven-year private unsecured bonds - issued at
par in January 2013; repayable in
January 2019 and 2020; 1.85% interest p.a.,payable annually.
Five-year unsecured bonds - issued at par in
May 2016; repayable in May 2020 and 2021;
1.19% interest p.a., payable annually.

Period2016.05.262021.05.26

2013.01.172020.01.17

2013.01.172018.01.17- 44 -

Five-year private unsecured bonds - issued at parin January 2013; repayable in January 2017and 2018; 1.6% interest p.a., payable annually.

Category

Related issuance conditions were as follows:

Less: Current portion and put option of convertible bonds

Unsecured corporate bonds first-time issued in 2013
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Unsecured corporate bonds first-time issued in 2017
Unsecured corporate bonds second-time issued in 2017
Unsecured corporate bonds first-time issued in 2018
Unsecured corporate bonds first-time issued in 2019
Convertible bonds - fifth-time issues
Convertible bonds - sixth-time issues

20. BONDS PAYABLE

2,750,000
4,700,000
5,000,000
2,350,000
3,500,000
4,500,000
3,500,000
5,752,625
32,052,625
10,000,000

Rate
(%)
Principal repayable in
1.60
January of 2017 and2018; indicator rate;
payable annually.
1.85
Principal repayable in
January of 2019 and2020; indicator rate;
payable annually.
1.19
Principal repayable in May
of 2020 and 2021; interest
p.a. payable annually.
(Continued)

Conditions

5,500,000
4,700,000
5,000,000
2,350,000
3,500,000
4,500,000
1,695,900
5,673,710
32,919,610
4,445,900

2018$ 28,473,710$

December 31$ 22,052,625

$

2019

The Group has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until December 2021, were used by the Group to guarantee commercial papers
issued. As of December 31, 2019 and 2018, the commercial papers were issued at discount rates of
1.1300%-1.3380% and 1.0693%-1.2960%, respectively.

Periods

2019

Bank loans (New Taiwan dollars) are repayable quarterly, semiannually or in lump sum upon maturity.
Related information is summarized as follows:

For information on secured bank loans which were secured by buildings, machinery equipment andflight equipment, refer to Note 35.

165

2016.09.272021.09.27

Five-year unsecured bonds - issued at par in
September 2016; repayable in September 2020
and 2021; 1.08% interest p.a., payableannually.
Three-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.2% p.a., payable annually.
Seven-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.75% p.a., payable annually.
Three-year private unsecured bonds - issued at
par in October 2017; repayable on due date;interest of 1.14% p.a., payable annually.
Five-year private unsecured bonds - issued at parin October 2017; repayable in October 2021
and 2022; 1.45% interest p.a., payableannually.
Five-year private unsecured bonds - issued at parin November 2018; repayable inNovember 2022 and 2023; 1.32% interest p.a.,payable annually
Five-year private unsecured bonds - issued at parin November 2018; repayable inNovember 2022 and 2023; 1.45% interest p.a.,payable annually
Five-year private unsecured bonds - issued at par
in June 2019; repayable in June 2023 and2024; 1.10% interest p.a., payable annually2013.12.262018.12.26

2018.01.302023.01.30

Five-year convertible bonds - issued at discountin December 2013; repayable in lump sum
upon maturity; 1.8245% discount rate p.a.

Five-year convertible bonds - issued at discountin December 2013; repayable in lump sum
upon maturity; 1.3821% discount rate p.a.

1.08
Principal repayable in
September of 2020 and2021; interest p.a. payableannually.
Principal repayable on due
1.20date; indicator rate;
payable annually.
1.75
Principal repayable on due
date; indicator rate;
payable annually.
1.14
Principal repayable on due
date; indicator rate;
payable annually.
1.45
Principal repayable in
October of 2021 and2022; indicator rate;
payable annually.
1.32
Principal repayable inNovember of 2022 and2023; indicator rate;
payable annually
1.45
Principal repayable inNovember of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable in June
1.10
of 2023 and 2024;
indicator rate; payableannually
1.32
Principal repayable in Juneof 2025 and 2026;
indicator rate; payableannually
Except for converting toshare capital or buying
back, principal repayable
in December of 2018
Except for converting toshare capital or buying
back, principal repayable
in December of 2023
(Concluded)

Conditions- 45 -The Company issued its 2016 first unsecured corporate bonds with a face value of $5,000,000 thousand,and the purchasers of the bonds included Mandarin Airlines Co., Ltd. and Sabre Travel Network (Taiwan)Co., Ltd., which held a face value of $300,000 thousand, and the amount was eliminated in the consolidated
financial statements.

2019.06.212026.06.21

Seven-year private unsecured bonds - issued at
par in June 2019; repayable in June 2025 and2026; 1.32% interest p.a., payable annually2019.06.212024.06.21

2018.11.302025.11.30

2018.11.302023.11.30

2017.10.122022.10.12

2017.10.122020.10.12

2017.05.192024.05.19

2017.05.192020.05.19

PeriodCategoryRate(%)$ 5,481,379$ 6,000,000(518,621)- 46 -

d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$13.2, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 29, 2019, the conversion price was adjusted to NT$12.6.

c. The Company may redeem the bonds at face value between April 30, 2018 and December 20, 2022
under certain conditions.

b. The holders can request that the Company repurchase their bonds at face value on the third anniversaryof the offering date. The holders can exercise the right to sell on January 30, 2021.

a. The holders may demand a lump-sum payment for the bonds upon maturity.

The Company issued the sixth issue of its unsecured convertible bonds, and the issuance conditions were as
follows:

Liability component at the date of issuance

Proceeds from issuance
Equity component

The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.8245% per annum on initial recognition.

e. The convertible bonds has expired on December 26, 2018, the Company has fully repayable in January
8, 2019, the related capital surplus - share option has reclassified as capital surplus - other.

d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$12.24, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of August 14, 2018, there was adjustment the conversion price to NT$11.38, corporate bonds with aface value of $3,316,800 thousand had been converted to 270,985 thousand units of ordinary shares.

c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.

b. The holders can request that the Company repurchase their bonds at 100.75% face value on the third
anniversary of the offering date. Because the holders can exercise selling rights on December 26, 2016,
the Company reclassified the bonds payable to “current portion of bonds payable” in December 2015.
The Company paid $994,705 thousand to the holders of the bonds payable who exercised the put
options, and the difference between the payment amount and carrying amount recognized was a loss on
the bonds payable buy back of $41,943 thousand, for which the Company reclassified the remaining
face value to non-current assets.

a. The holders may demand a lump-sum payment for the bonds upon maturity.

The Company issued the fifth issue of unsecured convertible bonds, and the issuance conditions were as
follows:

166$ 5,602,022

Liability component at the date of issuance

Carrying amounts
Current
Non-current

b. Lease liabilities - 2019

Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment

Additions to right-of-use assets

Carrying amounts
Land
Buildings
Flight equipment
Other equipmenta. Right-of-use assets - 20192019

21. LEASING- 47 -

8,153,382
824,955
62,052,701
2,579

376,425
798,933
10,721,575
2,157

5,863,625$ 2,340,873$ 15,801,724

December 31,
2019$ 11,899,090$$

For Year Ended
December 31,
2019$ 71,033,617$

December 31,
2019

The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 7, 2019. The cumulative face value of the bonds shall not exceed $3,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years.

$ 6,012,000(409,978)

Proceeds from issuance
Equity component

The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
1.09%-1.65%
0%-3.56%
2.49%-3.34%
1.06%-1.50%

December 31,
20192021.4.15-2028.5.15$1,457,058

Recognized in
Other
Comprehensive
IncomeFinancial liabilities for hedging current
Financial liabilities for hedging non-current

Subject

42,420,205

8,577,482$ (24,029)

Reclassified toIncome$Carrying Value$

737,895
1,717,953- 48 -

Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 36.

CAL Park, and Taoyuan International Airport Service signed a BOT contract with a land leaseagreement, for the details for the lease agreement, please refer to Note 35. The lease includes an option
to extend the lease, as it is not possible to extend the lease, the amount of the lease related to the period
covered by the option is not included in the lease liability. If the amount of the extended lease period is
included in the lease liability, the lease liability will increase by $873,293 thousand on December 31,
2019.

Refundable deposits
Credit guarantees

December 31,
2019

The information of refundable deposits and opening of credit letter due to rental of planes:

d. As lessees, China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes,
fifteen A330-300 planes, fifteen 737-800 planes, ten A320-200 planes, six ERJ190 planes and three
ART72-600 planes for operation, lease period are 6 to 12 years from February 2006 to May 2028. The
rental pricing method is partly a fixed amount of funds, and some of them are floating rents, floating
rents are according to benchmark ratio, the rent is revised every half year. When the lease expires, thelease agreements have no purchase rights.

For the year ended December 31, 2019

Influence of comprehensive income

December 31, 2019

Maturity Date

The Group specifics a part of US lease contract as a hedging instruments to avoid exchange fluctuations
is US dollar passenger revenue, and applies the accounting treatment of cash flow hedging. The lease
information is as follows:c. Financial liabilities under hedge accounting

Land
Buildings
Flight equipment
Other equipment

Range of discount rate for lease liabilities (include US lease hedging instruments):

167$
52,675$ (13,884,367)$ 596,000
1.0680%Present value of minimum lease payments

Interest rates- 49 -The Group had leased one A330-300 aircraft under sale-leaseback finance leases as of December
31, 2018. The lease terms started from June 2006 to April 2019. During the lease terms, the Groupretained all risks and rewards attached to the aircraft and engines and enjoyed the same substantive
rights as those prior to the transactions. The interest rates underlying all obligations under thesefinance leases were floating. Therefore, the minimum lease payments under the sale-leaseback
aircraft contracts do not include interest expenses.

$ 596,000-

December 31,
2018

Within one year
Beyond one year and within five years

Minimum lease payments - flight equipment

1) Sale-leaseback finance leases

2018

The Group chooses to waive the recognition of the contract provisions for the short-term leases and low
price lease, and does not recognize the related right-of-use assets and lease liabilities for such lease.

Short-term and low price lease payment
Total of lease cash outflow

For the Year
Ended
December 31,
2019

40,343$$ 636,343$ 633,398
2,945

4.756%

37,3982,945

40,34337,9982,974
40,972
(629)

$

$

$

Up to 1 year
Over 1 year to 5 years
Over 5 years- 50 -$ 78,030,370$ 11,785,442
44,559,429
21,685,499

December 31,
2018

The future minimum lease payments for the non-cancelable operating lease commitments were as
follows:

As of December 31, 2018, the refundable deposits paid by the Group under operating lease
contracts were $693,466 thousand. Some of the guarantees were secured by credit guarantees, andoutstanding credit guarantees as of December 31, 2018 were $1,682,774 thousand.

For the operating lease arrangements, please refer to the consolidated financial statements for theyear ended December 31, 2018.

3) Operating lease arrangements (include sale-leaseback operating leases)

Total amount of present value of minimum lease payments
Current
Noncurrent

Discount rate

Within one year
Beyond one year and within five years

Present value of minimum lease payments cargo terminal and other

Present value of minimum lease payments

g. Other lease information

The Group uses operating lease agreement for investment properties, refer to Note 16.

Less: Finance costs

Within one year
Beyond one year and within five years

Minimum lease payments - cargo terminal and otherDecember 31,
2018

Taiwan Air Cargo Terminal Co. (“TACT”) entered into a terminal construction contract. Refer toNote 36 for the terms of the contract. Dynasty Holiday Co., Ltd. signed a long-term equipment lease
contract, and the lease contract is a finance lease contract.

2) Finance leases

f. In order to revitalize assets and strengthen the financial structure, the Company sold five of its own
A330-300 aircraft to Altavair L.P. in September 2019 by sale-and-leaseback for $4,905,660 thousand.
The lease term was 5 to 6 years and a loss of $103,775 thousand was incurred. The lease agreement had
no terms for lease renewal or offtake rights. The annual lease payments for each aircraft are US$5,389
thousand to US$5,437 thousand.

Tigerair Taiwan Co., Ltd. signed a rental letter of intent for eight A321neo with ICBC Lease
Corporation, which is expected to be introduced in 2021.

The Company signed a rental letter of intent for eight A321neo with CALC Lease Corporation, which is
expected to be introduced in 2022.

e. The Company signed a rental contract for six A321neo with Air Lease Corporation, which is expected
to be introduced between 2021 and 2022.

168
2,895,535
20,401,549

2,493,551
18,956,569$$

360,393
10,011,464$ 10,371,857$

Current
Non-current

$

2018

8,794,539

321,075
8,473,464

8,794,539

December 31$ 21,450,120$ 23,297,084

2019$ 19,546,455
1,903,665$ 21,450,120$$ 21,060,773
2,236,311$ 23,297,084$

3,822,018
1,167,214
1,031,700
266,268
2,237,409
1,151,578
484,341
3,985,670$ 14,146,198

$

2018

December 31
2019
2018
Contract
Contract
Liabilities
Liabilities$ 10,371,857- 51 -

3,723,213
1,262,878
1,208,875
219,660
2,040,718
1,122,532
509,520
3,100,576$ 13,187,972

$

2019

$ 11,735,495

For the Year
Ended
December 31,
2018

December 31

Operating leases - aircraft

24. PROVISIONS

Current
Non-current

Frequent flyer programs
Advance ticket sales

23. CONTRACT LIABILITIES/DEFERRED REVENUE

Fuel costs
Ground service expenses
Repair expenses
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

22. OTHER PAYABLES

Minimum lease payments

The lease payments recognized in expense for the current period were as follows:

8,794,539
4,608,924(2,799,314)(232,292)

8,794,539

8,489,308
3,386,052(3,310,089)
229,268$ 10,371,857

$

$

$

- 52 -The defined benefit plan adopted by the Company and in accordance with the Labor Standards Law isoperated by the government. Pension benefits are calculated on the basis of the length of service andaverage monthly salaries of the six months before retirement. The Company and subsidiary contributeamounts equal to 2%-15% of total monthly salaries and wages to a pension fund administered by thepension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in thecommittee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If
the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees
who conform to retirement requirements in the next year, the Group is required to fund the difference in
one appropriation that should be made before the end of March of the next year. The pension fund ismanaged by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Group has no right toinfluence the investment policy and strategy.

b. Defined benefit plans

Employees based in the United states and Japan of China Airlines Co., Ltd. and subsidiaries are
members of the United states and Japan government retirement benefit plans. Subsidiaries should
appropriate a specific portion to retirement benefit plans. The obligation to the government retirement
benefit plans of China Airlines Co., Ltd. and subsidiaries is to appropriate a specific portion amount.

The Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed
defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’
individual pension accounts at 6% of monthly salaries and wages.

a. Defined contribution plans

25. RETIREMENT BENEFIT PLANS

The Group leased flight equipment under operating lease agreements. Under the contracts, when the leases
expire and the equipment is returned to the lessor, the flight equipment has to be repaired according to the
expected years of use, number of flight hours, flight cycles and the number of engine revolutions. The
Group had existing obligations to recognize provisions when signing a lease or during the lease term.
Tigerair Taiwan Co., Ltd. also leased flight equipment under operating lease agreements. In accordance tothe contract, Tigerair must pay maintenance reserves monthly according to the actual number of flight
hours.

Balance at December 31, 2019

Balance at January 1, 2019
Additional provisions recognized
Usage
Effect of exchange rate changes

Balance at December 31, 2018

Balance at January 1, 2018
Additional provisions recognized
Usage
Effect of exchange rate changes

Aircraft Lease
Contract

169

Balance at December 31, 2019

Balance at January 1, 2018
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (gain) loss - changes indemographic assumptions
Actuarial (gain) loss - changes in financial
assumptions
Actuarial (gain) loss - experience
adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
OthersBalance at December 31, 2018
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (gain) loss - changes indemographic assumptions
Actuarial (gain) loss - changes in financial
assumptions
Actuarial (gain) loss - experience
adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Others9,435,035(236,287)(1,486,550)
1,210,839(19,064)(8,661,474)(86,234)(86,234)(308,223)(308,223)(1,418,970)
1,452,632$ (9,022,269)

344, 716
727,899
1,088,153(1,210,839)(109,336)
17,464,856
1,321,600
161,808
1,483,408
15,959440,374
633,683
1,090,016(1,452,632)(128,344)- 53 -$-

15,538$ 18,457,304

633,683
781,793(1,418,970)(128,344)(236,287)-

440,374

15,959(308,223)

727,899
851,866(1,486,550)(128,400)
8,803,382
1,321,600
75,574
1,397,174

344, 716

15,538(236,287)

1,384,213
80,6881,464,901(82,595)(82,595)

8,101,565

1,384,213
163,283
1,547,496$$ (8,047,817)

Fair Value ofthe Plan Assets

8,803,382

Net Defined
BenefitLiabilities(Assets)$$ 17,464,856(8,661,474)

2018$ 16,149,382

Present Valueof the Defined
BenefitObligation

Movements in net defined benefit liabilities (assets) were as follows:$

Deficit (net defined benefit liabilities)

9,435,035$ 18,457,304(9,022,269)

December 31

Present value of funded defined benefit obligation
Fair value of plan assets

2019

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans
were as follows:

0.63%-1.10%
1.00%-2.50%

2018
0.86%-1.35%
1.00%-2.50%

December 31$

969,324(927,180)(939,308)
1,000,771$

December 31

811,485(760,793)(777,193)
841,4882018

8-11 years

The average duration of the defined benefit obligation- 54 -$ 930,963

20188-12 years$ 916,927

December 31
The expected contributions to the plan for the next year

2019

The sensitivity analysis presented above may not be representative of the actual change in the present
value of the defined benefit obligation as it is unlikely that the change in assumptions would occur inisolation of one another as some of the assumptions may be correlated.

Discount rate(s)0.5% increase
0.5% decrease
Expected rate(s) of salary increase
0.5% increase
0.5% decrease2019

If possible reasonable change in each of the significant actuarial assumptions will occur and all otherassumptions will remain constant, the present value of the defined benefit obligation would increase(decrease) as follows:

Discount rate(s)Expected rate(s) of salary increase2019

The actuarial valuations of the present value of the defined benefit obligation were carried out by
qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as
follows:3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the
future salaries of plan participants. As such, an increase in the salary of the plan participants will
increase the present value of the defined benefit obligation.

2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the
mandated management. However, in accordance with relevant regulations, the return generated byplan assets should not be below the interest rate for a 2-year time deposit with local banks.

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to thefollowing risks:

170
315,114
3,909
33,513
11,747
118,962
409,978
1,129,080
466,604

315,1143,303
33,513
11,747955
409,978
466,6042018$ 1,241,214$

December 31$ 2,488,907

$

2019

2018
6,000,000$ 60,000,000$ 54,209,846

December 31
7,000,000$ 70,000,000$ 54,209,846

2019- 55 -

According to amended Company Act, where the Company made profit in a fiscal year, the profit shallbe first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10%of the remaining profit, setting aside or reversing a special reserve in accordance with the laws andregulations, and then any remaining profit together with any undistributed retained earnings shall be
used by the Company’s board of directors as the basis for proposing a distribution plan with due
consideration of any future aircraft acquisition plans and fund demand, which should be resolved in theshareholders’ meeting for the distribution of dividends and bonuses to shareholders by cash or shares(cash dividends cannot be less than 30% of total dividends distributed). However, if the Company’s
profit before tax in a fiscal year after deductions for the abovementioned items is not sufficient forearnings distribution, retained earnings can be used as a supplement for the deficiency.

c. Appropriation of earnings and dividend policy

The capital surplus from long-term investments, employee share options expired, dividends distributed
to subsidiaries and retirement of treasury shares may not be used for any purpose. Besides, capitalsurplus from conversion of employee shares and convertible bonds payable may not be used for any
purpose.

The capital surplus from shares issued in excess of par (including additional paid-in capital fromissuance of ordinary shares and treasury share transactions) and the difference in sale price of shares ofsubsidiaries and book value may be used to offset deficits; in addition, when the Company has no
deficit, such capital surplus may be distributed as cash dividends or transferred to capital (but limited toa certain percentage of the Company’s paid-in capital on yearly basis).

Issuance of convertible bonds in excess of par value andconversion premium
Dividend distributed to subsidiaries
Retirement of treasury shares
Expired employee share options
Long-term investments
Bonds payable equity component
Difference in sale price of shares of subsidiaries and book value
Othersb. Capital surplus

Numbers of authorized shares (in thousands)
Amount of authorized shares
Amount of issued shares

Ordinary sharesa. Share capital

26. EQUITY$

145,831
118,810
1,193,670$0.2181820086

Dividends Per
Share (NT$)$

114,493
1,136,278$0.20960737

Dividends Per
Share (NT$)- 56 -The offsetting of deficits for 2019 is subject to the resolution of the shareholders in theshareholder’s meeting to be held on June 23, 2020.

On March 18, 2020, the board proposed to offset the accumulated deficit in 2019. The deficit
included a net loss of $1,199,798 thousand, negative adjustment of other retained earnings of$577,427 thousand, the remaining amount of accumulated deficit was $1,777,225 thousand.

3) Offsetting deficits in 2019

Company reversed special reserve of $105,843 thousand.

Legal reserve
Cash dividends

Appropriationof Earnings

The appropriation of earnings for 2018 was resolved in the shareholders’ meeting on June 25, 2019.
The appropriation and dividends per share were as follows:

2) Appropriation of earnings in 2018

Legal reserve
Special reserve
Cash dividends

Appropriationof Earnings

The appropriation of earnings for 2017 was resolved in the shareholders’ meeting on June 27, 2018.
The appropriations and dividends per share were as follows:

1) Appropriation of earnings in 2017

The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.

The Company shall set aside profits as a legal reserve untill the legal reserve amounts to the authorized
capital. The legal reserve could be used for making good the deficit of the Company. If the Company
has no deficit in a fiscal year, the Company can distribute all or part of the capital surplus by cash or
shares with due consideration of finance, marketing and management requirements in accordance withthe laws and regulations.

171

-

-

25,322-(9,664)

Balance at December 31,
2018

-

-

(53,411)8,368-(54,707)

Balance at December 31,
2019- 57 ---

11,835

$

-

-

$

-

-

-

-

$

(65,246)$

Balance at January 1,
2019
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at
FVTOCI
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodDisposal of subsidiaries
Transfers of initialcarrying amount ofhedged items(9,664)

-

$

$

$

-

-

1,198
(5,773)

-

-

-

$

930

-

-

$

-

-

-

107,262-

64,538105

79,392(14,854)---

42,61942,619-268(1,209)547--

42,35142,351

29,897

$

-

1,774

(34,986)$(1,774)(34,986)

Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI-$

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsBalance at January 1,
2018
Adjustments on initial
application of IFRS 9
Balance at January 1,
2018 after IFRS 9
adjustments
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at
FVTOCI
Effect of change in tax
rate
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodTransfers of initialcarrying amount ofhedged items

Exchange
Differences on
Translating
Foreign
Operations

The movement of other equity items is as follows:d. Other equity items

$

$

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

74,429(74,429)

Cash Flow
Hedges-(603)

1,119,013-(279,604)

20,014

1,378,603-

25,26825,268

12,11887,5792,530(24,117)-

31,731

77,435-(74,429)(74,429)$ 1,143,678

$

$

$

Gain (Loss) on
Hedging
Instruments(603)

1,130,140
8,473

79,392(282,623)

20,014

1,378,603(65,246)

58,22358,223

12,118113,1692,519(29,343)930

31,731

77,43529,897(67,064)

40,577(107,641)$ 1,196,233

$

$

$

Total

$ 3,578,345

8,528
22,586(89,955)(24,957)
619,387(416,438)$ 2,965,512
524,796(7,706)(100,136)(13,227)$ 2,965,512

105
26,888(72,925)565,963(171,019)$ 2,134,282
482,323(3,330)(69,654)(46)

For the Year Ended December 31
2019
2018

-

Number of shares, December 31, 2019

Mandarin Airlines
Dynasty Aerotech International Corp.

December 31, 2019

- 58 -

2,075
814

Shares(In Thousands)-

Number of shares, January 1, 2019
Addition during the year
Reduction during the year

Subsidiary-

50,000(50,000)

Number of shares, December 31, 2018

Number of shares, January 1, 2018
Addition during the year
Reduction during the year

Purpose of Treasury Shares

Buy Back toWrite off

$ 26,172$ 18,796
7,376

Carrying
Amount

2,889

2,889
-

2,889

2,889
-

Company’s
Shares Held by
Its Subsidiaries$ 26,172(Continued)$ 18,796
7,376

Market Value

2,889

2,889
-

2,889

2,889
50,000(50,000)

Total(Shares in Thousands)

Treasury shares are the Company’s shares held by its subsidiaries as of December 31, 2019 and 2018
were as follows:f. Treasury sharesEnding balance

Disposal of subsidiaries
Disposal of part equity of subsidiaries
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries

Beginning balance
Net income attributable to non-controlling interests
Foreign exchange differences
Actuarial gains and losses on defined benefit plans
Cash flow hedge on changes in fair value of hedging instruments
Cumulative gain (loss) arising on changes in fair value ofhedging instruments reclassified to profit or loss
Effect on income tax

e. Non-controlling interests

172
2,075
814

$ 22,821
8,956$ 31,777(Concluded)$ 31,777

Market Value$ 22,821
8,956

Carrying
AmountInterest income
Subsidy income
Dividend income
Othersb. Other income

Passenger
Cargo
Othersa. Revenue

27. NET INCOME- 59 -$ 170,711,607$ 168,444,160$ 330,710
11,2009,603
254,940$ 606,453$ 417,446
38,621
21,422
241,499$ 718,988

For the Year Ended December 31
2019
2018

$ 108,345,648
49,847,065
12,518,894$ 111,413,435
43,793,256
13,237,469

For the Year Ended December 31
2019
2018

To maintain the Company’s credit standing and shareholders’ rights and interests, the board of directors
decided to buy back shares of the Company from Taiwan Stock Exchange at a price from $9 to $14 pershare. The expected period of purchase is from August 10, 2018 to October 9, 2018. As of 50,000
thousand shares had been repurchased. The treasury shares held by the Company has retired on
December 18, 2018, share capital decreases $500,000 thousand, additional paid-in capital in excess of
par-ordinary share decreases $2,906 thousand and additional paid-in capital - treasury share increases$33,513 thousand. Under the Securities Exchange Act, the treasury shares held by the Company cannot
be pledged and are not entitled to dividends distribution and voting rights, etc.

The shares of the Company held by its subsidiaries were treated as treasury shares. The subsidiaries can
exercise shareholders’ right on these treasury shares, except for the right to subscribe for theCompany’s new shares and voting rights.

The above acquisitions by subsidiaries of the Company’s shares in previous years was due toinvestment planning.

Mandarin Airlines
Dynasty Aerotech International Corp.

December 31, 2018

Subsidiary

Shares(In Thousands)
32,460(10,462)
27,5807,656(141,611)(103,775)(285,660)$ 32,799,637

Depreciation and amortization expense$ 32,601,400$ 30,927,997
1,673,403$ 20,702,033
11,899,090
277
198,237

Property, plant, equipment
Right of use assets
Investment properties
Intangible assets

An analysis of depreciation by function
Operating costs
Operating expenses

41,925
1.16%-1.45%$$ 19,325,083(Continued)$ 18,648,142
676,941$ 19,517,062$ 19,324,804
279
191,979

For the Year Ended December 31
2019
2018

1.01%-1.35%

Capitalization rate

46,528$ 1,379,985

412,422
949,483
18,080$ 3,340,119$-

429,457
771,280
2,139,382$$

e. Depreciation and amortization expense$ (534,848)$ (270,597)(368,992)
11,168450,195
41,843(75,437)(50,000)(273,028)

For the Year Ended December 31
2019
2018

$ (473,812)$

For the Year Ended December 31
2019
2018

Capitalization interest- 60 -

Interest expense
Bonds payable
Bank loans
Interest on obligations under financial leases
Loss on derivatives designated as hedging instruments in cash
flow hedge accounting relationships reclassified from equity
to profit or loss

d. Finance costs(Loss) gain on disposal property, plant and equipment(Loss) gain on non-current assets held for saleNet gain (loss) on financial assets at FVTPL
Gain (loss) on disposal of investments
Gain (loss) on foreign exchange, net
Impairment loss on non-current assets held for saleImpairment loss on property, plant and equipment
Loss on sale and - leaseback
Othersc. Other gains and losses

173

198,237$$$
191,979(Concluded)

10,597
181,382$ 23,857,265
4,848,782$ 28,706,047$ 23,699,685
4,592,922$ 28,292,607$ 26,702,231

2,003,816$ 26,320,624$

538,915
1,464,901$ 20,910,604
5,791,627

1,971,983$$$ 20,813,757
5,506,867

574,809
1,397,174$

For the Year Ended December 31
2019
2018

12,380185,857$$$

578,185- 61 -- 62 -

578,185

808,565
The Income Tax Law of the ROC was amended and, starting from 2018, the corporate income tax rate
was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable tounappropriated earnings was reduced from 10% to 5%.

1,861(933,932)-

24,534(334)$

1,088,650
10,592586,135(5,546)616,250
7,391
20,662(25,730)35
22,786$$ 3,081,249

16,936(45,861)
378
8,468
11,157(19,362)
1,680(96,817)

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2019 and 2018 is available on the Market Observation Post System
website of the Taiwan Stock Exchange.

$

$

$

Income tax expense recognized in profit or loss

Income tax expense calculated at the statutory rate (% for 2019,20% for 2018)
Effect on different tax of subsidiaries govern by other region
Effect on adjustment to income tax
Non-deductible expenses in determining taxable income
Tax-exempt income
Income tax on unappropriated earnings (5%)
Income basic tax
Oversea income tax expense
Unrecognized loss carryforwards, investment tax credits andtemporary difference
Adjustments for prior years’ tax
Adjustments to deferred tax attributable to changes in tax rates
and laws
Adjustments to changes in tax rates and laws
Other

Profit before tax

For the Year Ended December 31
2019
2018

808,565

1,861(933,932)

24,534-

264,527
10,59235
1,465,482$$

35,149523,670(5,546)378

For the Year Ended December 31
2019
2018

A reconciliation of accounting profit and income tax expense is as follows:

Current tax
Current year
Prior year adjustment
Income tax on unappropriated earnings
Deferred tax
Current year
Adjustments to deferred tax attributable to changes in tax rates
and laws
Effect of income tax
Income tax expense recognized in profit or loss

The major components of tax expense were as follows:a. Income tax expense recognized in profit or loss

28. INCOME TAX

Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date that the annual consolidated financial statements are authorized for issue
are adjusted in the year that the bonuses and remuneration were recognized. If there is a change in the
proposed amounts after the annual consolidated financial statements were authorized for issue, thedifferences are recorded as a change in the accounting estimate.

According to the Company’s articles, the Company accrued employees’ compensation at rates of noless than 3% of the net profit before income tax and employees’ compensation, and accrued profit
bonus at a certain rate of profit before tax on the basis of the collective agreement signed with the China
Airlines Employees Union. The employees’ compensation and profit bonus for the year ended
December 31, 2018 was $51,656 thousand and $594,810 thousand. For the year ended December 31,
2019, the Company has experienced a deficit, and therefore, no employee’s compensation is estimated.

An analysis of employee benefits expense by function
Operating costs
Operating expenses

Other employee benefits
Salary expenses
Personnel service expenses

Post-employment benefits
Defined contribution plan
Defined benefit planf. Employee benefits expense

An analysis of amortization by function
Operating costs
Operating expenses

For the Year Ended December 31
2019
2018

174

Temporary differences
Unrealized foreign exchange gains
Others (Note)

Deferred tax liabilities

Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserves
Allowance for reduction of inventory
OthersDeferred tax assets

188,447$- 63 -

17
188,430$$$$ 5,152,070$$

72,761

81,760(8,999)13,078(29,560)
82,917428,155(38,854)(429,580)

Recognized in
Profit or Loss

$ 1,765,052
510,060
1,811,848
335,711729,399

Beginning
Balance

For the year ended December 31, 2019c. Deferred tax assets and liabilities

$

$

$

$

295,177

295,177

171,472

156,359
15,113

Recognized in
Other
Comprehensive
Income

$

$

$

$

757

757

1,006

1,006

Exchange
Difference$ (123,705)

Total income tax recognized in other comprehensive income

13,454(14,854)(278,664)
156,359-$

2019

Recognized in other comprehensive income
Translation of foreign operations
Fair value changes of financial assets at FVTOCI
Hedging instruments fair value revaluation for cash flow
hedging
Actuarial gain or loss on defined benefit plan
Effect of income tax

Deferred tax

b. Income tax recognized in other comprehensive income(24,128)
187,368
10,893(4,657)547$$
557,142

81,777475,365$ 5,337,626$ 1,891,851
592,977
2,240,003
296,857
315,938

EndingBalance$ 170,023

$

2018

915

197,555

31,010165,630
$

$

(898)

(20,165)(31,010)
11,743
$

$

$

$

7,173

7,173

-

177,196(18,546)--

195,742

Recognized in
Other
Comprehensive
Income

$

$

$

$

-

3,884

3,884

-

479

479
-

Exchange
Difference

$

$

$

$

-

-

-

8,639

1,427
-

-

7,212

Acquisition
Consolidated$$

188,447

188,43017$ 5,152,070

335,711729,399-

510,060
1,811,848$ 1,765,052

EndingBalance

Included adjustments on initial application due to tax rate changes $6,873 thousand fromIFRS 9.

$$(553,576)$ 5,519,332$

96,596(397,832)(821,417)

239,115
1,143,871
821,417

180,560
83,954
304,563$426,106
1,507,285$ 1,381,538

Recognized in
Profit or Loss

Difference in depreciation

Loss carryforwards
2019
2021
2022
2025
2026
2027
2028
2029

- 64 -

1,348,096

6,814,896$$

2,899,496
619,799
18,124
546,899
68,415
1,706,913
955,250

2018$

90,350$ 17,728,773$ 11,790,770
2,899,496
620,769
18,124
818,198
68,415
1,513,001-

December 31

$

2019

Deductible temporary differences, and unused loss carryforwards for which no deferred tax assets havebeen recognized in the consolidated balance sheets.

Note:

Temporary differences
Unrealized foreignexchange gains
Depreciation difference
from fixed assets
Others (Note)

Deferred tax liabilities

Temporary differences
Defined benefit plans
Frequent flyer
programs
Maintenance reserves
Allowance for
reduction of
inventory
OthersLoss carryforwards

Deferred tax assets

Beginning
Balance

For the year ended December 31, 2018

175

18,124
31,476
68,415
103,151
195,093416,259$

396,545$$

312,724
83,821$$ 6,002,092$ 2,899,496
619,799
202,699
1,519,941
760,157

UnusedAmount- 65 -

Earnings used in the computation of diluted earnings per share

Earnings used in the computation of basic earnings per share
Effect of potentially dilutive ordinary shares:
Interest on convertible bonds (after tax)

Basic earnings per share
Diluted earnings per share$ (1,199,798)$ 1,871,824

81,463

0.33
0.32

-

$
$

$ 1,790,361(0.22)(0.22)$ (1,199,798)$$

For the Year Ended December 31
2019
2018

The numerators and denominators used in calculating earnings per share were as follows:

29. EARNING PER SHARE

The income tax returns for 2017 of the Company and its subsidiaries have been examined by the tax
authorities.

e. Income tax assessment

2025
2026
2027
2028
2029

Taiwan Aircraft Maintenance And Engineering Co., Ltd.

2026
2028

Mandarin Airline Co., Ltd.

2021
2022
2026
2028
2029

China Airlines, Ltd.

Expiry Yeard. Unused tax loss carryforwards as of December 31, 2019 were as follows:

5,919,881

457,4818,821

5,418,096

5,453,579

5,418,096

918,033
553,390
186,883
49,4791,707,785(486,356)$ 1,221,429$- 66 -

e. The bargain purchase benefit of $26,615 thousand of Kaohsiung Catering (the date of acquisition) was
measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s
previously held equity interests in the acquiree over the net of the acquisition-date amounts of theidentifiable assets acquired and the liabilities assumed.

d. The non-controlling interest of Kaohsiung Catering (46.33% of equity) was valued $565,888 thousand;at the fair value of the identifiable net assets attributed to the non-controlling interest on the date ofacquisition.

c. The Company acquired the control of Kaohsiung Catering (the date of acquisition), and the 35.78%
equity held by the equity method was remeasured at the fair value of the acquisition date and thedifference recognized in gain on disposal of investment is $69,671 thousand.

Identifiable net assets

AssetsCurrent assets (included cash and cash equivalents of $380,512)
Property, plant and equipment
Intangible assets
Other assets
Total assets
Liabilities

b. Assets acquired and liabilities assumed at the date of acquisition.

a. Acquisition-related cash amounting to $243,743 thousand.

As stated in Note 14, the other disclosures of the Group’s acquisition of Kaohsiung Catering on March 7,
2018 are as follows:

30. BUSINESS COMBINATIONS

If the Group offered to settle compensation or bonuses paid to employees in cash or shares, the Groupassumed the entire amount of the compensation or bonuses would be settled in shares and the resulting
potential shares were included in the weighted average number of shares outstanding used in thecomputation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential
shares was included in the computation of diluted earnings per share until the number of shares to be
distributed to employees is resolved in the following year.

Weighted average number of ordinary shares used in thecomputation of diluted earnings per share

Weighted average number of ordinary shares in computation of basic
earnings per share
Effect of potentially dilutive ordinary shares:
Convertible bonds
Employees’ compensation or bonuses issued to employees

Thousand unit

For the Year Ended December 31
2019
2018

176
$ 1,823,950$ 229,665$ 50,934

Net assets disposed of- 67 -

Consideration received in cash and cash equivalents
Less: Cash and cash equivalent balances disposed ofd. Net cash inflow on disposal of subsidiaries$

Gain on disposal$ (17,413)$ 34,036(51,449)

7,656$ 34,036(50,934)
10,187
24,957(10,590)

Consideration received
Net assets disposed of
Fair value of equity
Non-controlling interests
Reclassification of other comprehensive income in respect of subsidiaries

c. Gain on disposals of subsidiaries$ 51,449
47,51017,035(49,742)(15,318)$ 34,036

Current assets
Cash and cash equivalents
Other current assets
Non-current assets
Current liabilities
Non-current liabilities

b. Analysis of assets and liabilities on the date control was lost

Consideration received in cash and cash equivalents

a. Consideration received from disposals

On January 21, 2019, the board of directors of the Company decided to sell part of Dynasty Holidays to
H.I.S. Taiwan Co., Ltd. for disposal price of $34,036 thousand and a disposition of $7,656 thousand. Afterthe disposal, the proportion of ownership decrease from 51% to 20%, loss control to the subsidiary.

31. DISPOSAL OF SUBSIDIARIES

Had these business combinations been in effect at the beginning of the annual reporting period, theGroup’s revenue from continuing operations would have been $171,039,102 thousand and the profit
from continuing operations would have been $2,310,159 thousand. This pro-forma information is forillustrative purposes only and is not necessarily an indication of the revenue and results of operations of
the Group that actually would have been achieved had the acquisition been completed on January 1,
2018, nor is it intended to be a projection of future results.

Revenue
ProfitKaohsiung
Catering

From the acquisition date, the operating results from the acquired Company, which are included in the
consolidated statements of comprehensive income, are as follows:f. Impact of acquisitions of the Group$ 32,052,625
67,663,783$ 32,062,874
67,663,783

Fair Value

Fair Value$ 31,651,865
74,404,225

2018$ 33,919,610
76,395,635

Carrying
AmountDecember 31- 68 -b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); anda) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;

The following table provides an analysis of financial instruments that are measured subsequent toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:

2) Fair value measurements recognized in the balance sheets

Some long-term borrowings and capital lease obligations are floating-rate financial liabilities, so
their carrying amounts are their fair values. As of December 31, 2019 and 2018, the fair values oflong-term borrowings and private bonds with fixed interest rates are estimated at the present valueof expected cash flows discounted at rates of 0.67% and 0.68%, respectively, prevailing in themarket for long-term borrowings (Level 2). Fair values of bond payable trading in OTC and basedon quoted market prices (Level 1).

Bonds payable
Loans and debt

Financial liabilities

Carrying
Amount2019

Except as detailed in the following table, the management considers the carrying amounts offinancial assets and financial liabilities recognized in the financial statements as approximating theirfair values.

1) Financial instruments not evaluated at fair value

a. Fair values of financial instruments

33. FINANCIAL INSTRUMENTS

To support its operating activities and purchase of aircraft, the Group needs to maintain sufficient capital.
Therefore, the goal of capital management is to ensure financial resources and operating plan is able tosupport the future working capital, capital expenditures, debt repayment and dividend expenses and otherneeds.

The Group manages its capital to ensure that entities in the Group will be able to continue as going
concerns while maximizing the return to stakeholders through the optimization of the debt and equity
balance. The capital structure of the Group consists of net debt (borrowings offset by cash and cash
equivalents) and equity of the Group comprising issued capital, reserves, retained earnings, other equity andnon-controlling interests.

32. CAPITAL MANAGEMENT

177

Financial assets at
FVTPL
Domestic money
market funds

December 31, 2018$

- 69 -

206,001

Level 1

$ 50,997,687

Financial liabilities forhedging-$

Financial assets forhedging

-

-

-

-

511,758-

511,758

$

$

$

$

$

Level 1

Financial liabilities at
FVTPL
Derivative
instruments

Financial assets at
FVTOCI
Investments in equity
instruments
United shares domestic
Unlisted shares foreign

Financial assets at
FVTPL
Domestic money
market funds
Foreign exchange
agreement

December 31, 2019

$

$

$

$

$

$

$

$

-

Level 2-37,069147

11,749

-

-

-

434

434

Level 2

$

$

$

$

$

$

$

$

-

-

-

Level 3

-

3,955

9,479

-

209,221

182,356

26,865

Level 3

9,626

11,749209,221

182,356

26,865512,192434

511,758$

206,001(Continued)

Total$ 51,038,711

$

$

$

$

$

$

Total

c) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).

-

-

-

-

-

-

$

$

$

$

$

-

-

-

560

28,005

221

Level 2

$

$

$

$

$

$

$

$

$

$

560
(Concluded)

32,906

221

132,191

110,445

21,746

Total

Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period andcontract forward rates, discounted at a rate that reflects thecredit risk of various counterparties.

Discounted cash flows.

Valuation Techniques and Inputs- 70 -The domestic unlisted equity investment is based on the comparative company valuation toestimate the fair value. The main assumptions are based on the multiplier of the market price ofthe comparable listed company and the net value per share, which have considered the liquidity
discount. The higher the multiplier or the lower the liquidity discount, the higher the fair valueof the relevant financial instruments.

The fair values of foreign exchanges and fuel options are determined using option pricing
models where the significant unobservable inputs are implied fluctuation. Changes in theimplied fluctuations used in isolation would result in an increase or decrease in the fair value ofthe foreign exchange forward contracts and fuel options.

e) Valuation techniques and inputs applied for Level 3 fair value measurement

Derivatives - foreign exchange
forward contracts andinterest rate swaps

Financial Instrumentsd) Valuation techniques and inputs applied for Level 2 fair value measurement

-

4,901

-

132,191

110,445

21,746

Level 3

There were no transfers between Levels 1 and 2 in the current periods.

$$

Financial assets forhedging
Financial liabilities forhedging$$$

Financial liabilities at
FVTPL
Derivative
instruments

Financial assets at
FVTOCI
Investments in equity
instruments
United shares domestic
Unlisted shares foreign

Level 1

178
4,901
4,901

$

$

Balance at January 1, 2018
Adjustments on initial application of IFRS 9
Other comprehensive income recognized during theperiodBalance at December 31, 2018

606

84,07547,510$ 132,191$$ 209,221$ 132,191
77,030$11,74951,038,711
134,240,993

$

2018

221
560
127,271,892

206,001
32,90640,496,618
132,191

December 31

512,192
9,626
41,479,556
209,2212019- 71 -

Note 2: The balances include financial liabilities measured at amortized cost, which compriseshort-term debts, short-term notes payable, notes and accounts payable, accounts payable related parties, other payables, bonds payable, long-term loans, lease liabilities payable, leaseliabilities, provisions, part of other current liabilities, part of other non-current liabilities andguarantee deposits.

Note 1: The balances include loans and receivables measured at amortized cost, which comprise cash
and cash equivalents, notes and accounts receivable, accounts receivable - related parties,
other receivables, refundable deposits, other financial assets and other restricted financial
assets.

Financial liabilities at FVTPL
Financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

Financial liabilities

Financial assets at FVTPL
Financial assets for hedging
Financial assets at amortized cost (Note 1)
Financial assets at FVTPCI - equity instrument investment

Financial assets

b. Categories of financial instruments

Because some financial instruments and nonfinancial instruments may not have their fair values
disclosed, the total fair value disclosed herein is not the total value of the Group’s collective
instruments.

-

5,524

$

Balance at December 31, 2019

4,901
623

EquityInstruments

Derivative
Instruments
$

80%
80%

Liquidity
Discount

0.75-13.23
0.74-15.29

Balance at January 1, 2019
Recognized in other comprehensive income

December 31, 2019
December 31, 2018

Multiplicator

The movements of Level 3 financial instruments are as follows:- 72 -The Group’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the next year. Those transactions
are designated as cash flow hedges. When forecasted purchases actually take place, basis
adjustments are made to the initial carrying amounts of hedged items.

When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be a increase in pre-tax profit and increase in pre-tax othercomprehensive income gain and losses for the year ended December 31, 2019 of $105,266
thousand and $1,612,256 thousand and a decrease in pre-tax profit and decrease in pre-tax othercomprehensive income gain and loss for the year ended December 31, 2018 of $91,397
thousand and $13,620 thousand, respectively.

The following details the Group’s sensitivity to a one dollar increase or decrease in the New
Taiwan dollar (the functional currency) against the relevant foreign currencies (i.e. the US
dollar). This is the sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis included only outstanding foreign
currency denominated monetary items and foreign currency forward contracts designated as
cash flow hedges and adjusts their translation at the end of the reporting period for a one US
dollars increase/decrease against the New Taiwan dollar.

The Group was mainly exposed to the US dollar.

Sensitivity analysis

The Group enters into foreign currency option contracts to hedge against the risks on change in
related exchange rates, enters into forward contracts to hedge against the risks on changes inforeign-currency assets, liabilities and commitments in the related exchange rates.

a) Foreign currency risk

The Group is primarily exposed to the financial risks of changes in foreign currency exchange rates
and interest rates. The Group entered into derivative financial instruments to manage its exposure toforeign currency risk and interest rate risk. The Group enters into foreign exchange forward
contracts, foreign currency option contracts, and interest swap contracts with fair values that arehighly negatively correlated to the fair values of hedged items and evaluates the hedging
effectiveness of these instruments periodically.

1) Market risk

In addition, the Group has a risk management committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging percentage. This
committee informs the Group of global economic and financial conditions, controls the entire financial
risk resulting from changes in the financial environment and fuel prices, and develops the strategy andresponse to avoid financial risk with the assistance of financial risk experts to effect risk management.

The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest
rates, in exchange rates and in fuel prices, the Group has its operating costs stay within a specified
range by using appropriate financial hedging instruments and hedging percentages in accordance withthe “Processing Program of Derivative Financial Instrument Transactions” approved by the Group
shareholders to reduce the impact of market price changes on earnings. These risks include market risk(including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

c. Financial risk management objectives and policies

179

NTD/USD

Aircraft prepaymentsforward exchange
contracts

NTD1,411,411/
USD47,000

NTD660,661/
USD22,000

NTD509,507/
USD16,967

Notional
Amount2020.11.4

2020.2.272020.11.30

2020.1.212020.12.24

Maturity

29.6-30.5

29.7-30.7

29.5-30.8

Forward Rate
Financial assets forhedging - current/
liabilities for hedging current
Financial assets forhedging - current/
liabilities for hedging current
Financial assets forhedging - current/
liabilities for hedging current

Line Item in
Balance Sheet
$

77

32

38

$

18,385

10,193

8,491

Carrying AmountAsset
Liability

NTD/USD

Currency

NTD2,265,231/
USD13,620

Notional
Amount2019.1.72019.12.26

Maturity
28.3-30.9

Forward Rate
Financial assets forhedging/liabilities forhedgingLine Item in
Balance Sheet$ 28,005$

560

Carrying AmountAsset
Liability- 73 -

Increase in operating costs or exchange loss.

$$ (63,763)

Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments

Note:

$

$ (35,897)(10,161)(17,705)

Comprehensive Income

9,084

9,137
(53)
-

AmountReclassified toProfit and Lossand theAdjusted Line
Item

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeFor the year ended December 31, 2019

(Note)

The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals in U.S. dollars
and Aircraft prepayment) are $27,445 thousand.

Cash flow hedge
Aircraft rentals forward exchange
contracts

Hedging Instruments

December 31, 2018

The abovementioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals in U.S. dollars,
aviation fuel and aircraft prepayments) are $(8,453) thousand, $(10,161) thousand and$(18,308) thousand, respectively.

NTD/USD

NTD/USD

Currency

Aviation fuel - forward
exchange contracts

Cash flow hedge
Aircraft rentals forward exchange
contracts

Hedging Instruments

December 31, 2019

The following table summarizes the information relating to the hedges of foreign currency risk.

For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Group performs a qualitative assessment of theeffectiveness, and it is expected that the value of the foreign exchange forward contracts and thevalue of the corresponding hedged items will systematically change in the opposite direction in
response to movements in the underlying exchange rates.

Increase in operating costs.

$ (22,415)$ (22,415)$ 104,324

AmountReclassified toProfit and Lossand theAdjusted Line
Item

80,44023,884$

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
Income(Note)$ 91,414,806
77,821,887

2018$ 34,919,610
75,031,978

December 31- 74 -

Had interest rates increased one yard (25 basis) points higher and had all other variables been
held constant, the Group’s pre-tax profit for the year ended December 31, 2018 would havedecreased by $187,580 thousand.

Had interest rates increased one yard (25 basis) points higher and had all other variables been
held constant, the Group’s pre-tax profit for the year ended December 31, 2019 would havedecreased by $194,555 thousand.

The sensitivity analyses below were determined based on the Group’s exposure to interest rates
for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A one yard
(25 basis) point increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.

Sensitivity analysis

Fair value interest rate risk
Cash flow interest rate risk

2019

The carrying amount of the Group’s financial assets and financial liabilities with exposure tointerest rates at the end of the reporting period were as follows.

The Group enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates. The risk is managed by the Group by maintaining an appropriate mix of
fixed and floating rate borrowings, and using interest rate swap contracts and forward interest
rate contracts.

b) Interest rate risk

And the amount of gains and losses on hedging instruments for the year ended December 31,
2018 reclassified from profit or loss to prepayments for equipment was $12,118 thousand.

Note:

Cash flow hedge
Aircraft rentals
Aircraft prepayments

Comprehensive Income

For the year ended December 31, 2018

And the amount of gains and losses on hedging instruments for the year ended December 31,
2019 reclassified from profit or loss to prepayments for equipment was $(603) thousand.

180

USD

Currency

NT$5,524

Notional
Amount2020.3.312020.12.31

Maturity
US$49.65US$80.75

Forward Rate
Financial assets forhedgingLine Item in
Balance Sheet
$

9,479

$

3,955

Carrying AmountAsset
Liability

US$72-US$88

Forward Rate
Financial assets forhedgingLine Item in
Balance Sheet
$

4,901

$

-

Carrying AmountAsset
Liability

2) Credit risk

-

$

-

7,973

$

-

-

$

-

-

Increase in operating costs.

Note:

Increase in operating costs.

Cash flow hedges - fuel options

Comprehensive Income- 75 -For the year ended December 31, 2018

Note:

Cash flow hedges - fuel options

Comprehensive Income
623

$

4,901

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
Income$Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
Income$(9,421)

AmountReclassified toProfit and Lossand theAdjusted LineItem

$ (13,597)

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)(Note)- 76 -The objective of the Group’s management of liquidity is to maintain cash and cash equivalents
sufficient for operating purposes, marketable securities with high liquidity and loan commitmentsthat are sufficient to ensure that the Group has adequate financial flexibility.

3) Liquidity risk

Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Group’s finance department. The Group’s trading partners and other parties were
well-performing banks and financial institutions, corporations, and government agencies, and so therisk of counterparties failing to discharge an obligation is low; therefore, there is no significant
credit risk.

Financial credit risk

To assess individual customers, the Group consider into the financial condition of the customers,
the credit rating agency rating, the Group’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, the Group
uses certain credit enhancement tools to reduce the credit risk of specific customers. Since thecustomers of the industry is dispersed and non-related, the credit risk concentration is not criticalaviation.

The Group has established procedures to management operations related credit risk to maintain thequality of accounts receivable.

Operation - related credit risk

2019.1.312019.12.31

Maturity-

For the year ended December 31, 2019

NT$4,901

Notional
Amount$Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Group. The Group’s credit risk, primarily comes from accounts receivable
generated from operating activities and bank deposits generated from investing activities, fixed
investment income and other financial instruments, operation related credit risk and financial credit
risk are managed separately.

USD

Currency

Fuel price increase of5%
Fuel price decrease of5%

For the Year Ended December 31
2019
2018
Other
Other
CompreComprehensive
hensive
IncomeIncomePre-tax Profit
Pre-tax Profit
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.

Sensitivity analysis

Hedge accounting is continued to be applied to the abovementioned hedging instruments
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $4,901 thousand.

Cash flow hedges fuel options

Hedging Instrument

December 31, 2018

Hedge accounting is continued to be applied to the abovementioned hedging instruments
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $5,524 thousand.

Cash flow hedges fuel options

Hedging Instrument

December 31, 2019

The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters into
fuel swap contracts to hedge against adverse risks on fuel price changes.

c) Other price risk

181

Lease liabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Hedging instruments
Bonds payable

December 31, 2018

Lease liabilities
Floating interest rate
liabilities
Derivative instruments
Bonds payable

December 31, 2019

- 77 -$ 21,861,882$ 72,982,432$ 23,733,860

20,810,464-

1,051,418$

30,835,449

42,143,959

3,024Over 5 Years

2,000,517
239,138
5,999,321$

1 to 5 Years

16,785,664
6,373,333
3,383,401

8,949,194$ 35,491,592$

Over 5 Years

0.1034
1.3905641,524

Less than 1
Year$ 106,496,473

36,274,033
39,729,062
19,871,174$ 10,622,204

1 to 5 Years

14,853,360$

15,254,687
10,060,822
10,823,905

3,357,996$ 39,497,410$

Less than 1Year1.81051.3104

The Weighted
Average
Effective
Interest Rate(%)-

1.90583.11312.25731.1613

The Weighted
Average
Effective
Interest Rate
(%)

2018
$ 17,337,000

December 31$ 18,422,0002019- 78 -

Major shareholder of theCompany
Associate
Joint venture investment

Major shareholder of the Company
Associate
Joint venture investment

Related Party Typec. Purchases

Other income

Account Items

Related Party Type

1,239
42,457$$28,670523
41,410$$$$56,474$ 414,106$ 1,911,091$
64,188$ 501,609$ 1,912,995

For the Year Ended December 31
2019
2018

25,457$For the Year Ended December 31
2019
2018

Associate (become associate in January 2019)
Subsidiary (become subsidiary in March 2018)
Associate
Associate
Associate
Associate
Joint venture investment
Joint venture investment
Joint venture investment
Joint venture investment
Director of the Company and major shareholder
Director, key management personnel, chairman,
general manager of the Group, spouse andsecond-degree relative

Dynasty Holidays
Kaohsiung Catering Services
China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
Othersb. Operating income

Relationship with the Company

Namea. Related parties’ names and relationships

The transactions, accounts balances, income and expenses between related parties were eliminated from theconsolidated report and, therefore, were not disclosed in this note. Except for the disclosures stated in othernotes, transactions between the Group and its related parties are disclosed below:

34. RELATED-PARTY TRANSACTIONSUnused bank loan limit (unsecured)The following table shows the remaining contractual maturity analysis of the Group’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Group may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.

Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Group’s liquidity analysis for its derivative financial instruments
is also shown in the following table. The table was based on the undiscounted contractual net cash
inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted grosscash inflows and outflows on those derivatives that require gross settlement. When the amountpayable or receivable is not fixed, the amount disclosed has been determined by reference to theprojected interest rates as illustrated by yield curves at the end of the reporting period.

Loan commitments

Liquidity and interest risk rate table

182
7,760
2,588
10,348$$$December 31
$

2019

9,043

7,589
1,454

2018

51,333484,700
5,982
542,015$

54,948474,499
3,368
532,815$2018$

December 31$

2019

CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenance

The Company

g. Endorsements and guarantees- 79 -$ 3,850,000
1,080,000
3,012,668
2,000,000

Authorized
Amount$ 2,129,400
685,444
1,279,827$ 3,850,000
1,080,000
1,081,792
2,000,000

Authorized
AmountDecember 31
ActualAmount Used2019

$ 2,339,700
418,491
605,457

ActualAmount Used

2018

Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots, the Company paid the rental on usage
hours. In 2019 and 2018, the Company had paid rentals of about $56,474 thousand and $64,188
thousand, respectively.

f. Leases of properties (operating leases)

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.

Associate
Joint venture investment
Major shareholder of the Company

Related Party Typee. Accounts payable - related parties (generated by operations)

The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.

Joint venture investment
Major shareholder of the Company

Related Party Typed. Accounts receivable - related parties (generated by operations)$$
42,05539,693
2,362$$

47,84644,551
3,295

For the Year Ended December 31
2019
2018

169,925$ 42,236,167$ 102,424,470$ 42,066,242-

2018

130,052$ 31,260,801
71,033,617

December 31- 80 -The original total expenditure of the previous main construction project was $8,490,000 thousand.
However, TACT filed an arbitration for the total amount of expenditure in 2012 to revise the total
amount to $6,840,000 thousand.

b. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. The terminal
expansion and improvements and the equipment installation and upgrade in the Taiwan Taoyuan
International Airport cargo terminal and Kaohsiung cargo terminal were expected to be completed in
the first 10 years of the COP. This construction project was approved by TACT’s board of directors in
2003. TACT filed an application for a 10-year extension of the COP for the cargo terminals in the
Taiwan Taoyuan International Airport and Kaohsiung International Airport and received the approval
from the Taoyuan Airport Corporation and CAA in July 2013 and July 2015, respectively.

a. For operation needs, the board of directors of Mandarin Airlines resolved to enter into a contract to buy
six ATR72-600 aircraft, and the total list price of the six aircraft was $120,000 thousand. The expected
delivery period ranges from June 2018 to June 2020, as of December 31, 2019, four of the aircraft has
been handed over to the company, and the total list price of the lefts two aircraft was $40,000 thousand,which has been paid in the amount of US$8,314 thousand (recognized as prepayments for aircraft).

As of December 31, 2019, except for the disclosures stated in other notes, the Group had commitments andcontingent liabilities (except for those mentioned in other notes) as follows:

36. COMMITMENTS AND CONTINGENT LIABILITIESProperty, plant and equipment
Right-of-use assets
Restricted assets - non-current
Pledged certificate deposits

2019

The following assets were pledged or mortgaged as collateral for long-term bank loans, lease obligations
and business transactions:35. PLEDGED ASSETS

The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.

Short-term employee benefits
Post-employment benefits

h. Compensation of key management personnel

183

Cargo Terminal Expansion Construction Consultant
Contract

CECI Engineering
Consultant, Inc., Taiwan$ 552,285- 81 -

During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.

CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow Article
No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies inInfrastructure Projects,” which states that rental calculation in the development stage should include theland value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of theamount based on the National Building Land Rental Standard plus land value tax, value-added tax andthe necessary maintenance fee.

CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.

c. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights on
this contract from the CAA. The contract is effective for 50 years (consisting of the development stage
and operating period) from the contract date. Three years before contract expiry date, CAL Park has thefirst option to renew the contract once with a 20-year extension.

TACT should pay royalties to Taoyuan Airport Corporation and the CAA during the charteredoperation period. The calculation is based on annual sales (including operating and non-operating
revenue but excluding the rental revenue from specific districts), and Taoyuan Airport Corporation and
the CAA have the option to adjust the royalty rates every 3 years starting from the date of transfer of thechartered operation rights on the basis of actual revenue and expenditures. The current royalty rate is
6%.

Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation when thechartered operating license expires.

As of December 31, 2019, the cumulated consultant service expense and construction equipment had
amounted to $481,776 thousand (VAT included) and $5,212,622 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,755 thousand (VAT included) and$5,200,780 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments were recognized under construction in progress.

Contract Title

Client NameContract
Amount (VAT
Included)

As of December 31, 2019, TACT had signed the following construction contracts with unrelatedparties:- 82 -

By the end of January 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei province
in China, became a pandemic. The Company has complied and continues to comply with the travel alerts
issued by the Taiwan Centers for Disease Control and has cancelled flights between several countries like
China, Hong Kong, Japan and Korea. Other flights have flexible capacity depending on the reduction ofdemand. So far, the air transport services for passengers have been severely affected. In addition toadjusting the operation, the Company also takes measures about funding assistance, human resources,
reducing expenditure, and asks the government for help in three main areas including guarantee for its
operation, relief from the burden, and a recovery plan.

37. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

g. In September 2019, Tigerair Taiwan Co., Ltd. signed a contract with Airbus S.A.S. to purchase sevenA320neo aircraft and an option to purchase two A320neo aircraft. The total list price of the sevenaircraft is US$729,746 thousand, and the list price of the option to purchase two aircraft is US$208,499
thousand. The expected delivery period of the seven aircraft ranges from 2025 to 2028. As of December
30, 2019, the list price has been paid in the amount of US$9,324 thousand (recognized as prepayments
for aircraft). In addition, in December 2019, Tigerair Taiwan Co., Ltd. signed a contract with
International Aero Engines Company to purchase two backup engines of A320neo aircraft. The total list
price of the two engines is US$27,345 thousand.

f. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three
B777F aircraft and exercised the option to purchase three B777F aircraft. The total list price of the six
aircraft is US$2,320,315 thousand, and the expected delivery period is from 2020 to 2023. As of
December 30, 2019, the list price has been paid in the amount of US$241,650 thousand (recognized as
prepayments for aircraft).

e. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery period of the eleven aircraft ranges from 2024 to 2026. As of
December 31, 2019, the list price has been paid in the amount of US$17,014 thousand (recognized as
prepayments for aircraft). In October 2019, the Company signed a contract with International AeroEngines Company to purchase four backup engines of A321neo. The total list price of the four engines
is US$60,289 thousand.

d. The Company failed to mediate labor disputes with the labor union. After obtaining the right to strike,the labor union went on strike on February 8, 2019, and the flights resumed normal operation on
February 14, 2019. A total of 214 flights was cancelled and the accumulated revenue loss was about$500 million. The initial estimated compensation for customer losses and other expenditures were about$54 million (recognized as operating cost).

CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.

184

Monetary items
USD
EUR
HKD
JPY
CNY

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
CNY

Financial assets

December 31, 2018

Monetary items
USD
EUR
HKD
JPY
CNY

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
CNY

Financial assets

December 31, 2019

2,480,896
7,638
74,651
6,584,434
153,196

658,407
18,401
228,234
6,262,272
425,343441,798
7,806
79,716
5,586,337
150,536

532,196
20,519302,930
6,479,942
394,503- 83 -$

Foreign
Currencies (InThousands)$

Foreign
Currencies (InThousands)

30.7692
35.21133.92310.27784.480330.7692
35.21133.92310.27784.4803

Exchange Rate

30.0300
33.6700
3.85950.27664.304830.0300
33.6700
3.85950.27664.3048Exchange Rate

13,593,777
274,873
310,978
1,552,067
674,446$ 16,375,237
722,514
1,188,425
1,800,967
1,767,491

Carrying
Amount74,501,305
257,155
288,117
1,821,237
659,478$ 19,771,957
619,571
880,868
1,732,130
1,831,012

Carrying
Amount

The following information was aggregated by the foreign currencies other than functional currencies of thegroup entities and the exchange rates between foreign currencies and respective functional currencies weredisclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

38. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES- 84 -c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 8 (attached)b. Investment in mainland China: Table 7 (attached)10) Derivative financial transactions (Notes 7 and 8)9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 6 (attached)

8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 5 (attached)7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 4 (attached)6) Disposals of individual real estates at costs or prices of at least NT$300 million or 20% of thepaid-in capital: None

5) Acquisitions of individual real estates at costs or price of at least NT$300 million or 20% of thepaid-in capital: None

4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: Table 3 (attached)

3) Marketable securities held: Table 2 (attached)2) Endorsements/guarantees provided: Table 1 (attached)

1) Financing provided: Nonea. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:

39. ADDITIONAL DISCLOSURESFor the years ended December 31, 2019 and 2018, the Group’s net foreign exchange gain (losses) were$(141,611) thousand and $41,843 thousand, respectively. It is impractical to disclose net foreign exchange
gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions
and functional currencies of the group entities.

185$ 15,915,060(6,317,254)(86,446)(7,115,616)

Total assets

Identifiable assets
Investments accounted for using
the equity method
Assets- 85 -$ 154,007,329$ 11,036,945

138,787(24,617)

4,022,383
330,710$ 230,136,582

2,200,149
62,753,370$ 165,183,062$$

3,081,249

1,429,884

Profit before income tax

2,617,116
367,246
157,301(1,379,985)(416,406)$$$ 170,711,607$(7,089,474)

Total$ 293,047,979

2,223,793
71,828,530

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses$(96,817)332,305495,249(3,340,119)(667,519)

2,665,821
417,446$ 218,995,656$$$ 168,444,160

Total$ 167,370,925$ 10,430,156

For the Year Ended December 31, 2018
Air
Adjustments
Transportation
Othersand Write-offs$ 209,397,850$$

1,449,620$$ 11,067,323

For the Year Ended December 31, 2019
Adjustments
Othersand Write-offs

Operating revenue

Total assets

Identifiable assets
Investments accounted for using
the equity method
AssetsProfit before income tax$

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses

1,302,647$ 164,492,453

Operating revenue

Air
Transportation

The Group mainly engages in air transportation services for passengers and cargo; the services include
airport service, storage service, and other air transportation services which are below the financial
threshold for an operating segment of the Group. Therefore, the Group’s main reportable segment is airtransportation. The accounting policies of the reportable segment are consistent with the accounting
policies described in Note 4.

a. Segment information

40. SEGMENT INFORMATION

Total assets$

1,328,004$

15,5202,717,255$$

94,631(2,412,823 )

34,132,301

$

($

$

$

($

$

$

$

$

8,985

(139,573 )

7,073,170

Australia

$

$

$

China

- 86 -

2,796

756,263 )

16,092,452

Europe

$

$

$

2,619

(904,416 )

6,760,146

Australia$$$

10,1742,454,935

22,114,227

China

50,948

1,913,140

21,790,943

For the Year Ended December 31, 2018

26,707

868,091 )

15,638,657
3,314,617

18,146,403

Domestic

2,365,591

16,958,615

Domestic$ 163,590,530$$$ 223,450,021$$(6,317,254 )

86,446 )(7,115,616 )

$

($

$

138,787

24,617 )(7,089,474 )Adjustment andEliminations

$

($

$

Adjustment andEliminations

Consolidation(96,817 )332,305495,249(3,340,119 )(667,519 )2,665,821
417,446

4,022,383
330,710$ 230,136,582

2,200,149
62,753,372$ 165,183,061$$$ 170,711,607

Consolidation$ 293,047,979

2,223,793
71,828,530$ 218,995,656$$$ 168,444,160

3,081,249

Identifiable assets
Investments
accounted forusing the equity
methodAssets$38,464,450$

154,074(3,497,592 )Southeast Asia

$

$

$

222,584

2,537,003

Northeast Asia$$

33,354,405$

39,232,038$

Profit before
income tax

582,721

43,278,890

America

1,399,591(507,237 )

40,324,160

For the Year Ended December 31, 2019
Europe367,246
146,667(1,369,351 )(416,406 )

$

$

$

$

$

Southeast Asia

Northeast Asia

Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
Expenses

Operating revenue

Total assets

Identifiable assets
Investments
accounted forusing the equity
methodAssetsProfit before
income tax

Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
Expenses

Operating revenue

America

The geographical segment information of the Company and its subsidiaries in 2019 and 2018 are listed
below:

b. Geographical segment

2,000,000$ 3,850,000
1,080,000
3,055,475
2,000,000$ 3,850,000
1,080,000
3,012,668
1,279,827$ 2,129,400
685,444$- 87 -

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s shareholders’ equity.

11,310,754$ 11,310,754
11,310,754
11,310,754

Note 2:

100% subsidiary
54% subsidiary
77.17% subsidiary bydirect and indirect
holdings
100% subsidiary

Nature of Relationship

ActualBorrowingAmount

-

3.54

6.81
1.91
5.33

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant Net Equity ofor Equipment
the Latest
Financial
Statement (%)

Based on the Company’s guidelines, the maximum amount of guarantee to an individual counterparty is up to 20% of the Company’s shareholders’ equity.

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

China Airlines
CAL Park(the “Company”) Taiwan Air Cargo Terminal
Tigerair Taiwan Co., Ltd.

Name

Limit on EachCounterparty’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmount(Note 1)

Note 1:0No.

Endorsement/
Guarantee
ProviderCounterparty

ENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

186
28,276,886$ 28,276,886
28,276,886
28,276,886

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

Y

Y
Y
Y

N

N
N
N

N

N
N
N

Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given byGiven on Behalf
Given by Parent
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

TABLE 1

Shares
TransAsia Airways

Beneficial certificatesFuh Hwa Emerging Market Short-term Income FundFuh Hwa Global Bond Fund

Taiwan Airport Services

Beneficiary certificates
Taishin 1699 Money Market Fund

SharesChina Airlines-

Beneficiary certificatesFranklin Templeton SinoAm Money Market FundFSITC Money Market Fund
Allianz Global Investors Taiwan Money Market Fund
Capital Money Market Fund

Sabre Travel Network (Taiwan)

Dynasty Aerotech International Corp.

-

SharesTaikoo (Xiamen) Landing Gear Services
HAECO Composite Structures (Jinjiang)

Cal-Asia Investment-

Parent company--

Parent company

SharesChina Airlines

Mandarin Airlines-

SharesEverest Investment Holdings Ltd. - ordinary shares
Everest Investment Holdings Ltd. - preference shares
Chung Hua Express Co.
Jardine Air Terminal Services
The Grand Hi Lai Hotel

Marketable Security Type and Issuer/Name

Relationshipwith the Holding
Company

China Airlines (“Parent company”)

Holding Company Name

MARKETABLE SECURITIES HELDDECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

187- 88 -

Financial assets at FVTPL - current

Financial assets at FVTOCI - non-current

Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial assets at FVTPL - current

Financial assets at FVTPL - current
Financial assets at FVTPL - current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial assets at FVTPL - current
Financial assets at FVTOCI - non-current

Financial assets at FVTOCI - non-current

Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial Statement Account349,523

814,152

1,671,657
1,233,211

2,277,786

7,816,048
497,740
6,444,010
2,842,146-

2,074,628

1,359,368
135,937
1,100,000
12,000,000
4,021

Number of
Shares/Units

$

4,748

7,376

20,25318,045-

81,124
89,14581,06546,035

101,365

18,79673,628
7,363
26,865
-

-

-

-

0.4

-

2.59
5.45

-

13.59
11.00
15.00
0.02

$

4,748

7,376

20,25318,045-

81,124
89,14581,06546,035

101,365

18,79680,991
26,865-

December 31, 2019
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount(%)
Value(Continued)

-

-

-

-

-

Note 2
Note 2-

Note 1Note

TABLE 2--

Relationshipwith the Holding
Company

Amortized cost financial assets

Financial assets at FVTPL - current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial Statement AccountNote 3: The table only lists financial assets that are IFRS 9 regulated.

Note 2: The Company does not issue shares because it is a limited company.

- 89 -

Note 1: The subsidiary’s net asset value was $80,991 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2019.

Government bondPhilippines government bondTigerair Taiwan Co., Ltd.

Marketable Security Type and Issuer/Name

Beneficiary certificates
Prudential Financial Money Market Fund
Prudential Financial Return Fund
Taishin 1699 Money Market Fund

Holding Company Name

Kaohsiung Catering Services

188-

5,407,832
4,493,628
1,106,807

Number of
Shares/Units$

299

85,88670,423
15,035
Not applicable

-

$

299

85,88570,423
15,035

December 31, 2019
Percentage of Market Value
Carrying
or Net Asset
Ownership
AmountValue(%)(Concluded)

-

Note

Financial Statement
Account

Counterparty(Note 2)

$

-

$

-

$

-

-

$

-

- 90 -

Subsidiaries planning initial public offering release stocks.

-

Note 5:-Ending Balance
Number ofAmountSharesPaid-in capital refers to paid-in capital of the indicated parent company. If the shares issued by an issuer have no par value or a par value other than NT$10 per share, the threshold of 20% of paid-in capital, as set out in the preceding item, shall be replaced by 10% of equity attributable toowners of the indicated parent company, as stated in the respective balance sheet.

$

Gain (Loss) on
Disposal

Note 4-

Disposal (Note 3)
Carrying
AmountAmount

The cumulative amount of acquired and disposed of marketable securities are required to be calculated separately to determine whether they are at least NT$300 million or 20% of the paid-in capital.

-

Number of
Shares

Note 3$Acquisition (Note 3)
Number ofAmountSharesThe marketable securities in this table refer to shares, bonds, beneficial certificates and the securities derived from the above items.

-

Beginning Balance
Number ofAmountSharesMarketable securities which are recognized as investments accounts for using the equity method are required to be filled in the second column.

Non-related party

Relationship(Note 2)

Note 2:

SharesTigerair Taiwan Co., Ltd. Investments accounted for (Note 5)
using the equity method

Type and Name ofMarketable Securities(Note 1)TABLE 3Note 1:China Airlines, Ltd.

Company Name

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

189

Taiwan Air Cargo Terminal
Taiwan Airport Services
Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan
Tigerair Taiwan
Taoyuan International Airport Service
Kaohsiung Catering Services
Hua Hsia
CAL Park
Cal Hotel
Global Sky Express
Eastern United International Logistics
China Pacific Laundry Services
China Pacific Catering Services
China Aircraft Services

Taiwan Airport Services

CAL Park

Taoyuan International Airport Service

Mandarin Airlines

Cal Hotel

Tigerair Taiwan

Related Party

China Airlines, Ltd.
(“China Airlines”)

Company Name

Same parent company

Same parent company

Same parent company

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Equity-method investee
Equity-method investee
Equity-method investee

Nature of Relationship

Purchase

Purchase

Purchase

Purchase
Purchase
Sale
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase

Purchase/
Sale

197,179

114,281

189,853

524,457
445,472(1,971,462)
242,114(373,811)
152,9141,220,422
561,443
349,602231,288
135,687(101,421)
216,368
120,088
1,791,003
169,400- 91 -$

Amount

2.53

26.07

2.56

0.39
0.33
1.35
0.18
0.26
0.11
0.90
0.42
0.26
0.17
0.10
0.07
0.16
0.09
1.33
0.13

% of
Total

Transaction Details

1 months

1 months

1 months

30 days
40 days
2 months
2 months
1 months
1 months
40 days
60 days
2 months
2 months
1 months
15 days
2 months
2 months
90 days
30 days

Payment Terms
$

-

-

-

-

-

-

-

-

-

$

(24.389)(382)(27,760)(41,017)(77,970)
158,123(247,997)
42,642(31,210)(347,127)(99,649)(37,860)(127)(40,293)
3,888(23,430)(20,118)(464,582)(27,679)(3.66)(0.53)(3.74)(1.52)(2.90)
1.83(9.21)
0.49(1.16)(12.90)(3.70)(1.41)(1.50)
0.05(0.87)(0.75)(17.26)(1.03)

Note/Account Payable or
Receivable% ofPayment Terms Ending Balance
Total

Abnormal Transaction
Unit PriceTOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

190
-

-

-

-

-

Note

TABLE 4

China Airlines

China Airlines

China Pacific Catering Services

Taoyuan International Airport Service

Parent company

Parent company

Parent company

Subsidiary

Nature of Relationship

347,127

464,582

247,997$ 158,123Ending Balance

3.43

3.90

Note

Note

Turnover Rate$

Amount- 92 -

Accounts receivable and revenue were not directly correlated because of the particular industry characteristics, and therefore the turnover rate was not applicable.

China Airlines

Mandarin Airlines

Note:

Mandarin Airlines

Related Party

China Airlines, Ltd. (“China Airlines”)

Company Name

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

191

-

-

-

-

-

-

-

-

Action Taken

Overdue

340,924

311,356

245,364$ 158,123

Amounts Received
in Subsequent
Period

$

-

-

-

-

Allowance for
Bad Debts

TABLE 5

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

The Company does not issue shares because it is a limited company.

Difference caused by lease arrangement between consolidated entities.

Difference cause by acquisition.

Note 4:Note 5:Catering business

Note 3:Kaohsiung, Taiwan

Airport services and investment

Note 2:

Delica International Co., Ltd.

Kaohsiung Catering
Services

Samoa

Forwarding and storage of air cargo

Adopted the treasury shares method in recognizing investment income or loss.

Taiwan Airport Service (Samoa)

Taiwan Airport Services

Hong Kong

Note 1:

Eastern United International Logistics

CAL-Asia Investment- 93 -Air transportation and maintenance of aircraft
Airport services

Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.
NORDAM Asia Ltd.

Taipei, Taiwan
Taipei, Taiwan

Aircraft maintenanceTaoyuan, Taiwan

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan

Dynasty Aerotech International Corp.

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment
Sale and maintenance of hardware and software
Airport services
Airport services
In-flight catering
Hotel business
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Air transportation and maintenance of aircraft
Aircraft maintenance

Main Business and ProductTaoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, USA
Taoyuan, Taiwan
Taoyuan, Taiwan
Territory of the British Virgin Islands
Taipei, Taiwan
Hong Kong International Airport
Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Taoyuan, Taiwan

Location

CAL Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
China Pacific Laundry Services

Investee Company

Mandarin Airlines

China Airlines, Ltd.

Investor Company

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2019
(In thousands of New Taiwan Dollars and Foreign Currencies in Thousands, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

192
US$

HK$

10,200

5,877

3,329

154,330
11,65837,97526,265
JPY
8,000
2,500
1,272,063
1,350,000

77,2701,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500$

December 31,
2019

US$

HK$

10,200

5,877

3,329

200,000
11,6582,450

26,265
JPY
20,4002,500
1,648,387
1,350,000

77,2701,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500$

December 31,
2018

Investment Amount

1,020,000-

1,050,000

15,433,000
469,755

3,797,500

1,600,000
160
250,000
138,906,275
135,000,000

77,270150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
20,626,644
21,494,637
46,500,000
13,750,000

51.00

100.00

35.00

7.72
1.08

49.00

100.00
20.00
25.00
69.45
100.00100.00100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.00
55.00

$

7,867

347,551

42,717

216,243
6,281

37,81325,26810,004
7,294
1,946,328
921,989

88,313

1,552,310
1,494,603
1,517,946
1,276,546
801,071
737,245559,562460,213461,263
276,134
661,170479,259
168,547

Balance as of December 31, 2019
Percentage
Carrying
Number ofofAmountShares/Units Ownership
(%)
$

(4)

23,107

9,678

808,718
156,861

(144)

(480)
(894)
6,392
808,718(206,151)

17,0081,163
204,018
271,552
41,262
511,121291,52230,820195,347
51,828156,861
292,632
16,78727,327Net Income(Loss) of theInvestee$(2)

23,107

3,387

77,587
1,689

(70)

(384)
(480)
1,598
699,039(206,149)

16,857

47,694
191,322
146,642
41,262
256,899
142,846
30,819183,490
10,36574,274
142,886
18,02015,030Investment
Income (Loss)-

Note 3---Note 4Note 4-

Notes 1 and 4

Note 4
Notes 1 and 4
Note 4
Notes 2 and 4
Note 5Note 4-Note

TABLE 6

Landing gear
2,495,195
maintenance services (US$ 83,090)

Composite material

Taikoo (Xiamen) Landing
Gear Services

HAECO Composite
Structures (Jinjiang)

Investment Amount
Authorized by Investment
Commission, MOEA

$650,192 (Note 3)

Accumulated Investment in
Mainland China as ofDecember 31, 2019

$267,886 (US$8,920)

350,240
11,663)Forwarding and storage
60,267of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

(US$

Forwarding and storage $ 10,95,480
of air cargo(RMB 254,480)

Main Business andProduct

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

19,099636)

64,601
2,151)

58,482
1,947)$36,079,270 (Note 4)

Limit on Investment

(US$

(US$

(US$

$
125,705 $(US$4,186)

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2019

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company Name

China Airlines

INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2019
(In thousands of New Taiwan Dollars/Renminbi/US Dollars)

CHINA AIRLINES, LTD. AND INVESTEES

193

Outflow

-

-

-

-

- 94 -$

Inflow

Investment Flow

-

-

-

-

Net Income(Loss) of
the Investee

(US$

(US$

(US$

19,099636)

64,601
2,151)--

58,482
89,573
1,947) (RMB 19,975)$
125,705 $76,711(US$4,186) (RMB 17,107)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2019

5.45

2.589

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

-

-

(RMB

42,7189,923)---

26,933875)(Note 2)

(Continued)

12,606124,071
2,796) (RMB 28,822) (US$86,2082,802)(Note 2)

Accumulated
InwardRemittance ofEarnings as ofDecember 31,
2019$
10,795 $223,683 $(RMB 2,395) (RMB 51,962) (US$Investment
Gain (Loss)

Carrying
Amountas ofDecember 31,
2019

TABLE 7

(US$

-

-

$

Inward$349,906 (Note 4)Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

57,8601,927)$
120,671 $(US$
4,018)

Outward

Remittance of Funds

-

-

(US$

57,86089,573
1,927) (RMB 19,975)

14.00

14.00

% Ownershipof Direct orIndirect
Investment

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2019

(RMB

12,540124,279
2,796) (RMB 28,870) (US$- 95 -

Note 6: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates of refer for the reporting period.

Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.

(Concluded)

42,2401,407)$
10,740 $222,478 $
114,304(RMB 2,395) (RMB 51,682) (US$3,806)

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2019

Note 4: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjustment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.

Note 3: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.

Note 2: The inward remittance of earnings in 2019 amounted to US$2,801,749 and US$875,330.

Net Income(Loss) of theInvestee$
120,671 $
76,711(US$
4,018) (RMB 17,107)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2019

Note 1: China Airlines, Ltd. the “Company” invested in CAL-Asia Investment, which, in turn, invested in a company located in mainland China.

$178,532 (US$5,945)$178,532 (US$5,945)

Indirect(Note 5)Investment Amounts Authorized by
Investment Commission, MOEA

Forwarding and storage
60,267of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

Indirect(Note 5)

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2019

Forwarding and storage $ 1,095,480
of air cargo(RMB 254,480)

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2019

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company

Taiwan Airport Services

194

China Airlines, Ltd.

Taiwan Air Cargo Terminal

Mandarin Airlines

Taoyuan International Airport Services

Taiwan Airport Service

Dynasty Aerotech International Corp.

1

2

3

4

5

Company Name

0No.

China Airlines, Ltd.

China Airlines, Ltd.
Mandarin Airlines

Tigerair Taiwan Co., Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.
Taiwan Airport Service
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

China Airlines, Ltd.

Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan Co., Ltd.
Mandarin Airlines
Taoyuan International Airport Services
Taiwan Airport Service
Dynasty Aerotech International Corp.
Taiwan Air Cargo Terminal
CAL Park
Cal Hotel Co., Ltd.
Kaohsiung Catering Services
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Services
Mandarin Airlines

Related Party

b

b
c

c
b
b

b
c
b
b
b
b
b

b

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Natural of
Relationship(Note 1)

- 96 -

Operating revenue

Operating revenue
Operating revenue

Airport service revenue
Airport service revenue
Accounts receivable - related parties

Passenger costs
Airport service costs
Passenger revenue
Operating expenses
Accounts receivable - related parties
Financial assets at amortized costs
Notes payable and accounts payable - relatedparties

Sales revenue

Passenger revenue
Other operating revenue
Other operating revenue
Passenger costs
Airport service costs
Airport service costs
Airport service costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties
Bonds payable - non-current

Financial Statement Account

BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIESFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

195

349,602445,472
189,853

197,179
1,220,422
347,127

1,728,158
189,853
242,114
243,304
247,997
250,000
158,123

524,457$ 1,728,158
243,304
373,811242,1141,220,422
445,472
349,602524,457
231,288
135,687
561,443
158,123
247,997
347,127
250,000

AmountTransaction Criteria

The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

Intercompany Transactions(Continued)

0.21

0.26
0.11

0.12
0.72
0.11

1.03
0.11
0.14
0.14
0.08
0.08
0.05

0.31

1.03
0.14
0.22
0.14
0.72
0.26
0.21
0.31
0.14
0.08
0.33
0.05
0.08
0.11
0.08

% of Total
Consolidated
Total Revenue
or Assets

TABLE 8CAL Park

Cal Hotel Co., Ltd.

Tigerair Taiwan Co., Ltd.

Kaohsiung Catering Services

7

8

9

Company Name

6

No.

China Airlines, Ltd.

China Airlines, Ltd.
Taoyuan International Airport Services

China Airlines, Ltd.
CAL Park

China Airlines, Ltd.
Cal Hotel Co., Ltd.

Related Party

b

b
c

b
c

b
c

Natural of
Relationship(Note 1)

Operating revenue

Operating expenses
Airport service costs

Operating revenue
Operating costs

Operating revenue
Operating revenue

Financial Statement AccountNote 3: The Company only discloses transaction amounts or balances of more than $100,000 thousand.

Note 2: Intercompany transactions were written off in the consolidated financial statements.

a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.

- 97 -

Note 1: The three directional types for transactions by business relationship between China Airlines, Ltd. and its subsidiaries are as follows:

196$

561,443

373,811
197,179

135,687
114,281

231,288
114,281

AmountTransaction Criteria

The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions

The same as ordinary transactions
The same as ordinary transactions

Intercompany Transactions(Concluded)

0.18

0.22
0.12

0.08
0.07

0.14
0.07

% of Total
Consolidated
Total Revenue
or Assets

197

We understood and tested the effectiveness of the information system related to the process of passenger
revenue.
We sampled several flight tickets, which were flown and recognized as revenue, to verify whether theboarding date matched the date recorded on the tickets, from advanced sales tickets.

2.
3.

-1-

In accordance with IFRS 15 “Revenue from Contracts with Customers”, passenger sales are accounted for as
contract liabilities before relevant transportation services are provided. After providing the related services,
contract liabilities are reclassified to passenger revenue. For the year ended December 31, 2019, passenger
revenue was NT$96,176,865 thousand. Refer to Notes 4 and 26 to the accompanying financial statements for
related detailed information.

-2-

Some investments accounted for using the equity method and disclosure information in Note 13 were audited byother independent auditors, and our audit opinion is based solely on the audit report of other independent
auditors. As of December 31, 2019, the aforementioned investment accounted for using the equity method was
NT$1,946,328 thousand, representing 0.72% of total assets. For the year ended December 31, 2019,
comprehensive income (including share of profit or loss of subsidiaries, associates and joint ventures and shareof other comprehensive income (loss) of subsidiaries, associates and joint ventures accounted for using theequity method) was NT$691,115 thousand.

Passenger Revenue Recognition

We selected one of the rental payments schedule of the aircrafts from the lease calculation system, torecalculate amount of the lease liabilities balance and financial cost and amortization of right-of-use, andrelated carrying amount. Also, we selected several aircraft lease contracts from the carrying amounts ofaircraft lease liability, and checked if there was any difference between contracted rental and rentals in theaircraft rental payment schedule. And we checked if the lease term used the rental payment schedule wasconsistent with the contract.

We understood and tested the effectiveness of the information system related to the calculation of leaseliabilities.

Other Matter - Audit by Other Independent Auditors

2.

1.

The main audit procedures that we performed included the following:

China Airlines leased ten 777-300ER planes, fifteen A330-300 planes and fifteen 737-800 planes, for operation.
Because the lease term of aircrafts is higher and the amount of rental is higher, the percentage of right-of-use
assets and lease liabilities of the aircrafts in the balance sheet is high. The parameters and lease terms are
determined by the management, and the calculation of the lease liabilities will affect the carrying amount anddepreciation expense of the right-of-use assets and lease liabilities (including financial liabilities for hedging)
relating to aircrafts. Therefore, we identified initial application of IFRS 16-Aircrafts as a key audit matter.

In accordance with IFRS 16 “Leases”, aircrafts leases initially classified as finance leases under IAS 17 should
be recognized as Right-of-use assets and lease liabilities in the balance sheet. As of December 31, 2019, thecarrying amount of right-of-use assets and lease liabilities (including financial liabilities for hedging) relating toaircrafts leases are NT$53,870,134 thousand and NT$52,153,682 thousand, respectively. Refer to Notes 4 and
20 to the accompanying financial statements for related detailed information.

Initial Application of IFRS 16 (Leases) - Aircraft

We understood and tested the internal control related to the process of revenue from passenger, including
manual and automatic control.

1.

The main audit procedures that we performed included the following:

Since relevant sales can only be recognized as passenger revenue when passengers actually boarded,
confirmation from each passenger holding the ticket who actually boarded involves a complicated process;therefore, we identified passenger revenue recognition as a key audit matter.

The key audit matters in the audit of the financial statements of the Company are stated below:

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements for the year ended December 31, 2019. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on these matters.

Key Audit Matters

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial
Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China.
Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of
the Financial Statements section of our report. We are independent of the Company in accordance with The
Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.

Basis for Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows
for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by
Securities Issuers and other regulations.

We have audited the accompanying financial statements of China Airlines, Ltd. (the “Company”), which
comprise the balance sheets as of December 31, 2019 and 2018, and the statements of comprehensive income,changes in equity and cash flows for the years then ended, and the notes to the financial statements, including asummary of significant accounting policies (collectively referred to as the “financial statements”).

OpinionThe Board of Directors and the Shareholders
China Airlines, Ltd.

INDEPENDENT AUDITORS’ REPORT(Appendix 2)

198
The accompanying financial statements are intended only to present the financial position, financial
performance and cash flows in accordance with accounting principles and practices generally accepted in the
Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit
such financial statements are those generally applied in the Republic of China.

Notice to Readers-4-

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditors’ report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Company to cease to continue as a going concern.

4.

-3-

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made by management.

3.

March 18, 2020

Deloitte & Touche
Taipei, Taiwan
Republic of China

The engagement partners on the audit resulting in this independent auditors’ report are Jui-Chan Huang andShiuh-Ran, Cheng.

From the matters communicated with those charged with governance, we determine those matters that were ofmost significance in the audit of the financial statements for the year ended December 31, 2019 and are
therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulationprecludes public disclosure about the matter or when, in extremely rare circumstances, we determine that amatter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.

For the convenience of readers, the independent auditors’ report and the accompanying financial statements
have been translated into English from the original Chinese version prepared and used in the Republic of China.
If there is any conflict between the English version and the original Chinese version or any difference in theinterpretation of the two versions, the Chinese-language independent auditors’ report and financial statements
shall prevail.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control.

2.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Company to express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.

6.

5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,and whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

1.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we
exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with the auditing standards generally accepted in the Republic of China will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.

Auditors’ Responsibilities for the Audit of the Financial Statements

Those charged with governance, including the audit committee and supervisors, are responsible for overseeing
the Company’s financial reporting process.

In preparing the financial statements, management is responsible for assessing the Company’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease operations,or has no realistic alternative but to do so.

Management is responsible for the preparation and fair presentation of the financial statements in accordancewith the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal
control as management determines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

199

The accompanying notes are an integral part of the financial statements.

TOTAL

Total equity

EQUITY (Notes 19 and 25)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficits)
Total retained earnings
Other equity
Treasury shares-5-

102,652,815
157,832,649

54
79

57,081,572$ 214,914,221

21
100

466,416
12,967(1,777,225)(1,297,842)
1,196,233(43,372)$ 268,876,505

56,553,772

351,923
118,810
1,144,928
1,615,661
58,223(43,372)20
154,209,846
1,241,214

28,773,710
56,827,738
1,903,665
7,730,114
21,195
6,932,783
463,610

55,179,834

221
239
1,198,647
17,065,481
1,583,684
11,739,301
268,901
4,445,900
15,335,005
596,000
2,946,455

16
8
18
4
1
4
3
-

25

$

171,981,362$ 214,914,221

85
100

3
7
1
4
4
5
1

83,366
13,158,355
149,029,054
2,047,448
979,708
4,561,346
2,122,085

42,932,859

15
5
49
24
1
2
4

$ 18,688,022
2,310,000
27,3549,280,662
298,311656,790
15,8108,451,892
46,154
3,157,864

2018
Amount8
3
3
1%

54,209,846
2,488,907

144,322,560
212,322,733

42,420,205
22,352,625
48,618,168
10,909,262
2,236,311
9,431,736
399,253
7,588,745
366,255

68,000,173

11,7498,610,015
1,222,410
18,584,287
1,469,434
10,892,203
695,215
10,000,000
13,708,320
2,806,540

Total liabilities$$ 268,876,505

227,886,893

107,856
13,482,877
131,029,886
64,262,830
2,047,448
971,298
4,757,142
11,227,556

40,989,612$ 20,626,014
434
1,460,450
9,588
7,694,431
232,386
560,819
52,776
8,246,515
2,106,199

2019
AmountTotal non-current liabilities

NON-CURRENT LIABILITIESFinancial liabilities for hedging - non-current (Notes 4, 20 and 30)
Bonds payable (Notes 4, 19, 30 and 31)
Loans and debts (Notes 18, 30 and 32)
Lease liabilities - non-current (Notes 4 and 20)
Contract liabilities (Notes 4 and 22)
Provisions (Notes 4 and 23)
Deferred tax liabilities (Notes 4 and 27)
Accrued pension costs (Notes 5 and 24)
Other non-current liabilities

Total current liabilities

CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - current (Notes 4, 7 and 30)
Financial liabilities for hedging - current (Notes 4, 20 and 30)
Notes and accounts payable (Note 30)
Contract liabilities current (Notes 4 and 22)
Accounts payable - related parties (Note 31)
Other payables (Notes 21 and 26)
Provisions - current (Notes 4 and 23)
Lease liabilities - current (Notes 4 and 20)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 19, 30 and 31)
Loans and debts - current portion (Notes 18, 30 and 32)
Capital lease obligations - current portion (Notes 4, 20, 30, 31 and 33)
Other current liabilities

LIABILITIES AND EQUITY

TOTAL

Total non-current assets

NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4, 8 and 30)
Investments accounted for using the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 14 and 32)
Right-of-use assets (Notes 4, 20 and 32)
Investment properties (Notes 4 and 15)
Other intangible assets (Notes 4 and 16)
Deferred tax assets (Notes 4 and 27)
Other non-current assets (Notes 17, 20 and 30)

Total current assets

CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 30)
Financial assets at fair value through profit or loss - current (Notes 4, 7 and 30)
Financial assets at amortized cost (Notes 9 and 30)
Financial assets for hedging - current (Notes 4 and 30)
Notes and accounts receivables, net (Notes 4, 10 and 30)
Accounts receivables - related parties (Note 31)
Other receivables
Current tax assets (Notes 4 and 27)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4 and 12)
Other current assets (Note 17)

ASSETSBALANCE SHEETSDECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD.

100

27

1
1
-

25
1

73

48

13
27
1
4
3
-

25

1
8
1
5
2
7
1

100

80

6
69
1
1
2
1

20

9
1
4
4
2

%

-6-

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Loss on hedging instruments subject to basis
adjustments (Notes 4, 25 and 31)
Unrealized (loss) gain on investments in equity
instruments designated as at fair value throughother comprehensive income (Notes 4 and 25)
Remeasurement of defined benefit plans (Notes 4
and 24)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method (Notes 4 and 24)
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 27)-

(72,718)
101,259--

24,490(562,259)

-

(1)

-

(1)

(17,705)(1,199,798)

12,472

INCOME TAX EXPENSE (Notes 4 and 27)
NET INCOME (LOSS)(1,187,326)(1)

1

1,811,960(1,267,561)

(2)

-

8

-

-

-

-

1

-

1

-

1

(1)

1

7

8

92

100

%

127,120(Continued)(105,569)(674,905)(23,830)

23,884

1,790,361

525,270

2,315,631

468,064

1,918,922

420,416(559,230)(1,312,044)

1,847,567

10,802,269

12,649,836

137,614,956

92
8$ 150,264,792

2018
Amount100%

524,233(569,582)(3,034,172)

PROFIT (LOSS) BEFORE INCOME TAX

Total non-operating income and expenses

NON-OPERATING INCOME AND EXPENSES
Other income (Note 26)
Other gains and losses (Notes 12, 13, 14 and 26)
Finance costs (Notes 26 and 32)
Share of the profit of associates and joint ventures(Note 13)

80,235

11,284,000

OPERATING EXPENSES (Notes 4, 26 and 32)
OPERATING PROFIT

11,364,235

135,008,166

COSTS (Notes 4, 11, 26 and 32)
GROSS PROFIT$ 146,372,401

REVENUE (Notes 4, 26 and 32)

2019
Amount

STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD.

200
552,713

Other comprehensive income (loss) for the year,
net of income tax$$(0.22)(0.22)-7-

The accompanying notes are an integral part of the financial statements.

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 27)
Basic
Diluted(647,085)-(273,227)$

1

1,425,306

TOTAL COMPREHENSIVE INCOME (LOSS) FOR
THE YEAR-(13,259)-1-(59,174)$%

Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 25)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method (Notes 4 and 25)
Gain on hedging instruments not subject to basis
adjustment (Notes 4, 25 and 31)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 27)2019
Amount

STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD.

$

$

$
$

-

-

-

-

-

1

%

(Concluded)

0.33
0.32

1,258,035(532,326)(18,193)

75,45429,57334,1402018
Amount-

Appropriation of 2017 earnings
Legal reserve
Special reserve
Cash dividends - $0.2181820086 per share

Changes in capital surplus from dividends distributed to subsidiaries

Net income for the year ended December 31, 2018

Other comprehensive income (loss) for the year ended December 31, 2018,
net of income tax

Total comprehensive income (loss) for the year ended December 31, 2018

Treasury shares acquired-

Total comprehensive income (loss) for the year ended December 31, 2019

Changes in capital surplus from investments in associates and joint
ventures accounted for using the equity method

The accompanying notes are an integral part of the financial statements.

$ 54,209,846-

Other comprehensive income (loss) for the year ended December 31, 2019,
net of income tax

BALANCE AT DECEMBER 31, 2019--

Changes in capital surplus from investments in associates and joint
ventures accounted for using the equity method

Net loss for the year ended December 31, 2019-

Appropriation of 2018 earnings
Legal reserve
Special reserve
Cash dividends - $0.20960737 per share

Actual disposal or acquisition of interests in subsidiaries-

54,209,846

Basis adjustments to gain on hedging instruments

BALANCE AT DECEMBER 31, 2018

(500,000)-

Basis adjustments to gain on hedging instruments

Treasury shares retired-

54,709,846-$ 54,709,846

Share CapitalIssuance of convertible bonds

BALANCE AT JANUARY 1, 2018 AS RESTATED

Effect of retrospective application and retrospective restatement

BALANCE AT JANUARY 1, 2018

STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD.

201

$

$

2,488,907

-

-

-

-

1,247,087

606

-

-

1,241,214

30,607

-

-

-

-

630

-

-

409,978

799,999-

799,999

Capital Surplus$$

466,416

-

-

-

-

-

-

114,493--351,923

-

-

-

-

-

-

145,831---206,092-

206,092

Legal Reserve$$

12,967

-

-

-

-

-

-

(105,843)--

118,810

-

-

-

-

-

-

118,810
-

-

-

-

-

-

Special Reserve

Retained Earnings-(1,777,225)(577,427)(1,199,798)--(114,493)
105,843(1,136,278)-

1,144,928--

1,144,866(645,495)

1,790,361-(145,831)(118,810)(1,193,670)--

1,458,373

60

1,458,313-8-$ (1,777,225)$

UnappropriatedEarnings(Accumulated
Deficits)$$(54,707)

8,368(53,411)(53,411)

-

-

-

-

-

(9,664)--25,322

25,322

-

-

-

-

-

(34,986)-(34,986)

Exchange
Differences on
Translating
Foreign
Operations

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(1,774)

1,774

Unrealized Gain
(Loss) on
Available-forsale Financial
Assets$$107,262105

64,53864,538

-

-

-

-

-

42,619

-

-

268

268

-

-

-

-

-

42,35142,351-Other Equity
Unrealized
Gain on Financial
Assets at Fair
Value Through
Other
Comprehensive
Income

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

74,429(74,429)

Cash Flow
Hedges$$

1,143,678-

1,119,013

1,119,013

-

-

-

-

(603)

25,268--87,57987,579---12,118-(74,429)(74,429)-

Gain (Loss) on
Hedging
Instruments$$(43,372)

-

-

-

-

-

-

-

-

(43,372)

469,393(469,393)

-

-

-

-

-

-

-

(43,372)-(43,372)

Treasury Shares
Held by
Subsidiaries$ 56,553,772

8,473(647,085)

552,713(1,199,798)

1,247,087

606(1,136,278)(603)

57,081,572-(469,393)

1,258,035(532,326)

1,790,361

630(1,193,670)

12,118409,978

57,063,874

40,637$ 57,023,237

Total Equity

202
$

2018

Net cash generated from operating activities-9-

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments for:
Expected credit loss recognized on trade receivables
Depreciation expenses
Amortization expenses
Net gain on fair value changes of financial assets and liabilities atfair value through profit or loss
Interest income
Dividend income
Share of profit of associates and joint ventures
Loss (gain) on disposal of property, plant and equipment
Gain on disposal of investments accounted for using the equity
methodLoss on disposal of non-current assets held for sale
Loss on inventories and property, plant and equipment
Impairment loss recognized on property, plant and equipment
Net gain on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leasebacks
Loss on sale-leasebacks
OthersImpairment loss recognized on non-current assets held for sale
Changes in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
Financial liabilities mandatorily classified as at fair value throughprofit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income tax paid
(450,195)
368,992
623,01250,000288,598
1,312,044
2,566,045(13,888)
75,437
11,076(9,359)(1,260,344)
212,277(94,232)(225,553)
62,151
878,219
89,678513,674
3,102,855(2,539,210)
10,515
99,13524,453,417
244,604
624,834(1,242,278)(19,085)(7,656)
10,462571,960
41,292
3,034,172
3,616,519
103,775
525,266
11,5281,507,192
65,925101,047(128,037)
351,186
53,077(114,250)(731,599)
1,851,452(1,970,226)(120,655)
93,70334,578,335
307,503
940,039(3,038,729)(41,260)
24,061,492(Continued)(11,076)(274,189)(9,603)(1,918,922)
273,308(25,700)(314,944)(10,112)(1,811,960)(26,377)

32,745,888

50,00018,192,291
165,050

2,315,631

24,00029,398,635
165,981$ (1,187,326)

18,688,022

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR- 10 -

The accompanying notes are an integral part of the financial statements.

$ 20,626,014

1,937,992

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

(220,402)(16,645,990)(9,666,313)
3,500,000(4,445,900)
4,905,660
5,500,000(15,336,255)
167,034(133,938)(1,136,278)(13,941,504)

1,713,825(387,244)
104,825(13,699,043)(157,571)$ (1,467,317)
2,310,000(35,525)(2,397,742)
38,59635,6922019

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESNet cash used in financing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of the principal portion of lease liabilities
Payments for buy-back of treasury shares
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds from sale-leasebacks
Proceeds from long-term borrowings
Repayments of long-term borrowings and capital lease obligations
Proceeds from guarantee deposits received
Refunds of guarantee deposits received
Dividends paid to owners of the Company

Net cash used in investing activities

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at amortized cost
Disposal of financial assets at amortized cost
Acquisition of investments accounted for by the equity method
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of non-current assets held for sale
Proceeds from disposal of investments accounted for using the equity
methodIncrease in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software costs

STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

2019

CHINA AIRLINES, LTD.

CHINA AIRLINES, LTD.

(Concluded)$ 18,688,022

16,563,559

2,124,463

2,690(3,940,469)(469,393)
10,512,000(2,700,000)
17,200,000(27,339,868)
118,367(67,905)(1,193,670)(17,999,250)(51,378)
103,593(13,798,867)(155,431)$ (2,310,000)(243,743)(2,561,987)
330,136
688,427

2018

203

Lease liabilities were recognized on January 1, 2019 for leases classified as operating leases under IAS
17. Lease liabilities are measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at
an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease
payments. The Company applies IAS 36 to all right-of-use assets.

China Airlines, Ltd. (the “Company”) was founded in 1959 and its shares have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine aircraft
maintenance; (c) major maintenance of flight equipment; (d) communications and data processing services
to other airlines; (e) the sale of aircraft parts, equipment and the entire aircraft; and (f) leasing of aircraft.

The major shareholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of December 31, 2019 and 2018, CADF and NDF
held 44.03% of the Company’s shares. As of December 31, 2019 and 2018, the Company had 12,175 and12,498 employees, respectively.

- 11 -The Company elected to apply the guidance of IFRS 16 in determining whether contracts are, or contain,
a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as
containing a lease under IAS 17 and IFRIC 4 are not be reassessed and accounted for in accordancewith the transitional provisions under IFRS 16.

Definition of a lease

IFRS 16 provides a comprehensive model for the identification of lease arrangements and theirtreatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4“Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer
to Note 4 for information relating to the relevant accounting policies.

IFRS 16 “Leases”

Except for the following, the initial application of the amendments to the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by
the FSC did not have material impact on the Company’s accounting policies:a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports
by Securities Issuers (FSC) and the International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)
endorsed and issued into effect by the FSC

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

The financial statements were approved by the Company’s board of directors on March 18, 2020.

2. APPROVAL OF FINANCIAL STATEMENTS- 12 -The Company does not reassess sale and leaseback transactions entered into before January 1, 2019 todetermine whether the transfer of an underlying asset satisfies the requirements in IFRS 15 to beaccounted for as a sale. Upon initial application of IFRS 16, the aforementioned transitional provision
for a lessee is applied to the leaseback portion. In addition, for assets accounted for as a sale and afinance lease under IAS 17, the Company continues to amortize any gains on sales over the lease term.

If the Company determines that a sale and leaseback transaction does not satisfy the requirements of
IFRS 15 to be accounted for as a sale of an asset, it is accounted for as a financing transaction. If it
satisfies the requirements to be accounted for as a sale of an asset, the Company recognizes only theamount of any gain or loss which relates to the rights transferred to the buyer-lessor. Prior to theapplication of IFRS 16, the leaseback portion is classified as either a finance lease or an operating leaseand accounted for differently.

For leases classified as finance leases under IAS 17, the carrying amount of right-of-use assets and leaseliabilities on January 1, 2019 was determined as the carrying amount of the leased assets and financelease payables as of December 31, 2018.

The Company recognizes right-of-use assets, or investment properties if the right-of-use assets meet thedefinition of investment properties, and lease liabilities for all leases on the balance sheets except for
those whose payments under low-value and short-term leases are recognized as expenses on astraight-line basis. On the statements of comprehensive income, the Company presents the depreciation
expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities;
interest is computed using the effective interest method. On the statements of cash flows, cash payments
for the principal portion of lease liabilities are classified within financing activities; cash payments forthe interest portion are classified within operating activities. Prior to the application of IFRS 16,
payments under operating lease contracts, including property interest qualified as investment properties,
were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified
within operating activities on the statements of cash flows. Leased assets and finance lease payables
were recognized on the balance sheets for contracts classified as finance leases.

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATIONThe Company as lessee

CHINA AIRLINES, LTD.

204
$ 58,286,964
596,000

Discounted amount using the incremental borrowing rate on January 1, 2019
Add: Finance lease payable on December 31, 2018
Add: Adjustments as a result of a different treatment of extension and termination
options
Add: Other
Less: Derivative financial instruments for hedging$ 27,940,511

$

$

$

Total effect on assets

Lease liabilities - current
Lease liabilities - non-current
Capital lease obligations
Financial liabilities for hedging - current
Financial liabilities for hedging - non-current

Total effect on liabilities- 13 -$

Prepaid rent
Refundable deposits
Right-of-use assets
Other financial assets

596,000

596,000-

1,076,675

699,098
377,577-

Carrying
Amount as ofDecember 31,
2019(699,098)(215,426)
69,988,735
189,808

3,394,630
24,545,881(596,000)
5,947,449
35,972,059$ 69,264,019$$ 69,264,019$

Adjustments
Arising from
InitialApplication
162,151
69,988,735
189,808

3,394,630
24,545,881
5,947,449
35,972,059$ 69,860,019$$ 70,340,694$

Adjusted
Carrying
Amount as ofJanuary 1, 2019

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16
is set out as follows:

The Company does not make any adjustments to leases in which it is a lessor and accounts for thoseleases under IFRS 16 starting from January 1, 2019.

The Company as lessor

Lease liabilities recognized on January 1, 2019

$ 68,174,292

Undiscounted amount on January 1, 2019

6,419,285
4,557,770(41,919,508)$ 68,174,292

The future minimum lease payments of non-cancellable operating leasecommitments on December 31, 2018

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on
January 1, 2019 was 2.47%. The difference between the (i) lease liabilities recognized and (ii) operatinglease commitments on December 31, 2018 is explained as follows:
Effective Date
Announced by IASB

Effective Date
Announced by IASB (Note)

Unless stated otherwise, the above New IFRSs are effective for annual reporting periods
beginning on or after their respective effective dates.

- 14 -

The financial statements have been prepared on the historical cost basis except for financial instruments
which are measured at fair value.

Basis of Preparation

The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers and other regulations.

Statement of Compliance

4. SIGNIFICANT ACCOUNTING POLICIESThe application of new IFRSs in issue but not yet endorsed and issued into effect by the FSC would nothave any material impact on the Company’s accounting policies. As of the date the financial statements
were authorized for issue, the Company is continuously assessing the possible impact that theapplication of other standards and interpretations will have on the Company’s financial position andfinancial performance and will disclose the relevant impact when the assessment is completed.

Note:

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
To be determined by IASB
between an Investor and its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
January 1, 2021
Amendments to IAS1 “clarify the classification of liabilities as current January 1, 2022
or non-current”

New IFRSs

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

As of the date the financial statements were authorized for issue, the Company is continuously
assessing the possible impact that the application of other standards and interpretations will have on the
Company’s financial position and financial performance and will disclose the relevant impact when theassessment is completed.

Note 3: The amendment is applied for the annual period beginning after January 1, 2020.

Note 2: Business combinations that began after January 1, 2020 and acquisition of assets after the
aforesaid date are subjected to the amendment.

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.

Amendments to IFRS 3 “Definition of Business”
January 1, 2020 (Note 1)
Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 2)
Reform”
Amendments to IAS 1 and IAS 8 “Definition of Materiality”
January 1, 2020 (Note 3)

New IFRSs

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

205- 15 -

In preparing the financial statements of the Company, transactions in currencies other than the Company’sfunctional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the datesof the transactions. At the end of each reporting period, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at that date. Non-monetary items that are measured at historical costin a foreign currency are not retranslated. Non-monetary items measured at fair value that are denominatedin foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.

Foreign Currencies

Assets and liabilities that are not classified as current are classified as non-current.

c. Liabilities for which the Company does not have an unconditional right to defer settlement for at least
12 months after the reporting period.

b. Liabilities due to be settled within 12 months after the reporting period; anda. Liabilities held primarily for the purpose of trading;Current liabilities include:c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period.

b. Assets expected to be realized within 12 months after the reporting period; anda. Assets held primarily for the purpose of trading;Current assets include:

Current and Non-current Assets and Liabilities- 16 -

Under the equity method, the investment is initially recognized at cost and the carrying amount isincreased or decreased to recognize the Company’s share of the profit or loss and other comprehensive
income of the subsidiary after the date of acquisition. Besides, the Company also recognizes theCompany’s share of the changes in other equity of the subsidiary.

Subsidiaries (including special purpose entities) are the entities controlled by the Company.

a. Investment in subsidiaries

Investments in subsidiaries, associates and jointly controlled entities are accounted for by the equity
method.

Investments Accounted for by the Equity Method

Non-current assets classified as held-for-sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.

Non-current assets are classified as held-for-sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the Non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.

Non-current Assets Held for Sale

Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sale and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.

Inventories

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.

For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign
operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising are recognized in other comprehensive income (attributed to the owners of theCompany and non-controlling interests as appropriate).

Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.

c. Level 3 inputs are unobservable inputs for an asset or liability.

When preparing these parent company only financial statements, the Company used the equity method toaccount for its investments in subsidiaries, associates and joint ventures. In order for the amounts of the net
profit for the year, other comprehensive income for the year and total equity in the parent company only
financial statements to be the same with the amounts attributable to the owners of the Company in its
standalone financial statements, adjustments arising from the differences in accounting treatments between
the parent company only basis and the standalone basis were made to investments accounted for using theequity method, the share of profit or loss of subsidiaries, associates and joint ventures, the share of othercomprehensive income of subsidiaries, associates and joint ventures and the related equity items, as
appropriate, in these parent company only financial statements.

b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); anda. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fairvalue measurement inputs are observable and based on the significance of the inputs to the fair value
measurement in its entirety, are described as follows:

206- 17 -

When the Company subscribes for additional new shares of an associate and joint ventures at apercentage different from its existing ownership percentage, the resulting carrying amount of theinvestment differs from the amount of the Company’s proportionate interest in the associate and joint
ventures. The Company records such a difference as an adjustment to investments with thecorresponding amount charged or credited to capital surplus. If the Company’s ownership interest is
reduced due to the subscription of additional new shares of the associate and jointly controlled entity,
the proportionate amount of the gains or losses previously recognized in other comprehensive income inrelation to that associate and joint ventures is reclassified to profit or loss on the same basis as would be
required had the investee directly disposed of the related assets or liabilities. When the adjustment
should be debited to capital surplus, but the capital surplus recognized from investments accounted forusing the equity method is insufficient, the shortage is debited to retained earnings.

Under the equity method, an investment in an associate and jointly controlled entity is initiallyrecognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss andother comprehensive income of the associate and jointly ventures. The Company also recognizes thechanges in the Company’s share of equity of associates and jointly ventures attributable to theCompany.

The Company uses the equity method to account for its investments in associates and joint ventures.

An associate is an entity over which the Company has significant influence and that is neither asubsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby theCompany and other parties that have joint control of the arrangement and the rights to the net assets of
the arrangement.

b. Investments in associates and joint ventures

Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits andlosses from upstream with a subsidiary and side stream transactions between subsidiaries are recognizedin the Company’s financial statements only to the extent of interests in the subsidiary that are notrelated to the Company.

When the Company ceases to have control over a subsidiary, any retained investment is measured atfair value at that date and the difference between the previous carrying amount of the subsidiary
attributable to the retained interest and its fair value is included in the determination of the gain or loss.
Furthermore, the Company accounts for all amounts previously recognized in other comprehensive
income in relation to that subsidiary on the same basis as would be required if the Company had
directly disposed of the related assets or liabilities.

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired isrecognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net
identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.

When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary(which includes any carrying amount of the investment in subsidiary accounted for by the equity
method and long-term interests that, in substance, form part of the Company’s net investment in thesubsidiary), the Company continues recognizing its share of further losses.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s lossof control over the subsidiaries are accounted for as equity transactions. Any difference between the
carrying amounts of the investment and the fair value of the consideration paid or received isrecognized directly in equity.

- 18 -

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. Assets are depreciated over the shorter of the lease term and their useful lives using the straight-line
method.

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation methods are reviewed at the end of eachreporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

Freehold land is not depreciated.

Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes and are expected to be used for more than
one period. The cost of an item of property, plant and equipment shall be recognized as an asset if, and only
if, it is probable that future economic benefits associated with the item will flow to the Company; and thecost of the item can be measured reliably. Property, plant and equipment are stated at cost less recognizedaccumulated depreciation and recognized accumulated impairment loss.

Property, Plant and Equipment

When the Company transacts with its associate and joint ventures, profits and losses resulting from thetransactions with the associate are recognized in the Company’ financial statements only to the extent ofinterests in the associate and the jointly controlled entity that are not related to the Company.

The Company discontinues the use of the equity method from the date on which it ceases to havesignificant influence and joint control. Any retained investment is measured at fair value at that date andthe fair value is regarded as its fair value on initial recognition as a financial asset. The difference
between the previous carrying amount of the associate and the jointly controlled entity attributable to
the retained interest and its fair value is included in the determination of the gain or loss on disposal of
the associate and the jointly controlled entity. The Company accounts for all amounts previously
recognized in other comprehensive income in relation to that associate and the jointly controlled entity
on the same basis as would be required if that associate had directly disposed of the related assets or
liabilities.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single
asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is
not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment.
Any reversal of that impairment loss is recognized to the extent that the recoverable amount of theinvestment subsequently increases.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets and liabilities of an associate and joint ventures recognized at the date of acquisition isrecognized as goodwill, which is included within the carrying amount of the investment and is notamortized. Any excess of the Company’s share of the net fair value of the identifiable assets andliabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Company’s share of losses of an associate and joint ventures equals or exceeds its interest inthat associate and joint ventures which includes any carrying amount of the investment accounted forusing the equity method and long-term interests that, in substance, form part of the Company’s net
investment in the associate and joint ventures entity, the Company discontinues recognizing its share offurther losses. Additional losses and liabilities are recognized only to the extent that the Company has
incurred legal obligations, or constructive obligations, or made payments on behalf of that associate andjoint ventures.

207- 19 -

Financial assets and financial liabilities are recognized when the Company becomes a party to thecontractual provisions of the instruments.

Financial Instruments

When an impairment loss is subsequently is reversed, the carrying amount of the asset or cash-generating
unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying
amount that would have been determined had no impairment loss been recognized for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the Company uses the estimated cash flows discounted by the future pre-tax discount rate, and thediscount rate reflects the current market time value of money and the specific risks to the asset for estimatedfuture cash flows not yet adjusting to the market.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.

At the end of each reporting period, the Company reviews the carrying amounts of its tangible andintangible assets, excluding goodwill, to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimatedin order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit towhich the asset belongs. Corporate assets are allocated to the individual cash-generating units on areasonable and consistent basis; otherwise, corporate assets are allocated to the smallest group of
cash-generating units on a reasonable and consistent allocation basis.

Impairment of Tangible and Intangible Assets Other Than Goodwill

Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, andamortization methods are reviewed at the end of each reporting period, with the effects of any changes inthe estimates being accounted for on a prospective basis. The residual value of an intangible asset with afinite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset
before the end of its economic life.

Intangible Assets

Any gain or loss arising on the derecognition of investment properties is calculated as the difference
between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss inthe period in which the property is derecognized.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.

Investment properties are properties held to earn rentals or for capital appreciation. Investment properties
also include land held for a currently undetermined future use.

Investment Properties

The financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; and- 20 -Cash equivalents include time deposits with original maturities within 3 months from the date ofacquisition, which are highly liquid, readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. These cash equivalents are held for the
purpose of meeting short-term cash commitments.

Interest income is calculated by applying the effective interest rate to the gross carrying amountof a financial asset.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash
equivalents, trade receivables, other receivables and other financial assets, are measured atamortized cost, which equals the gross carrying amount determined using the effective interest
method less any impairment loss. Exchange differences are recognized in profit or loss.

ii. The contractual terms of the financial asset give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal amount outstanding.

i.

Financial assets that meet the following conditions are subsequently measured at amortized
cost:b) Financial assets at amortized cost

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses
arising on remeasurement recognized in profit or loss. Fair value is determined in the manner
described in Note 31.

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified
or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include
investments in equity instruments which are not designated as at FVTOCI and debt instrumentsthat do not meet the amortized cost criteria or the FVTOCI criteria.

a) Financial assets at FVTPL

Financial assets are classified into the following categories: financial assets at FVTPL, financial
assets at amortized cost, and investments in equity instruments at FVTOCI.

1) Measurement category

All regular purchases or sales of financial assets are recognized and derecognized on a trade date basis.
All regular purchases or sales of financial assets are buy or sell of financial assets in the period set byregulation or market convention.

a. Financial assets

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issuance of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of thefinancial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized
immediately in profit or loss.

208- 21 -

On derecognition of a financial asset at amortized cost in its entirety, the difference between theasset’s carrying amount and the sum of the consideration received and receivable is recognized in
profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference
between the asset’s carrying amount and the sum of the consideration received and receivable andthe cumulative gain or loss which had been recognized in other comprehensive income isrecognized in profit or loss. However, on derecognition of an investment in an equity instrument at
FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable is recognized in profit or loss, and the cumulative gain or loss which had
been recognized in other comprehensive income is transferred directly to retained earnings, without
recycling through profit or loss.

The Company derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.

3) Derecognition of financial assets

The impairment loss of all financial assets is recognized in profit or loss by a reduction in theircarrying amounts through a loss allowance account, except for investments in debt instruments thatare measured at FVTOCI, for which the loss allowance is recognized in other comprehensive
income and the carrying amounts of such financial assets are not reduced.

Expected credit losses reflect the weighted average of credit losses with the respective risks of a
default occurring as the weights. Lifetime ECL represents the expected credit losses that will result
from all possible default events over the expected life of a financial instrument. In contrast,
12-month ECL represents the portion of lifetime ECL that is expected to result from default eventson a financial instrument that are possible within 12 months after the reporting date.

The Company always recognizes lifetime expected credit losses (ECLs) for trade receivables andother receivables. For all other financial instruments, the Company recognizes lifetime ECLs when
there has been a significant increase in credit risk since initial recognition. If, on the other hand, thecredit risk on a financial instrument has not increased significantly since initial recognition, theCompany measures the loss allowance for that financial instrument at an amount equal to 12-month
ECLs.

The Company recognizes a loss allowance for expected credit losses on financial assets at
amortized cost (including trade receivables), as well as contract assets.

2) Impairment of financial assets

Dividends on these investments in equity instruments are recognized in profit or loss when the
Company’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of an investment.

Investments in equity instruments at FVTOCI are subsequently measured at fair value withgains and losses arising from changes in fair value recognized in other comprehensive income
and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit orloss on disposal of the equity investments; instead, they will be transferred to retained earnings.

On initial recognition, the Company may make an irrevocable election to designate investmentsin equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if an equity
investment is held for trading or if it is contingent consideration recognized by an acquirer in abusiness combination.

c) Investments in equity instruments at FVTOCI- 22 -The Company enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options swaps and fuel swaps.

e. Derivative financial instruments

Transaction costs that relate to the issuance of the convertible notes are allocated to the liability andequity components in proportion to the allocation of the gross proceeds. Transaction costs relating to
the equity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.

The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized and includedin equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which case,the balance recognized in equity will be transferred to capital surplus - share premiums. When theconversion option remains unexercised at maturity, the balance recognized in equity will be transferred
to capital surplus - share premiums.

On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The component parts of compound instruments (i.e. convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.

d. Convertible bonds

The difference between the carrying amount of a financial liability derecognized and theconsideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in
profit or loss.

2) Derecognition of financial liabilities

Except for financial liabilities at FVTPL, all financial liabilities are measured at amortized costusing the effective interest method.

1) Subsequent measurementc. Financial liabilities

Repurchase of the Company’s own equity instruments is recognized in and deducted directly fromequity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.

Equity instruments issued by the Company entity are recognized at the proceeds received, net of direct
issue costs.

Debt and equity instruments issued by the Company entity are classified as either financial liabilities oras equity in accordance with the substance of the contractual arrangements and the definitions of afinancial liability and an equity instrument.

b. Equity instruments

209

The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date ofa lease, except for short-term leases and low-value asset leases accounted for applying a recognition
exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.
Right-of-use assets are initially measured at cost, which comprises the initial measurement of leaseliabilities adjusted for lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives
received. Right-of-use assets are subsequently measured at cost less accumulated depreciation andimpairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets arepresented on a separate line in the balance sheets.
Right-of-use assets are depreciated using the straight-line method from the commencement dates to theearlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. However, if
leases transfer ownership of the underlying assets to the Company by the end of the lease terms or if thecosts of right-of-use assets reflect that the Company will exercise a purchase option, the Company
depreciates the right-of-use assets from the commencement dates to the end of the useful lives of theunderlying assets.
Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed
payments, in-substance fixed payments, variable lease payments which depend on an index or a rate,
residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option, and payments of penalties for terminating a lease if the lease term reflects suchtermination, less any lease incentives payable. The lease payments are discounted using the interest rate
implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, theCompany uses the lessee’s incremental borrowing rate.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period as when the hedged item affects profit or loss. If a hedge of a forecasted transaction
subsequently results in the recognition of a non-financial asset or a non-financial liability, the associatedgains and losses that were recognized in other comprehensive income are removed from equity and areincluded in the initial cost of the non-financial asset or non-financial liability.

Starting from 2018, the Company discontinues hedge accounting only when the hedging relationship ceases
to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or
exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized inother comprehensive income from the period in which the hedge was effective remains separately in equity
until the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur, thegain or loss accumulated in equity is recognized immediately in profit or loss.

Provisions






- 23 -

Identifying the contract with the customer;
Identifying the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; andWhen applying IFRS 15 during 2018, the Company recognizes revenue by applying the following steps:

Revenue Recognition

The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows. When the aircraft lease contracts expire and will
be returned to lessor, the Company will assess if there are existing obligations and if a provision is required
when signing the lease contract.

The Company recognizes provisions when the Company has a present obligation (legal or constructive)
arising from past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.

The Company as lessee- 24 -

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods
in which they are incurred.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, withinterest expense recognized over the lease terms. When there is a change in a lease term, a change in theamounts expected to be payable under a residual value guarantee, a change in the assessment of an option topurchase an underlying asset, or a change in future lease payments resulting from a change in an index or arate used to determine those payments, the Company remeasures the lease liabilities with a corresponding
adjustment to the right-of-use-assets. Lease liabilities are presented on a separate line in the balance sheets.

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.

2019

Leasing

Passenger and cargo revenue are recognized as revenue when the passengers and goods are actually carried.
When the tickets are sold, due to the fact that the fulfillment obligations of the shipment have not been met,
the relevant amount of revenue is first recorded as contract liabilities until passengers actually board.
Before 2017, the relevant amounts were recorded as deferred revenue.

Shipping service revenue Recognize revenue when the Company satisfies a performance obligation.

The Company enters into some derivative transactions that aim to manage interest rates, foreign exchange
rates, fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging
transactions are defined as cash flow hedges. When entering into hedging transactions, the Company has
prepared official documents that describe the hedging relationship between hedging instruments and items
which have been hedged, the objective of risk management, the hedging strategy, and the way to evaluate
the effectiveness of the hedging instrument.

Hedge Accounting

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gain orloss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event, the timing of the recognition in profit or loss depends on the natureof the hedging relationship. When the fair value of a derivative financial instrument is positive, thederivative is recognized as a financial asset; when the fair value of a derivative financial instrument isnegative, the derivative is recognized as a financial liability.

210
Income tax expense represents the sum of the current tax and deferred tax.

a. Short-term employee benefits- 25 -

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets which are substantially ready for their intended use or sale through a fairly long period) are added tothe cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Borrowing Costs

Net defined benefit liabilities (assets) represent the actual deficit in the Company’s defined benefit
plans.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined
contribution retirement benefit plan are determined using the projected unit credit method. Service cost(including current service cost and past service cost) and net interest on the net defined benefit
liabilities (assets) are recognized as employee benefits expense in the period in which they occur.
Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest),
is recognized in other comprehensive income in the period in which it occurs. Remeasurement
recognized in other comprehensive income is reflected immediately in retained earnings and will not bereclassified to profit or loss.

Payments to the defined contribution retirement benefit plan are recognized as expenses whenemployees have rendered services entitling them to the contributions.

b. Retirement benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related services.

- 26 -

Deferred tax is recognized on temporary differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred
tax assets are generally recognized for all deductible temporary differences, unused loss carryforwards
and unused tax credits for purchases of machinery, equipment and technology, research anddevelopment expenditures, and personnel training expenditures to the extent that it is probable thattaxable profit will be available against which those deductible temporary differences can be utilized.

b. Deferred tax

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the shareholders approve the retention of these earnings.

The Company’s current tax liabilities are calculated by the tax rate was legislated or substantiallylegislated at the balance sheet date.

The current tax liabilities are based on current taxable profit. Since part of the income and expenses aretaxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the statements of comprehensive
income.

a. Current tax

Taxation

Employee Benefits

Operating lease payments are recognized as expenses on a straight-line basis over the lease term

The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Company’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the granted share options are vested immediately.

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.

Finance expenses are recognized immediately in profit or loss, unless they are directly attributable toqualifying assets, in which case, they are capitalized in accordance with the Company’s general policy on
borrowing costs.

Assets held under finance leases are initially recognized as assets of the Company at the lower of their fairvalue at the inception of the lease or the present value of the minimum lease payments. The corresponding
liability to the lessee is included in the balance sheets as a finance lease obligation.

Share-based Payment Arrangements

A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
Company recognizes this deferred revenue as revenue only when the Company has fulfilled its obligations
on the granting of rewards or when the period for converting the mileage to rewards has expired.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

The Company as lessee

The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member rewards.

Frequent Flyer Programs

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period
in which they are incurred.

2018

For sale and leaseback transactions, if the transfer of an asset satisfies the requirements of IFRS 15 to beaccounted for as a sale, the Company recognizes only the amount of any gain or loss which relates to therights transferred to the buyer-lessor, and adjusts the off-market terms to measure the sale proceeds at fairvalue. If the transfer does not satisfy the requirements of IFRS 15 to be accounted for as a sale, it isaccounted for as a financing transaction.

211- 27 -The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year are discussed below.

Key Sources of Estimation Uncertainty

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised if the revisions affect only that
period or in the period of the revisions and future periods if the revisions affect both current and future
periods.

In the application of the Company’s accounting policies as disclosed in Note 4, management is required tomake judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered relevant. Actual results may differ from these estimates.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY

The overhaul costs of an owned or leased aircraft that meet the criteria for fixed asset capitalization are
capitalized as replacements for aircraft and engines and are depreciated on a straight line basis over the
expected annual overhaul cycle.

Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.

Maintenance and Overhaul Costs

Current and deferred taxes are recognized in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity, in which case, the current and deferredtaxes are also recognized in other comprehensive income or directly in equity, respectively.

c. Current and deferred taxes for the year

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period inwhich the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that havebeen enacted or substantively enacted by the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which theCompany expects, at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates and interests in joint ventures, except where the Company is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reversein the foreseeable future. Deferred tax assets arising from deductible temporary differences associatedwith such investments and interests are only recognized to the extent that it is probable that there will be
sufficient taxable profit against which to utilize the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.

12,662,162
3,038,176

58,661
4,867,015

12,269,231-

51,264
6,367,527

2018$ 18,688,022$

December 31$ 20,626,014

$

2019

0.01%-1.90%
0.60%-2.55%
0.55%-0.70%

2018- 28 -

Derivative financial instruments (not under hedge accounting)foreign exchange forward contracts

Financial liabilities held for trading

Financial assets mandatorily classified at FVTPL
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts

Financial assets - current

434

$

$

December 31$ 11,749

$

2019

221

2018

-

0%-1.90%
0.60%-3.55%-

December 31

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

2019

The market rate intervals of cash in banks and cash equivalents at the end of the reporting period were as
follows:

Cash on hand and revolving funds
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

6. CASH AND CASH EQUIVALENTS

The present value of defined benefit obligations at the end of the reporting period are calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgment and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may have amaterial impact on the amount of defined benefit obligations.

Defined Benefit Obligations

Flight equipment is depreciated on a straight-line basis at rates that can be used to write down their cost to
their estimated residual values at the end of their useful lives. The estimates of the useful lives and residual
values of the flight equipment are made by the Company on the basis of past experience and fleet operation
performance in the industry. Due to changes in the fleet plan, the board of directors of the Company has
decided to change the expected useful lives of four 747-400 (GE) from 20 to 16-17 years since January 1,
2018 in order to meet the economic benefits and number of years of consumption. It is estimated that the
depreciation expense will increase by approximately NT$770 million annually.

Depreciation of Property, Plant and Equipment - Flight Equipment

212

NTD/USD

2019.01.02-2019.01.31

NTD30,923/USD1,000

NTD570,571/USD19,000

83,366$

61,620$ 107,856$

2018

21,74680,991

December 31

26,865$2019$ 1,460,450

2019

2018

$ 2,310,000

December 31- 29 -The range of interest rates for time deposits with original maturities of more than 3 months wereapproximately 0.60%-2.44% and 0.40%-0.68% per annum as of December 31, 2019 and 2018, respectively.

Time deposits with original maturities of more than 3 months (e)Current

9. FINANCIAL ASSETS AT AMORTIZED COST

These investments in equity instruments are not held for trading. Instead, they are held for medium- tolong-term strategic purposes. Accordingly, the management elected to designate these investments in equity
instruments as at FVTOCI as it believes that recognizing short-term fluctuations in these investments’ fairvalues in profit or loss would not be consistent with the Company’s strategy of holding these investments
for long-term purposes.

Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

Non-current

Investments in Equity Instruments

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Buy forward contracts

December 31, 20182020.01.15-2020.07.31$ 9,280,662

596,739$ 7,694,431

$

2018

8,875,002(191,079)
8,683,923

297,075

December 31

7,577,460(180,104)
7,397,356$

2019- 30 -The Company writes off a trade receivable when there is information indicating that the debtor isexperiencing severe financial difficulty and there is no realistic prospect of recovery. For accounts
receivable that have been written off, the Company continues to engage in enforcement activity to attempt
to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss.

The Company applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience
with the debtors and an analysis of the debtors’ current financial position, adjusted for general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as theforecasted direction of economic conditions at the reporting date. As the Company’s historical credit loss
experience does not show significantly different loss patterns for different customer segments, the loss
allowance based on the past due status is not further distinguished according to the different segments of theCompany’s customer base.

The average credit period was 7 to 55 days. In determining the recoverability of a trade receivable, theCompany considered any change in the credit quality of the receivable since the date credit was initiallygranted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Company’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position. The Company adopted apolicy of only dealing with entities that are rated the equivalent of investment grade or higher and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Credit rating information is obtained from independent rating agencies where available or, if not available,
the Company uses other publicly available financial information or its own trading records to rate its major
customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored
and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit
exposure is controlled by counterparty limits that are reviewed and approved by the risk management
committee annually.

At amortized cost
Gross carrying amountLess: Allowance for impairment loss

NTD/USD

Buy forward contracts

Notes receivable
Accounts receivable

Maturity Date

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

December 31, 2019

Currency

Notional Amount(In Thousands)

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:213(3,796)33,02356,880(16,178)

73,058$$29,309(12,611)41,92021.78%

61 to 90 Days$$

22.14%

61 to 90 Days$$

$ 8,683,923(191,079)$ 8,875,002

Total$ 7,397,356(180,104)$ 7,577,460

-

Total

$ 8,451,892$ 8,246,515- 31 -The operating costs for the years ended December 31, 2019 and 2018 included losses from inventory
write-downs of $317,629 thousand and $371,275 thousand, respectively.

$ 7,669,834
554,084
227,9742018$ 191,079$ 7,390,981
571,601
283,9332019$ 180,104

Balance at December 31$ 142,637
50,000(2,555)997

December 31$ 191,079
24,000(34,975)-

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services-(172,824)

172,824

97.5%

Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses

11. INVENTORIES-(153,992)

153,992

Over 90 Days

$

$

100%

Over 90 Days

For the Year Ended December 31
2019
2018

The movements of the loss allowance of accounts receivables were as follows:

$

(699)

$ 1,330,830$ 7,290,761

36,819(1,149)Amortized cost$

$ 1,331,529$ 7,291,910

3.67%

31 to 60 Days

Gross carrying amount
Loss allowance (lifetime
ECLs)

0.06%

Up to 30 Days

31,871(6,020)37,891

0.06%

Not Past Due$$

15.89%

31 to 60 Days

Expected credit loss rate

December 31, 2018

$ 1,239,904(1,862)$ 6,068,701(2,052)

Amortized cost

$ 1,241,766$ 6,070,753

Gross carrying amount
Loss allowance (lifetime
ECLs)

0.15%

Up to 30 Days

0.03%

Not Past Due

Expected credit loss rate

December 31, 2019

The following table details the loss allowance of trade receivables based on the Company’s provision
matrix.

$

2019
-

2018
$ 46,154

December 31- 32 -

Tigerair Taiwan Co., Ltd.
CAL Park
Mandarin Airlines
CAL-Dynasty International
Taiwan Air Cargo Terminal
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
CAL Hotel
Taiwan Airport Services
Hwa Hsia
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
Yestrip
Dynasty Holidays
Global Sky Express
Kaohsiung Catering Services

Unlisted companies

a. Investment in subsidiaries

Investments in subsidiaries
Investments in associates
Investments in jointly controlled entities

1,946,328
1,552,310
1,494,603
1,276,546
1,517,946
737,245559,562460,213479,259
276,134
88,313921,989
25,2687,294
661,170

1,805,921
1,507,445
1,201,109
1,266,921
1,533,244
755,619494,098
454,149
461,239
266,775
89,101
1,128,138
26,946
26,0596,996
662,817$ 11,686,577

$

2018

$ 13,158,355

December 31$ 12,004,180

$

2019

$ 13,482,877

2018$ 11,686,577
497,362
974,416

December 31$ 12,004,180
471,267
1,007,430

2019

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

The fair value was determined by transactions of the related market, and the proposed sale price was basedon the current status of the aircraft. The fair value is classified as Level 3.

In 2019 and 2018, the Company recognized impairment losses of $0 thousand and $75,437 thousand,respectively. In 2019 and 2018, the Company recognized disposal losses of $10,462 thousand and $368,992
thousand, respectively.

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft
according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original
book value which was higher than the expected sale price and which was recognized as an impairment loss.
However, the actual loss shall be identified by the actual sale price.

Aircraft held for sale

12. NON-CURRENT ASSETS HELD FOR SALE

214
69%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
20%
100%
25%
54%

90%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
51%
100%
25%
54%

2018

The share of profit or loss

- 33 -$ 1,529,721

2019$ 1,628,453

2018

The share of profit or loss of subsidiaries recognized under the equity method was as follows:

In order to prepare the listing of Tigerair Taiwan Co., Ltd. and comply with the rules relating to theexamination for public listing, the release of the shares of Tigerair Taiwan Co., Ltd. held by theCompany was resolved in the shareholders’ meeting of the Company on June 25, 2019. The shares shallbe subscribed by all shareholders of the Company on the basis of the percentage of shareholdings. For
the subscribed shares that the original shareholders waived or for the undersubscribed portion, thechairman was authorized to contact specific persons to subscribe. The subscription price was set at $41
per share. In October and December 2019, the stock price was fully paid and the shares werecompletely delivered and transferred. The proceeds from disposal were $1,679,789 thousand, and therelated gain on disposal was $1,129,080 thousand and recognized in the capital surplus account.

The board of directors of the Company decided to sell part of the equity of Dynasty Holidays to H.I.S.
Taiwan Co., Ltd. on January 21, 2019, and completed the transaction on January 31, 2109. After thesale of the equity, the Company’s holding of the issued share capital decreased from 51% to 20%.
Dynasty Holidays was classified as an associate since the Group lost control of the subsidiary. For the
information about the disposal of the Dynasty Holidays, please refer to Note 31.

The Company paid $243,743 thousand on March 7, 2018 to acquire an additional 18% of Kaohsiung
Catering, Ltd. (Kaohsiung Catering) of which the Company’s holding of the issued share capital
exceeded 50%. Kaohsiung Catering is listed as a subsidiary because the Company has control over theinvestee. For the disclosure of the Company’s acquisition of Kaohsiung Catering, refer to Note 30.

Each of the Company’s holdings of the issued share capital of Taoyuan International Airport Service,Taiwan Airport Service and Global Sky Express did not exceed 50%, but since the Company had
control over these investees, they were listed as subsidiaries.

Tigerair Taiwan Co., Ltd.
Taiwan Air Cargo Terminal
CAL Park
Mandarin Airlines
CAL-Dynasty International
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
Taiwan Airport Services
CAL Hotel
Hwa Hsia
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
Dynasty Holidays
Yestrip
Global Sky Express
Kaohsiung Catering Services

2019

December 31

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by
the Company were as follows:$ 497,362$ 471,267

2018$ 497,362-

December 31$ 461,263
10,004

2019

20%
20%

December 31
20%
51%

2018

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

- 34 -The investments in jointly controlled entities were as follows:c. Investments in jointly controlled entities

China Aircraft Services
Dynasty Holidays

805,157
166,901
2,358
974,416$$$ 1,007,430

2018
801,070
168,547
37,813$

December 31

6,402

$
$ 10,380

2019

6,402
-

$

2018
$ 10,36515

2019

The recognized investment income of associates accounted for using the equity method were as
follows:

Note:Dynasty Holidays was list as a associate on January 31, 2019.

China Aircraft Services
Dynasty Holidays (Note)2019

At the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Company were as follows:

China Aircraft Services
Dynasty Holidays

Unlisted companies

b. Investments in associates

215

51%
55%
49%

51%
55%
49%

2018

$ 267,413
16,695(41)$ 284,067$ 271,859

2018$ 256,899
15,030(70)

December 31- 35 -For details on services, major business offices and the country where the above associates and jointly
controlled entities are registered, refer to Table 6, “Names, Locations, And Other Information of
Investees Over Which the Company Exercises Significant Influence” and, Table 7, “Investments In
Mainland China”, following the notes to financial statements.

The financial statements used as a basis of the amounts of and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2019 and 2018 were all independently audited,
except of China Aircraft Services. However, the management determined that there would have been no
significant adjustments had this investee’s financial statements been independently audited.

The Company’s shares of other comprehensive income of subsidiaries, associates and jointly controlled
entities were losses of $(85,977) thousand and $(75,996) thousand in 2019 and 2018, respectively.

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2019

Details of the investment income attributable to investments in jointly controlled entities were as
follows:

To enhance the Company’s maintenance capabilities, the Company established a joint venture with the
US NORDAM Aerospace Group in December 2017, planning to provide thrust reversers and composite
repair services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business disputation with their cooperative
partner, while their company operation was not impact. NORDAM Asia suspended its operation from
October 5, 2018 to October 4, 2019 and resumed business on October 4, 2019. The company increased
capital of $35,525 thousand to NORDAM Asia on November 2019.

The Company signed a joint venture agreement with the Taikoo Company to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe majority power in the board of directors to pose a motion for veto, and therefore the Company does
not have control.

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2019

December 31

At the end of the reporting period, the percentages of ownership and voting rights in jointly controlled
entities held by the Company were as follows:$

Carrying amounts at
December 31, 2019

193,013--

193,013

193,013-

193,013--

193,013

193,013
-

$

$

$

$

$

$

$

$

$

$

3,327,375(4,056,383)(3,880,602)(175,943)
162-

7,383,758

7,335,537
37,725(162)
10,6583,454,935(3,880,602)(3,717,055)(172,873)
9,326-

7,335,537

7,304,328
41,016(10,349)
542

Buildings$ 126,571,614$ (140,336,300)$ (122,357,428)(18,186,434)
14,899,562(14,692,000)$ 266,907,914$ 255,579,627
2,211,321(20,698,042)
29,815,008$ 133,222,199$ (122,357,428)$ (135,671,634)(15,732,018)
19,813,183(50,000)
9,283,041$ 255,579,627$ 261,114,631
2,308,683(20,305,928)
12,462,241

FlightEquipment- 36 -

Reclassification is mainly from prepaid equipment.

$

$

$

Balance at December 31,
2019

Balance at January 1,
2019
Depreciation expense
Disposals
Reclassification

Accumulated depreciationand impairment

Balance at December 31,
2019

Balance at January 1,
2019
Additions
Disposals
Reclassification
$

$

Cost

$

Carrying amounts at
December 31, 2018

$

$

$

Balance at December 31,
2018

Balance at January 1,
2018
Depreciation expense
Disposals
Impairment losses
Reclassification

Accumulated depreciationand impairment

Balance at December 31,
2018

Balance at January 1,
2018
Additions
Disposals
Reclassification

Cost

Freehold Land

14. PROPERTY, PLANT AND EQUIPMENT

25,211,677

25,594,436(1,811,222)
1,428,463-

25,211,677(79,866)(25,131,811)

11,137,069

$

$

-

-

$ (14,074,608)(741,780)
79,866
14,736,522

$

$

$

$ (14,074,608)$ (13,613,023)(1,993,631)
1,532,046-$$

Equipment
under FinanceLeases

$

$

$

$

$

$

$

$

$

$

937,884(5,571,763)(5,318,708)(284,537)
76,586(45,104)

6,509,647

6,340,546
148,696(85,852)
106,257

1,021,838(5,318,708)(5,102,584)(293,769)
89,841(12,196)

6,340,546

6,163,436
212,288(108,752)
73,574

Others$ 131,029,886$ (149,964,446)$ (145,631,346)(19,388,694)
15,056,176(582)$ 280,994,332$ 294,660,400
2,397,742(20,863,922)
4,800,112$ 149,029,054$ (145,631,346)$ (158,104,296)(18,192,291)
21,444,396(50,000)
9,270,845$ 294,660,400$ 300,369,844
2,561,987(22,236,251)
13,964,820

Total

216
18-25 years
10-20 years
12-20 years
6-8 years
3-10 years
8-12 years
3-15 years
5-12 years

5 years
3-5 years

25 years
3-13 years
3-15 years

45-55 years
10-25 years

2018- 37 -

The fair value of the investment properties held by the Company were both $2,473,771 thousand as ofDecember 31, 2019 and 2018. The fair value valuation was performed by independent qualified
professional valuers, and the future income evaluated by management was based on market transactions.
All of the Company’s investment properties were held under freehold interest.

$ 2,047,448

December 31$ 2,047,448

2019

The investment properties (land) held Company, located in Nankan, were leased to others.

Carrying amount
Investment properties

15. INVESTMENT PROPERTIES

Based on the particularity of risk in the aviation industry, all of the Company’s assets such as aircraft, realestate, and movable property are adequately insured to diversify the potential risk related to operations.

Refer to Note 32 for the carrying amounts of aircraft equipment and right-of-use assets pledged by theCompany.

Regarding changes in fleet composition, current and forecasted market values, and other technical factors,
the Company recognized impairment losses on a part of aircraft equipment of $50,000 thousand in 2018.

Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersFlight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimateduseful life of the asset:$ 2,218,356(916,027)(165,050)$ (1,247,058)$ (1,081,077)(165,981)$ (1,081,077)$

Accumulated
Amortization

$

$

$

$

$ 11,227,556

8,322,518
2,264,220
621,715
19,1032,106,199$$

94,682
1,551,113
460,404

$

$

$

$

2018

2,122,085

223,745
1,501,429
377,577
19,334

3,157,864

290,6622,549,376
317,826

December 31

$

2019

- 38 -The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A321neo and B777F aircraft. For details on the A321neo and B777F aircraft purchase contracts, refer toNote 33.

Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Other financial assets

Non-current

Temporary payments
Prepayments
OthersCurrent

17. OTHER ASSETS

971,298

979,708
157,571(165,981)

979,708

989,327
155,431(165,050)

Net Value

The above items of other intangible assets are amortized on a straight-line basis over 2-10 years.

Balance at December 31, 2019

$ 2,060,785
157,571-$ 2,060,785

Balance at December 31, 2018
Balance at January 1, 2019
Additions
Amortization expense$ 1,905,354
155,431-

Computer
Software Costs
Balance at January 1, 2018
Additions
Amortization expense

16. OTHER INTANGIBLE ASSETS

217

1.08%-1.46%

0.92%-1.46%$ 56,827,738

7,749,000
34,171,875$ 48,618,168

$

2018

30,300,000
58,132
72,162,743
15,335,005

650,000
30,435,870

December 31

31,300,000
59,38262,326,488
13,708,320

$

2019

2008/2/262030/4/25

2007/5/242030/4/25

2018- 39 -

Less: Current portion and put option of convertible bonds

Unsecured corporate bonds first-time issued in 2013
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Unsecured corporate bonds first-time issued in 2017
Unsecured corporate bonds second-time issued in 2017
Unsecured corporate bonds first-time issued in 2018
Unsecured corporate bonds first-time issued in 2019
Convertible bonds - fifth-time issue
Convertible bonds - sixth-time issue

19. BONDS PAYABLE

2,750,000
5,000,000
5,000,000
2,350,000
3,500,000
4,500,000
3,500,000
5,752,625
32,352,625
10,000,000$ 22,352,625$

2019
5,500,000
5,000,000
5,000,000
2,350,000
3,500,000
4,500,000
1,695,900
5,673,710
33,219,610
4,445,900

2018$ 28,773,710$

December 31

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until August 2024, were used by the Company to guarantee commercial paper
which it issued. The commercial paper was issued at discount rates of 1.1300%-1.1680% in 2019 and1.0693%-1.2960% in 2018.

Periods

2019

December 31

Bank loans (New Taiwan dollars and U.S. dollars) are repayable quarterly, semiannually or in lump sum
upon maturity. Related information is summarized as follows:

For information on secured bank loans which were secured by flight equipment, refer to Note 32.

Interest rates

Less: Current portion

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountLong-term Borrowings

18. BORROWINGS

Five-year private unsecured bonds - issued at
par in January 2013; repayable in January
2017 and 2018; 1.6% interest p.a., payableannually
Seven-year private unsecured bonds - issued at
par in January 2013; repayable in January
2019 and 2020; 1.85% interest p.a., payableannually
Five-year unsecured bonds - issued at par in
May 2016; repayable in May 2020 and2021; 1.19% interest p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in
September 2020 and 2021; 1.08% interestp.a., payable annually
Three-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.2% p.a., payable annually
Seven-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.75% p.a., payable annually
Three-year private unsecured bonds - issued at
par in October 2017; repayable on due date;interest of 1.14% p.a., payable annually
Five-year private unsecured bonds - issued at
par in October 2017; repayable in October
2021 and 2022; 1.45% interest p.a., payableannually
Five-year private unsecured bonds - issued at
par in November 2018; repayable inNovember 2022 and 2023; 1.32% interestp.a., payable annually
Seven-year private unsecured bonds - issued at
par in November 2018; repayable inNovember 2022 and 2023; 1.45% interestp.a., payable annually
Five-year private unsecured bonds - issued at
par in June 2019; repayable in June 2023
and 2024; 1.10% interest p.a., payableannually
Seven-year private unsecured bonds - issued at
par in June 2019; repayable in June 2025
and 2026; 1.32% interest p.a., payableannually

Category

Related issuance conditions were as follows:- 40 -

1.32

1.10

1.45

1.32

1.45

1.14

1.75

1.20

1.08

1.19

1.85

1.6

Rate
(%)

(Continued)

Principal repayable in June of2025 and 2026; indicatorrate; payable annually2019.06.212026.06.21

2019.06.212024.06.21

2018.11.302025.11.30

2018.11.302023.11.30

2017.10.122022.10.12

2017.10.122020.10.12

2017.05.192024.05.19

2017.05.192020.05.19

2016.09.272021.09.27

2016.05.262021.05.26

2013.01.172020.01.17

Principal repayable in
January of 2017 and 2018;indicator rate; payableannually
Principal repayable in
January of 2019 and 2020;
indicator rate; payableannually
Principal repayable in May of2020 and 2021; interest p.a.
payable annuallyPrincipal repayable in
September of 2020 and2021; interest p.a. payableannually
Principal repayable on due
date; indicator rate;
payable annuallyPrincipal repayable on due
date; indicator rate;
payable annuallyPrincipal repayable on due
date; indicator rate;
payable annuallyPrincipal repayable in
October of 2021 and 2022;
indicator rate; payableannually
Principal repayable inNovember of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable inNovember of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable in June of2023 and 2024; indicatorrate; payable annually

Conditions

2013.01.172018.01.17

Period218

2013.12.262018.12.26

Five-year convertible bonds - issued at
discount in December 2013; repayable inlump sum upon maturity; 1.8245% discountrate p.a.
Five-year convertible bonds - issued at
discount in January 2018; repayable in lumpsum upon maturity; 1.3821% discount ratep.a.

Except for converting to sharecapital or buying back,principal repayable in
December of 2018
Except for converting to sharecapital or buying back,principal repayable in
December of 2023
(Concluded)

Conditions$ 5,481,379

Liability component at the date of issuance- 41 -$ 6,000,000(518,621)

Proceeds from issuance
Equity component

The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.8245% per annum on initial recognition.

e. The convertible bonds has expired on December 26, 2018, the Company has fully repayable in January
8, 2019, the related capital surplus - share option has reclassified as capital surplus - other.

d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$12.24, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of August 14, 2018, there was adjustment the conversion price to NT$11.38, corporate bonds with aface value of $3,316,800 thousand had been converted to 270,985 thousand units of ordinary shares.

c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.

b. The holders can request that the Company repurchase their bonds at 100.75% face value on the third
anniversary of the offering date. Because the holders can exercise selling rights on December 26, 2016,
the Company reclassified the bonds payable to “current portion of bonds payable” in December 2015.
The Company paid $994,705 thousand to the holders of the bonds payable who exercised the put
options, and the difference between the payment amount and carrying amount recognized was a loss on
the bonds payable buy back of $41,943 thousand, for which the Company reclassified the remaining
face value to Non-current assets.

$ 5,602,022

Carrying amounts
Land
Buildings
Flight equipmenta. Right-of-use assets - 2019Year 2019

20. LEASE AGREEMENTS- 42 -

3,442,366
6,950,330
53,870,134$ 64,262,830$

December 31,
2019

The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 7, 2019. The cumulative face value of the bonds shall not exceed $3,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years.

Liability component at the date of issuance

Proceeds from issuance
Equity componenta. The holders may demand a lump-sum payment for the bonds upon maturity.

$ 6,012,000(409,978)The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.

d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$13.2, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 29, 2019, the conversion price was adjusted to NT$12.6.

c. The Company may redeem the bonds at face value between April 30, 2018 and December 20, 2022
under certain conditions.

b. The holders can request that the Company repurchase their bonds at face value on the third anniversaryof the offering date. The holders can exercise the right to sell on January 30, 2021.

a. The holders may demand a lump-sum payment for the bonds upon maturity.

The Company issued the sixth issue of its unsecured convertible bonds, and the issuance conditions were as
follows:

The Company issued the fifth issue of unsecured convertible bonds, and the issuance conditions were as
follows:

The Company issued its 2016 first unsecured corporate bonds with a face value of $5,000,000 thousand,and the purchasers of the bonds included Mandarin Airlines Co., Ltd. and Sabre Travel Network (Taiwan)Co., Ltd., which held a face value of $300,000 thousand, and the amount was eliminated in the Company’s
consolidated financial statements.

2018.01.302023.01.30

PeriodCategory

Rate
(%)

219

171,147
767,9399,070,855

1.09%-1.65%
0%-3.56%
2.49%-3.16%

December 31,
2019$695,215$ 10,909,262

December 31,
2019

Subject

For the year ended December 31, 2019

- 43 -$ 1,457,058

Recognized in
Other
Comprehensive
Income2021.4.15-2028.5.15 Financial liabilities for hedging current
Financial liabilities for hedging non-current

Influence of comprehensive income

December 31, 2019

Maturity Date

42,420,205

8,577,482$(24,029)

Reclassified toIncome$Carrying Value

The Company specifics a part of US lease contract as a hedging instruments to avoid exchange
fluctuations is US dollar passenger revenue, and applies the accounting treatment of cash flow hedging.
The lease information is as follows:c. Financial liabilities under hedge accounting

Land
Buildings
Flight equipment

Range of discount rate for lease liabilities (include US lease hedging instruments):

Carrying amounts
Current
Non-current

b. Lease liabilities - 2019$

Depreciation for right-of-use assets
Land
Buildings
Flight equipment

5,043,409$ 10,009,941$

Additions to right-of-use assets

For the Year
Ended
December 31,
2019$463,115
1,406,702$
18,144$ (11,583,349)- 44 -The Company chooses to waive the recognition of the contract provisions for the short-term leases andlow price lease, and does not recognize the related right-of-use assets and lease liabilities for such lease.

Short-term and low price lease payment
Total of lease cash outflow

For the Year
Ended
December 31,
2019

The Company uses operating lease agreement for investment properties, refer to Note 15.

g. Other lease information

As lessee, the Company leased office buildings and equipment from CAL Park. Lease period is 2 years,
and the fixed payment (tax included) is $20,238 thousand per month.

In order to revitalize assets and strengthen the financial structure, the Company sold five of its own
A330-300 aircraft to Altavair L.P. in September 2019 by sale-and-leaseback for $4,905,660 thousand.
The lease term was 5 to 6 years and a loss of $103,775 thousand was incurred. The lease agreement had
no terms for lease renewal or offtake rights. The annual lease payments for each aircraft are US$5,389
thousand to US$5,437 thousand.

f. Sale-and-leaseback

The Company signed a rental letter of intent for eight A321neo with CALC Lease Corporation on May
2019, which is expected to be introduced in 2022.

The Company signed a rental contract for six A321neo with Air Lease Corporation on September 2019,
which is expected to be introduced between 2021 and 2022.

e. Lease agreement

Refundable deposits
Credit guarantees

December 31,
2019

The information of refundable deposits and opening of credit letter due to rental of planes:

As lessee, China Airlines leased ten 777-300ER planes, fifteen A330-300 planes and fifteen 737-800
planes for operation, lease period are 8 to 12 years from February 2006 to May 2028. The rental pricing
method is partly a fixed amount of funds, and some of them are floating rents, floating rents areaccording to benchmark ratio, the rent is revised every half year. When the lease expires, the leaseagreements have no purchase rights.

d. Material leasing activities and terms

220$ 596,000
1.0680%Present value of minimum lease payments

Interest rates

Minimum lease payments- 45 -The lease payments recognized in expense for the current period were as follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

9,943,373
38,789,047
19,441,872$ 10,024,963

For the Year
Ended
December 31,
2018$ 68,174,292$

December 31,
2018

The future minimum lease payments for the non-cancelable operating lease commitments were as
follows:

As of December 31, 2018, the refundable deposits paid by the Company under operating lease contracts
were $215,425 thousand. Some of the guarantees were secured by credit guarantees, and outstanding
credit guarantees as of December 31, 2018 were $1,437,707 thousand.

For the operating lease arrangements, please refer to the financial statements for the year ended
December 31, 2018.

b. Operating lease arrangements (include sale-leaseback operating leases)

The Company had leased one A330-300 aircraft under sale-leaseback finance leases as of December 31,
2018. The lease terms started from June 2006 to April 2019. During the lease terms, the Company
retained all risks and rewards attached to the aircraft and engines and enjoyed the same substantive
rights as those prior to the transactions. The interest rates underlying all obligations under these financeleases were floating. Therefore, the minimum lease payments under the sale-leaseback aircraft contracts
do not include interest expenses.

$ 596,000-

December 31,
2018

Within one year
Beyond one year and within five years

Minimum lease payments - flight equipmenta. Sale-and-leaseback finance leases

2018

Current
Non-current

Operating leases - aircraft

23. PROVISIONS

Current
Non-current

Frequent flyer programs
Advance ticket sales- 46 -

22. CONTRACT LIABILITIES/DEFERRED REVENUE

Fuel costs
Ground service expenses
Repair expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

21. OTHER PAYABLES

3,419,803
1,178,184
1,136,588
214,089
1,577,322
914,428
509,520
1,942,269

2,884,122
17,936,476

9,431,736$ 9,431,736$

268,901
7,730,114$ 7,999,015$$ 7,999,015

2018$ 18,969,146$ 17,065,481
1,903,665

December 31$ 9,431,736

2019$ 20,820,598$ 18,584,287
2,236,311

2,489,950
16,479,196$ 18,969,146$

December 31
2019
2018
Contract
Contract
Liabilities
Liabilities$ 20,820,598$

3,571,314
1,089,125
960,138
260,179
2,053,442
914,171484,341
2,406,591

2018$ 11,739,301$

December 31$ 10,892,203

$

2019

221

$ 7,999,015$ 7,999,015
3,616,519(1,970,226)(213,572)$ 9,431,736

Balance at December 31, 2018

Balance at January 1, 2019
Additional provisions recognized
Usage
Effect of exchange rate changes

Balance at December 31, 2019

- 47 -

Before the end of each year, the Company assesses the balance in the pension fund. If the amount of thebalance in the pension fund is inadequate to pay retirement benefits for employees who conform toretirement requirements in the next year, the Company is required to fund the difference in one
appropriation that should be made before the end of March of the next year. The pension fund ismanaged by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Company has no right toinfluence the investment policy and strategy.

The Company adopted the defined benefit plan under the Labor Standards Law, under which pension
benefits are calculated on the basis of the length of service and average monthly salaries of the six
months before retirement. The Company contribute amounts equal to 15% of total monthly salaries andwages to a pension fund administered by the pension fund monitoring committee. Pension contributions
are deposited in the Bank of Taiwan in the committee’s name.

b. Defined benefit plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is astate-managed defined contribution plan. Under the LPA, an entity makes monthly contributions toemployees’ individual pension accounts at 6% of monthly salaries and wages.

a. Defined contribution plans

24. RETIREMENT BENEFIT PLANS$ 7,758,651
2,566,045(2,539,210)
213,529

Balance at January 1, 2018
Additional provisions recognized
Usage
Effect of exchange rate changes

Aircraft Lease
Contract

The Company rented flight equipment under operating lease agreements. Under the contracts (some of theleased flight equipment’s lease payments are calculated monthly), when the lease expires and the equipment
is returned to the lessor, the flight equipment has to be repaired according to the expected years of use,
number of flight hours, flight cycle and the number of engine revolutions. The Company had existingobligations to recognize provisions when signing a lease or during the lease term.

Balance at December 31, 2019

Balance at January 1, 2018
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Payment to employees direct from theemployer
Effect of exchange rate changes
Balance at December 31, 2018
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Payment to employees direct from theemployer
Effect of exchange rate changes

7,588,745(219,345)(219,345)(1,038,624)
1,154,724-

290,044491,560
781,604(1,154,724)(117,492)
70- 48 -$ (6,343,766)(56,049)(56,049)

1,187,281
118,5171,305,798$ 13,932,511(6,184,472)(168,987)(1,058,494)
897,483

283,774
560,118
843,892(897,483)(174,390)
9,589
13,117,255(168,987)(56,995)(56,995)

1,263,193
116,231
1,379,424-$ (5,797,479)

Fair Value ofthe Plan Assets$$ 13,932,511(6,343,766)

2018

6,932,783$$

7,588,745(117,492)70

290,044491,560
562,259(1,038,624)-(219,345)

1,187,281
62,4681,249,749(174,390)
9,589
6,932,783

283,774
560,118
674,905(1,058,494)-(168,987)

1,263,193
59,236
1,322,429

6,158,744

Net Defined
BenefitLiabilities(Assets)$$ 13,117,255(6,184,472)

December 31$ 11,956,223

Present Valueof the Defined
BenefitObligation

Movements in net defined benefit liabilities (assets) were as follows:

Net defined benefit liabilities

Present value of defined benefit obligation
Fair value of plan assets

2019

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as
follows:

222
0.71%
1.00%

0.93%
1.00%

2018

$ (576,271)$ 626,381$ 601,326$ (563,743)$ 626,743$ (600,073)

2018$ (613,408)$ 653,413

December 31

9.6 years

The average duration of the defined benefit obligation- 49 -$ 736,056

2018

9.8 years$ 722,820

December 31

The expected contributions to the plan for the next year

2019

The sensitivity analysis presented above may not be representative of the actual change in the present
value of the defined benefit obligation as it is unlikely that the change in assumptions would occur inisolation of one another as some of the assumptions may be correlated.

Discount rate
0.5% increase
0.5% decrease
Expected rate of salary increase
0.5% increase
0.5% decrease2019

If possible reasonable change in each of the significant actuarial assumptions will occur and all otherassumptions will remain constant, the present value of the defined benefit obligation would increase(decrease) as follows:

Discount rate
Expected rate of salary increase

2019

December 31

The actuarial valuations of the present value of the defined benefit obligation were carried out by
qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as
follows:3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the
future salaries of plan participants. Thus, an increase in the salaries of the plan participants will
increase the present value of the defined benefit obligations.

2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the
mandated management. Based on relevant regulations, the return generated by plan assets should
not be below the interest rate for a two-year time deposit with local banks.

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to thefollowing risks:

315,114
3,909
33,513
1,129,080
11,747
118,962
409,978
466,604

315,1143,303
33,513
11,747955
409,978
466,6042018$ 1,241,214$

December 31$ 2,488,907

$

2019

2018
6,000,000$ 60,000,000$ 54,209,846

December 31
7,000,000$ 70,000,000$ 54,209,846

2019- 50 -

The capital surplus from long-term investments, employee shares options expired, dividends distributed
to subsidiaries and retirement of treasury shares may not be used for any purpose, expect for offsetting a
deficit. As for capital surplus from conversion of convertible bonds payable may not be used for any
purpose.

The capital surplus from shares issued in excess of par (additional paid-in capital from issuance ofordinary shares) may be used to offset a deficit; in addition, when the Company has no deficit, suchcapital surplus may be distributed as cash dividends or transferred to capital (limited to a certain
percentage of the Company’s paid-in capital).

Income of convertible bonds in excess of par value andconversion premium
Dividends distributed to subsidiaries
Retirement of treasury shares
Difference in sale price of share of subsidiaries and book value
Expired employee share options
Long-term investments
Bonds payable equity component
Othersb. Capital surplus

Number of authorized shares (in thousands)
Amount of authorized shares
Amount of issued shares

Ordinary sharesa. Share capital

25. EQUITY

223

$

145,831
118,810
1,193,670$0.2181820086

Dividends Per
Share (NT$)- 51 -

Company reversed special reserve of $105,843 thousand.

Legal reserve
Cash dividends$

114,493
1,136,278

Appropriationof Earnings$0.20960737

Dividends Per
Share (NT$)

The appropriation of earnings for 2018 was resolved in the shareholders’ meeting on June 25, 2019.
The appropriation and dividends per share were as follows:

2) Appropriation of earnings in 2018

Legal reserve
Special reserve
Cash dividends

Appropriationof Earnings

The appropriation of earnings for 2017 was resolved in the shareholders’ meeting on June 27, 2018.
The appropriations and dividends per share were as follows:

1) Appropriation of earnings and dividends per share in 2017

The distribution of profit surplus shall be approved in the annual shareholders’ meeting held in thefollowing year and shall be accounted for in that year.

The Company shall set aside profits as a legal reserve untill the legal reserve amounts to the authorized
capital. The legal reserve could be used for making good the deficit of the Company. If the Company
has no deficit in a fiscal year, the Company can distribute all or part of the capital surplus by cash or
shares with due consideration of finance, marketing and management requirements in accordance withthe laws and regulations.

According to amended Company Act, where the Company made profit in a fiscal year, the profit shallbe first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10%of the remaining profit, setting aside or reversing a special reserve in accordance with the laws andregulations, and then any remaining profit together with any undistributed retained earnings shall be
used by the Company’s board of directors as the basis for proposing a distribution plan with due
consideration of any future aircraft acquisition plans and fund demand, which should be resolved in theshareholders’ meeting for the distribution of dividends and bonuses to shareholders by cash or shares(cash dividends cannot be less than 30% of total dividends distributed). However, if the Company’s
profit before tax in a fiscal year after deductions for the abovementioned items is not sufficient forearnings distribution, retained earnings can be used as a supplement for the deficiency.

c. Appropriation of earnings and dividend policy

Balance at December 31,
2018

Balance at January 1,
2018
Adjustments on initial
application of IFRS 9
Balance at January 1,
2018 after IFRS 9
adjustments
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at
FVTOCI
Share of profit orassociates accounted
for using equity
methodEffect of change in tax
rate
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodTransfers of initialcarrying amount ofhedged items$$$(9,664)-25,322

1,198(6,828)(3,188)

-

$

-

-

$

$

$

42,619-268(1,209)547

24,760(23,830)---

42,35142,351-

Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI- 52 -

-

-

-

-

-

-

-

-

34,140--(34,986)

1,774(1,774)$$

Unrealized
Gain (Loss) on
Available-forsale Financial
Assets-(34,986)

Exchange
Differences on
Translating
Foreign
Operations

The movement of other equity items is as follows:d. Other equity items

$

$

$

-

-

-

-

-

-

-

-

-

-

74,429(74,429)

Cash Flow
Hedges$$$25,268

12,11887,5792,530(22,290)

8,001-

14,35484,984-(74,429)(74,429)-

Gain (Loss) on
Hedging
Instruments

58,223

12,118113,1692,519(28,571)

29,573(23,830)

14,35484,98434,140(67,064)

40,577(107,641)(Continued)

$

$

$

Total

The offsetting of deficits for 2019 is subject to the resolution of the shareholders in theshareholders’ meeting to be held on June 23, 2020.

On March 18, 2020, the board proposed to offset the accumulated deficit in 2019. The deficit
included a net loss of $1,199,798 thousand, negative adjustment of other retained earnings of$577,427 thousand, the remaining amount of accumulated deficit was $1,777,225 thousand.

3) Offsetting of deficits in 2019

224

-

-

-

(6,072)
11,835(53,411)8,368-(54,707)

Balance at December 31,
2019

$

$

107,262-

64,538105

54,902(14,854)

24,490---42,619Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI- 53 -

-

-

-

$

-

-

$

-

-

-

$

-

(9,664)(59,174)$

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsBalance at January 1,
2019
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at
FVTOCI
Share of profit orassociates accounted
for using equity
methodEffects of income tax
Other comprehensive
income (loss)
recognized in the
periodDisposal of subsidiaries
Transfers of initialcarrying amount ofhedged items

Exchange
Differences on
Translating
Foreign
Operations$$

Cash Flow
Hedges

-

-

-

-

-

-

-

-

-

(603)

1,119,013-(7,187)(281,401)

-

9,305

1,398,296-

25,268$ 1,143,678$

Gain (Loss) on
Hedging
Instruments(603)

1,130,140
8,473

41,643(284,420)

24,4909,305

1,398,296(59,174)

58,223(Concluded)$ 1,196,233

$

Total

2,075
814

2,075
814

Shares(In Thousands)-$ 22,821
8,956$ 31,777$ 31,777$ 26,172$ 26,172$ 22,821
8,956$ 18,796
7,376

Market Value

2,889

2,889
50,000(50,000)

2,889

2,889
-

Total

$ 18,796
7,376

Carrying
Amount

2,889

2,889
-

2,889

2,889
-

Company’s
Shares Held by
Its Subsidiaries- 54 -

To maintain the Company’s credit standing and shareholders’ rights and interests, the board of directors
decided to buy back shares of the Company from Taiwan Stock Exchange at a price from $9 to $14 pershare. The expected period of purchase is from August 10, 2018 to October 9, 2018. As of 50,000
thousand shares had been repurchased. The treasury shares held by the Company has retired on
December 18, 2018, share capital decreases $500,000 thousand, additional paid-in capital in excess of
par-ordinary share decreases $2,906 thousand and additional paid-in capital - treasury share increases$33,513 thousand. Under the Securities Exchange Act, the treasury shares held by the Company cannot
be pledged and are not entitled to dividends distribution and voting rights, etc.

The shares of the Company held by its subsidiaries were treated as treasury shares. The subsidiaries can
exercise shareholders’ right on these treasury shares, except for the right to subscribe for theCompany’s new shares and voting rights.

The above acquisitions by subsidiaries of the Company’s shares in previous years was due toinvestment planning.

Mandarin Airlines
Hwa Hsia

December 31, 2018

Mandarin Airlines
Hwa Hsia

December 31, 2019

Subsidiary

Number of shares, December 31, 2018

50,000(50,000)-

Number of shares, December 31, 2019
Number of shares, January 1, 2018
Addition during the year
Reduction during the year-

Number of shares, January 1, 2019
Addition during the year

Purpose of Treasury Shares

Buy Back toWrite off

(Shares in Thousands)

Treasury shares are the Company’s shares held by its subsidiaries, as of December 31, 2019 and 2018
were as follows:e. Treasury shares

225- 55 -

Interest expense
Bonds payable
Bank loans
Interest on obligations under finance leases
Interest on lease liabilities

d. Finance costs

Gain (loss) on disposal property, plant and equipment
Loss on Non-current assets held for sale
Net loss on financial assets as held for trading
Gain on disposal of investment
Gain (loss) on foreign exchange, net
Loss on sale-and-lease backImpairment loss recognized on Non-current assets held for saleImpairment loss recognized on flight equipment
Othersc. Other gains and losses

Interest income
Subsidy income
Dividend income
Othersb. Other income

Passenger
Cargo
Othersa. Revenue

26. NET INCOME$ 150,264,792$ 146,372,401$ 420,416$ 524,233$ (559,230)$ (569,582)

431,599703,681
1,898,892$ 3,034,172$

414,564
882,190
15,290$ 1,312,044$

For the Year Ended December 31
2019
2018

$ (273,308)(368,992)
11,076450,195
10,812(75,437)(50,000)(263,576)

26,377(10,462)
25,7007,656(262,610)(103,775)(252,468)$

For the Year Ended December 31
2019
2018

$ 274,189
11,2009,603
125,424$ 314,944
38,621
10,112
160,556

For the Year Ended December 31
2019
2018

$ 94,248,291
49,422,018
6,594,483$ 96,176,865
43,406,487
6,789,049

For the Year Ended December 31
2019
2018

$ 37,174
1.16%-1.31%

165,981$

165,050$ 18,192,291

1,622,936$$ 21,969,811$ 17,862,954
4,106,857$ 20,346,875$ 14,475,115
1,282,461
4,589,299

373,187
1,249,749$

1,688,136

365,707
1,322,429$ 21,551,714$ 17,751,051
3,800,663$ 19,863,578$ 15,010,513
1,242,585
3,610,480$$

For the Year Ended December 31
2019
2018

$

$ 29,398,635$ 17,907,878
284,413$ 18,357,341$ 29,564,616$ 28,373,597
1,025,038

165,050$ 19,388,694
10,009,941
165,981$ 18,192,291

For the Year Ended December 31
2019
2018

$ 36,404
1.01%-1.28%

For the Year Ended December 31
2019
2018

- 56 -

According to the Company’s articles, the Company accrued employees’ compensation at rates of noless than 3% of the net profit before income tax and employees’ compensation, and accrued profit
bonus at a certain rate of profit before tax on the basis of the collective agreement signed with the China
Airlines Employees Union. The employees’ compensation and profit bonus for the year ended
December 31, 2018 was $51,656 thousand and $594,810 thousand. For the year ended December 31,

An analysis of employee benefits expense by function
Operating costs
Operating expenses

Other employee benefits
Salary expenses
Labor and health insurance
Personnel service expenses

Post-employment benefits
Defined contribution plans
Defined benefit plans

f. Employee benefits expense

An analysis of amortization by function
Operating expenses

An analysis of depreciation by function
Operating costs
Operating expenses

Property, plant and equipment
Right of use assets
Intangible assets

e. Depreciation and amortization expenses

Capitalization interest
Capitalization rate

Information about capitalized interest was as follows:226
12,472

Income tax expense recognized in profit or loss

- 57 -$

525,270

12,472

Income tax expense recognized in profit or loss

$

(377)

26,512-

463,126
20,098(343,107)
22,506
1,227,000(868,842)
4,866$

17,900(347,338)
8,836
550,685(6,658)(237,465)$$ 2,315,631

Income tax expense calculated at the statutory rate
Add (deduct) tax effects of:Nondeductible expenses in determining taxable income
Tax-exempt income
Overseas income tax expense
Additional income tax under the Alternative Minimum Tax Act
Unrecognized loss carryforwards and investment tax credits
Effect of income tax
Adjustments for prior years’ tax
Adjustments to deferred tax attributable to changes in tax rates
and laws
Other$ (1,187,326)

Profit before tax

For the Year Ended December 31
2019
2018

A reconciliation of accounting profit and income tax expense is as follows:$ 525,270(868,842)

26,512$

1,366,740(16,218)

22,506
4,866

$

8,836
(6,658)$For the Year Ended December 31
2019
2018

Current tax
Current year
Prior year adjustment
Deferred tax
Current year
Adjustments to deferred tax attributable to changes in tax rates
and laws
Effect of income tax

The major components of tax expense were as follows:a. Income tax recognized in profit or loss

27. INCOME TAX

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2019 and 2018 is available on the Market Observation Post System
website of the Taiwan Stock Exchange.

Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date the annual financial statements are authorized for issue are adjusted in
the year that the bonus and remuneration were recognized. If there is a change in the proposed amounts
after the annual financial statements were authorized for issue, the differences are recorded as a change
in the accounting estimate.

2019, the employees’ compensation have not estimated since it was loss before income tax.

Temporary differences
Unrealized foreign exchange
gains
Others (Note)

Deferred tax liabilities

Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserve
Allowance for reduction of
inventory
OthersDeferred tax assets

21,195$- 58 -

21,195$$ 4,561,346

333,653646,627$ 1,396,033
510,060
1,674,973

Beginning
Balance

For the year ended December 31, 2019c. Deferred tax assets and liabilities

$

$

$

$

81,77881,778-71,484(38,854)(377,534)

18,72680,634
388,512

Recognized in
Profit or Loss

Total income tax recognized in other comprehensive income

Recognized in other comprehensive income
Translation of foreign operations
Fair value revaluation of hedging instruments for cash flow
hedgesActuarial gain or loss on defined benefit plan
Fair value changes of financial assets at FVTOCI
Effect of income tax

Deferred tax

b. Income tax recognized in other comprehensive income(281,401)
112,452(14,854)-

11,835$$$$296,280

296,280

124,312

11,860112,452-

Recognized in
Other
Comprehensive
Income$ (171,968)$(22,290)134,979547
2,519(6,828)$$399,253

81,778317,475$ 4,757,142

294,799
280,953$ 1,527,211
590,694
2,063,485

EndingBalance$ 108,927$

For the Year Ended December 31
2019
2018

It was announced that the Income Tax Law in the ROC. was amended and, starting from 2018, thecorporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate
surtax applicable to unappropriated earnings will be reduced from 10% to 5%.

227

45,819915
13,89431,010$$(37,560)(915)(5,635)(31,010)

$

$

$

$

12,936

12,936-

121,863(13,117)-

134,980-$$

21,19521,195-$ 4,561,346

333,653646,627-$ 1,396,033
510,060
1,674,973

EndingBalance

Included adjustments on initial application due to tax rate changes $6,873 thousand fromIFRS 9.

$$(535,458)$$ 4,974,941

205,081
83,954
279,168
96,287(420,179)(779,769)$

237,366
1,079,923
779,769$ 1,055,972
426,106
1,395,805

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
IncomeOther

Loss carryforwards
2019
2021
2022
2026
2028
2029

- 59 -

1,097,908

6,002,092$$

2,899,496
619,799
202,699
1,519,941
760,157

2018$

39,142$ 16,839,292$ 11,790,770
2,899,496
619,799
202,699
1,326,528-

December 31

$

2019

Deductible temporary differences, unused loss carryforwards and unused investment credits for which
no deferred tax assets have been recognized in the balance sheets are as follows:

Note:

Temporary differences
Depreciation difference fromfixed assets
Unrealized foreign exchange
gains
Others (Note)

Deferred tax liabilities

Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserve
Allowance for reduction of
inventory
OthersLoss carryforwards

Deferred tax assets

Beginning
Balance

For the year ended December 31, 2018

$ 6,002,092$ 2,899,496
619,799
202,699
1,519,941
760,157

UnusedAmount

$
$

0.33
0.32

5,418,096--

5,418,096

5,919,881

8,821

457,481

5,453,579$ 1,871,824

81,463$ (1,199,798)$ 1,790,361$ (1,199,798)

For the Year Ended December 31
2019
2018

$ (0.22)$ (0.22)

For the Year Ended December 31
2019
2018

- 60 -

If the Company offers to settle compensation or bonuses paid to employees in cash or shares, the Company
assumes the entire amount of the compensation or bonuses would be settled in shares, and the resulting
potential shares were included in the weighted average number of shares outstanding used in thecomputation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential
shares was included in the computation of diluted earnings per share until the number of shares to be
distributed to employees is resolved in the following year.

Weighted average number of ordinary shares used in thecomputation of diluted earnings per share (in thousands)

Weighted average number of ordinary shares in computation of basic
earnings per share (in thousands)
Effect of potentially dilutive ordinary shares:
Convertible bonds (in thousands)
Employees’ compensation or bonuses issued to employees (inthousands)

Earnings used in the computation of diluted earnings per share

Earnings used in the computation of basic earnings per share
Effect of potentially dilutive ordinary shares:
Interest on convertible bonds (after tax)

Basic earnings per share
Diluted earnings per share

28. EARNINGS PER SHARE

The income tax returns of the Company through 2017 have been examined by the tax authorities.

e. Income tax returns

2021
2022
2026
2028
2029

Expiry Yeard. Unused tax loss carryforwards as of December 31, 2018 were as follows:228$ 32,352,625
62,326,488

Carrying
AmountFair Value$ 32,363,301
62,326,488

2019
Fair Value$ 31,651,865
70,171,333

2018$ 33,219,610
72,162,743

Carrying
AmountDecember 31- 61 -

2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;

The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value isobservable:

b. Fair value measurements recognized in the balance sheets

Some long-term borrowings are floating-rate financial liabilities, so their carrying amounts are their fairvalues. The fair values of long-term borrowings and private bonds with fixed interest rates are estimatedat the present value of expected cash flows discounted at rates of 0.67% in 2019 and 0.68% in 2018prevailing in the market for long-term borrowings (Level 2). The fair values of bonds payable are basedon those which are traded in the stock exchange and based on quoted market prices (Level 1).

Bonds payable
Bank loans

Financial liabilities

a. Fair values of financial instruments

30. FINANCIAL INSTRUMENTS

To support its operating activities and purchase of aircraft, the Company needs to maintain sufficient
capital. Therefore, the goal of capital management is to ensure financial resources and operating plan is able
to support the future working capital, capital expenditures, debt repayment and dividend expenses and otherneeds.

The Company manages its capital to ensure that entities in the Company will be able to continue as going
concerns while maximizing the return to stakeholders through the optimization of the debt and equity
balance. The capital structure of the Company consists of net debt (borrowings offset by cash and cash
equivalents) and equity of the Company comprising issued capital, reserves, retained earnings, other equity
and non-controlling interests.

29. CAPITAL MANAGEMENT

Level 1

-

-

-

-

-

$

Financial liabilities for hedging

-

-

221
22,453
239

$
$

-

$
$

-

Level 2

28,578109

11,749

-

-

434

$

$

$

$

$

$

$

Level 2

$

$

$

$

$

$

$

$

$

$

$

-

9,588

11,749107,856

26,86580,991434- 62 -

The fair values of derivatives (except options) have been
determined based on discounted cash flow analyses using
interest yield curves applicable for the duration of thederivatives. The estimates and assumptions that the Company
used to determine the fair values are identical to those used in
the pricing of financial instruments for market participants.
Derivatives - foreign exchange
forward contracts andinterest rate swaps

239

27,354

221

83,366

21,746
61,620

Valuation Techniques and Inputs

$

$

$

$

$

Total

$ 51,030,220

$

$

$

$

$

Total

Financial Instruments

4) Valuation techniques and inputs applied for Level 2 fair value measurement

-

4,901

-

83,366

21,746
61,620Level 3

3,955

9,479

-

107,856

26,86580,991

Level 3

There were no transfers between Level 2 and 3 in the current and prior periods.

$

Financial assets for hedging

-

-

$
$

-

$

Level 1

$ 50,997,687$$

Financial liabilities at FVTPL
Derivative instruments

Financial assets at FVTOCI
Investments in equity instruments
United shares - domestic
Unlisted shares - foreign

December 31, 2018

Financial liabilities for hedging

Financial assets for hedging

Financial liabilities at FVTPL
Derivative instruments$

Financial assets at FVTOCI
Investments in equity instruments
Unlisted shares - domestic
Unlisted shares - foreign$$

Financial assets at FVTPL
Derivative instruments

December 31, 20193) Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable market data (unobservable inputs).

229

$

Balance at December 31, 2018

4,901

4,901
$ 83,366$ 64,177
43,019(23,830)- 63 -

Because some financial instruments and nonfinancial instruments may not have their fair values
disclosed, the total fair value disclosed herein is not the total value of the Group’s collective
instruments.

$

Balance at January 1, 2018
Adjustments on initial application of IFRS 9
Other comprehensive income recognized during the period

EquityInstruments

Derivative
Instruments

83,36624,490$ 107,856

$

5,524

$

Balance at December 31, 2019

4,901
623

EquityInstruments

Derivative
Instruments
$

80%
80%

Liquidity
Discount

0.75-13.23
0.74-15.29

Multiplicator

Balance at January 1, 2019
Recognized in other comprehensive income

December 31, 2019
December 31, 2018

The movements of Level 3 financial instruments are as follows:

The domestic unlisted equity investment is based on the comparative company valuation to estimate
the fair value. The main assumptions are based on the multiplier of the market price of thecomparable listed company and the net value per share, which have considered the liquidity
discount. The higher the multiplier or the lower the liquidity discount, the higher the fair value ofthe relevant financial instruments.

The fair values of currency options and fuel options are determined using option pricing models
where the significant unobservable inputs are implied fluctuation. An increase in the implied
fluctuation used in isolation would result in a decrease in the fair value of currency options and fueloptions.

5) Valuation techniques and inputs applied for Level 3 fair value measurement$

11,74951,030,220
119,888,720

$

2018

221
239
120,519,575

27,354
31,630,697
83,366

December 31

434
9,588
31,356,562
107,856

2019- 64 -The Company enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated to the fair values of hedged items andevaluates the hedging effectiveness of these instruments periodically.

The Company is primarily exposed to the financial risks of changes in foreign currency exchange
rates and interest rates. The Company entered into derivative financial instruments to manage its
exposure to foreign currency risk and interest rate risk.

1) Market risk

In addition, the Company has a risk management committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging portion. This committee
informs the Company of global economic and financial conditions, controls the Company’s entire
financial risk resulting from changes in the financial environment and fuel prices, and develops thestrategy and response to avoid financial risk with the assistance of financial risk experts to effect risk
management.

The Company has risk management and hedging strategies to respond to changes in the economic,
financial environment and in the fuel market. To reduce the financial risks from changes in interest rates,in exchange rates and fuel prices, the Company has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by Company
shareholders to reduce the impact of market price on earnings. These risks include market risk(including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

d. Financial risk management objectives and policies

Note 2: The balance of financial liabilities measured at amortized cost comprised short-term notes
payable, notes and accounts payable, accounts payable - related parties, other payables, bonds
payable and long-term loans, lease liabilities, provisions, parts of other current liabilities, partsof other noncurrent liabilities and guarantee deposits.

Note 1: The balances include financial assets measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivable, accounts receivable - related parties, otherreceivables, refundable deposits and other restricted financial assets.

Financial liabilities at FVTPL
Financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

Financial liabilities

Financial assets at FVTPL
Financial assets for hedging
Financial assets at amortized cost (Note 1)
Financial assets at FVTOCI - equity instrument investment

Financial assets

c. Categories of financial instruments

230

NTD/USD

NTD/USD

Currency

NTD1,411,411/
USD47,000

NTD660,661/
USD22,000

Notional
Amount2020.11.4

2020.2.272020.11.30

Maturity

29.6-30.5

29.7-30.7

Forward Rate
Financial assets forhedging - current/
liabilities for hedging current
Financial assets forhedging - current/
liabilities for hedging current

Line Item in
Balance Sheet
$

77

32

18,385$ 10,193

Carrying AmountAsset
Liability- 65 -

The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals in U.S. dollars

Aircraft rentals forward exchange
contracts

Cash flow hedge
Aviation fuel - forward
exchange contracts

Hedging Instruments

December 31, 2019

The following table summarizes the information relating to the hedges of foreign currency risk.
For the information related to lease contract as a hedging instruments, please refer to note 20.

For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Company performs a qualitative assessment of
the effectiveness, and it is expected that the value of the foreign exchange forward contracts andthe value of the corresponding hedged items will systematically change in the opposite direction
in response to movements in the underlying exchange rates.

The Company’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the next year. Those transactions
are designated as cash flow hedges. When forecasted purchases actually take place, basis
adjustments are made to the initial carrying amounts of hedged items.

For the year ended December 31, 2019

When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be a decrease in pre-tax profit of $40,775 thousand and increase in
pre-tax other comprehensive income gain and losses of $1,629,223 thousand in year ended
December 31, 2019. A decrease in pre-tax profit of $35,184 thousand and decrease in pre-tax
other comprehensive income gain and losses of $54,250 thousand in year ended December 31,
2018.

The following details the Group’s sensitivity to a one dollar increase and decrease in the New
Taiwan dollar (i.e. the functional currency) against the U.S. dollar. The sensitivity amount used
when reporting foreign currency risk internally to key management personnel and which
represents management’s assessment of the reasonably possible change in foreign exchange
rates is one dollar. The sensitivity analysis included only outstanding foreign currency
denominated monetary items and foreign exchange forward contracts designated as cash flow
hedges and adjusts their translation at the end of the reporting period for the New Taiwan dollar
strengthening or weakening one dollar against the U.S. dollar.

The Company is mainly exposed to the U.S. dollar.

Sensitivity analysis

The Company enters into currency option to hedge against the risks of changes in related
exchange rates, and enters into foreign exchange forward contracts to hedge against the risks ofchanges in the related exchange rates of foreign-currency assets, liabilities and commitments.

a) Foreign currency risk

$ 28,321$ (50,080)
Decrease in operating costs or foreign exchange loss.

$ 28,374(53)-

AmountReclassified toProfit and Lossand theAdjusted LineItem

$ (22,214)(10,161)(17,705)

Hedging Gain
Recognized in
Other
Comprehensive
Income(Note)

NTD/USD

Currency

NTD1,669,231/
USD54,250

Notional
Amount2019.1.172019.12.23

Maturity

28.3-30.7

ForwardRate

Financial assets forhedging - current/
liabilities for hedging current

Line Item in
Balance Sheet$ 22,453$

239

Carrying AmountAsset
Liability

Cash flow hedge
Aircraft rentals
Aircraft prepayments

Increase in operating costs or foreign exchange loss.

$ (4,933)$ (4,933)-

AmountReclassified toProfit and Lossand theAdjusted Line
Item
(Note)- 66 -For the year ended December 31, 2018, the hedging instruments settlement reclassified toprepaid equipment was $12,118 thousand.

Note:$ 70,553
23,884Comprehensive Income$ 94,437

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeFor the year ended December 31, 2018

The above hedging instruments are continuously applied to hedging accounting. The book valueof other equity which belongs to each hedging items (aircraft rentals in U.S. dollar) are $22,214
thousand.

Cash flow hedge
Aircraft rentals forward exchange
contracts

Hedging Instruments

December 31, 2018

For the year ended December 31, 2019, the hedging instruments settlement reclassified toprepaid equipment was $(603) thousand.

Note:

Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments

Comprehensive Income

For the year ended December 31, 2019

and aviation fuel) are $(18,308) thousand and $(10,161) thousand, respectively.

231$ 83,350,312
73,930,965$ 33,523,710
70,758,743

2018

Cash flow hedges - fueloptions

Hedging Instrument

USD

Currency

December 31, 2019

NTD5,524

Notional
Amount- 67 -

2020.3.312020.12.31

Maturity
USD49.65USD80.75

Forward Rate
Financial assets forhedging - current/
liabilities for hedging current

Line Item in
Balance Sheet
$

9,479

$

3,955

Carrying AmountAsset
Liability

The Company was exposed to fuel price risk on its purchase of aviation fuel. The Company
enters into fuel swap contracts to hedge against adverse risks on fuel price changes.

c) Other price risk

Had interest rates increased one yard (25 basis) and had all other variables been held constant,
the Company’s pre-tax profit for the year ended December 31, 2018 would have decreased by$176,897 thousand.

Had interest rates increased one yard (25 basis) and had all other variables been held constant,
the Company’s pre-tax profit for the year ended December 31, 2019 would have decreased by$184,827 thousand.

The sensitivity analyses below were determined based on the Company’s exposure to interest
rates for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. One yard (25basis) increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.

Sensitivity analysis

Fair value interest rate risk
Cash flow interest rate risk

2019

December 31

The carrying amount of the Company’s financial liabilities with exposure to interest rates at theend of the reporting period were as follows.

The risk is managed by the Company through maintaining an appropriate mix of fixed andfloating rate borrowings, and using interest rate swap contracts and forward interest rate
contracts.

The Company enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.

b) Interest rate risk

USD

Currency
NT$4,901

2019.1.312019.12.31

Maturity

USD72-USD88

Forward Rate$

Financial assets forhedgingLine Item in
Balance Sheet

623

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
Income$(Note)

4,901

$

-

Carrying AmountAsset
Liability$ (13,597)

AmountReclassified toProfit and Lossand theAdjusted Line
Item

Note:

Increase in operating costs.

Cash flow hedges - fuel options

Comprehensive Income- 68 -For the year ended December 31, 2018

$

4,901

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
Income$ (9,421)

AmountReclassified toProfit and Lossand theAdjusted Line
Item
(Note)

The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (fuel payments) is $4,901
thousand.

Cash flow hedges fuel options

Hedging Instrument

Notional
AmountIncrease in operating costs.

December 31, 2018

Note:

Cash flow hedges - fuel options

Comprehensive Income

For the year ended December 31, 2019

The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (fuel payments) is $5,524
thousand.

232

$

-

-

$
-

7,973

$
-

-

$
-

-

- 69 -The objective of the Company’s management of liquidity is to maintain cash and cash equivalents
sufficient for operating purposes, marketable securities with high liquidity and loan commitmentsthat are sufficient to ensure that the Company has adequate financial flexibility.

3) Liquidity risk

Endorsements given by the Company on behalf of its subsidiaries can be found in Notes 31(g).

Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Company’s finance department. The Company’s trading partners and other parties
were well-performing banks and financial institutions, corporations, and government agencies, andso the risk of counterparties failing to discharge an obligation is low; therefore, there is no
significant credit risk.

Financial credit risk

Since the customers of the industry is dispersed and non-related, the credit risk concentration is notcritical aviation.

To assess individual customers, the Company consider into the financial condition of the customers,
the credit rating agency rating, the Company’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, theCompany uses certain credit enhancement tools to reduce the credit risk of specific customers.

The Company has established procedures to management operations related credit risk to maintainthe quality of accounts receivable.

Operation - related credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Company. The Company’s credit risk, primarily comes from accounts
receivable generated from operating activities, bank deposits generated from investing activities,
fixed investment income and other financial instruments. Operation related credit risk and financial
credit risk are managed separately.

2) Credit risk

Fuel price increase of5%
Fuel price decrease of5%

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Hedging instruments
Bonds payable

December 31, 2018

Finance leaseliabilities
Floating interest rate
liabilities
Hedging instruments
Bonds payable

December 31, 201914,284,090
10,060,822
10,823,905

914,419$ 70,688,414$ 22,657,777- 70 -

30,835,449

39,852,965-

2,005,900
239
5,999,321$

1 to 5 Years

1.18001.3905

601,743

34,457,400
39,729,062
19,871,174

3,362,181$ 97,419,817$

1 to 5 Years

14,050,574$

Less than 1
Year$ 36,083,236$

Less than 1Year1.10841.0627

The Weighted
Average
Effective
Interest Rate(%)

0.9576
3.1131
2.52730.1448The Weighted
Average
Effective
Interest Rate(%)

1,051,418

18,293,128-$ 19,344,546$

Over 5 Years$ 34,995,624

14,787,869
6,373,333
3,383,401$ 10,451,021

Over 5 Years

Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Company’s liquidity analysis for its derivative financial
instruments is also shown in the following table. The table was based on the undiscounted
contractual net cash inflows and outflows on derivative instruments that settle on a net basis, andthe undiscounted gross cash inflows and outflows on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined byreference to the projected interest rates as illustrated by yield curves at the end of the reporting
period.

The following table shows the remaining contractual maturity analysis of the Company’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Company may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.

The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.

For the Year Ended December 31
2019
2018
Other
Other
CompreComprehensive
hensive
IncomeIncomePre-tax Profit
Pre-tax Profit
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

Liquidity and interest risk rate table

Sensitivity analysis

233

2018
$ 17,337,000

December 31$ 18,422,000

2019

Others- 71 -

Asian Compressor Technology Services
China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation

CAL-Dynasty International Inc.
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance and Engineering Co., Ltd.
Kaohsiung Catering Services

Taiwan Aircargo Terminal Company
Taoyuan International Airport Service Co., Ltd.
Sabre Travel Network (Taiwan), Ltd.
Taiwan Airport Service Co., Ltd.
Taiwan Airport Service (Samoa)
Hwa Hsia
Yestrip
Global Sky Express
Mandarin Airlines
CAL Park
CAL Hotel Co., Ltd.
CAL-Asia Investment
Dynasty Holidays, Inc.

Name

a. Related parties’ names and relationships

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate (become associate in January
2019)
Subsidiary
Subsidiary
Subsidiary
Subsidiary (become subsidiary in March2018)
Associate (disposal in January 2018)
Associate
Associate
Associate
Associate
Joint venture investment
Joint venture investment
Joint venture investment
Joint venture investment
Director of the Company and major
shareholder
Director, key management personnel,
chairman, general manager of theCompany, spouse and second-degree
relative

Relationship with the Company

Except for the disclosures stated in other notes, transactions between the Company and its related partiesare disclosed below:

31. RELATED-PARTY TRANSACTIONSUnused bank loan limit (unsecured)

Loan commitments
Related Party Type
Subsidiary
Major shareholder of theCompany
Associate
Joint venture investment

222,038
7,760
2,588
232,386$$$

298,311289,268
7,589
1,454

2018

$ 3,843,308$
64,188$ 501,609$ 1,912,995

December 31$

2019$ 3,915,258$
56,474$ 414,106$ 1,911,091

For the Year Ended December 31
2019
2018

523
41,410

$
$

$
$

1,239
42,457$ 2,651,423$
28,670$ 2,577,039$
25,457For the Year Ended December 31
2019
2018

$ 1,583,684$ 1,469,434

2018$ 1,050,869
54,948474,499
3,368

December 31
927,419
51,333484,700
5,982

$

2019

- 72 -The Company rented out planes to Mandarin Airlines under an operating lease contract. The monthly
rent received is based on flight hours. In 2019 and 2018, the rentals received amounted to $1,624,568
thousand and $1,685,494 thousand, respectively.

f. Leases of properties (operating leases)

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.

Subsidiary
Associate
Joint venture investment
Major shareholder of the Company

Related Party Typee. Accounts payable - related parties (generated by operations)

The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.

Subsidiary
Joint venture investment
Major shareholder of the Company

Related Party Typed. Accounts receivable - related parties (generated by operations)

Subsidiary
Major shareholder of the Company
Associate
Joint venture investment

Related Party Typec. Purchases

Other income

Account Items

b. Operating income

234

i.

$ 2,339,700
418,491
605,457

ActualAmount Used2018

a. The Company failed to mediate labor disputes with the labor union. After obtaining the right to strike,the labor union went on strike on February 8, 2019, and the flights resumed normal operation on
February 14, 2019. A total of 214 flights was cancelled and the accumulated revenue loss was about$500 million. The initial estimated compensation for customer losses and other expenditures were about$54 million (recognized as operating cost).

As of December 31, 2019, except for the disclosures stated in other notes, the Company had commitments
and contingent liabilities which were as follows:

33. COMMITMENTS AND CONTINGENT LIABILITIES

250
50

$

250,000
50,00039,693
2,362
42,055$$$$47,84644,551
3,295

For the Year Ended December 31
2019
2018

- 73 -The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.

Short-term employee benefits
Post-employment benefits

Compensation of key management personnel

In 2019, interest expenses was $3,570 thousand. This bonds payable will be paid off in May 2021. As of
December 31, 2019 the interest payable was $2,142 thousand.

The first issue of unsecured bonds in 2016

Related Party

December 31, 2019
Aggregate
Units
Par/Dollars- 74 -

By the end of January, 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei
province in China, became a pandemic. The Company has complied and continues to comply with thetravel alerts issued by the Taiwan Centers for Disease Control and has cancelled flights between several
countries like China, Hong Kong, Japan and Korea. Other flights have flexible capacity depending on the
demand. So far, the air transport services for passengers have been severely affected. In addition toadjusting the operation, the Company also takes measures about funding assistance, human resources,
reducing expenditure, and asks the government for help in three main areas including guarantee for its
operation, relief from the burden, and a recovery plan.

34. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

c. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three
B777F aircraft and exercised the option to purchase three B777F aircraft. The total list price of the six
aircraft is US$2,320,315 thousand, and the expected delivery period is from 2020 to 2023. As of
September 30, 2019, the list price has been paid in the amount of US$241,650 thousand (recognized as
prepayments for aircraft).

$ 3,850,000
1,080,000
1,081,792
2,000,000

Authorized
Amount$ 37,468,142$ 37,468,142-

2018

Mandarin Airlines
Sabre Travel Network (Taiwan)$ 2,129,400
685,444
1,279,827

ActualAmount Used2019

$ 91,219,461$ 26,956,631
64,262,830

December 31

b. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery period of the eleven aircraft ranges from 2024 to 2026. As of October
31, 2019, the list price of the fourteen aircraft has been paid in the amount of US$17,014 thousand(recognized as prepayments for aircraft). In October 2019, the Company signed a contract with
International Aero Engines Company to purchase four backup engines of A321neo. The total list priceof the four engines is US$60,289 thousand.

$ 3,850,000
1,080,000
3,012,668
2,000,000

Authorized
AmountDecember 31

Property, plant and equipment
Right-of-use asset

2019

The following assets were pledged or mortgaged as collateral for long-term bank loans, lease obligations
and business transactions:32. PLEDGED ASSETS

Related parties that invested in the first issue of unsecured bonds in 2016 (Note 19) are summarized asfollows:

h. Bonds payable - related parties

CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenance

The Company

g. Endorsements and guarantees

In March 2010, the Company signed with CAL Park a yearly renewable operating lease agreement to
use the Operating and Aviation Headquarters building of the Taiwan Taoyuan International Airport. In
2019 and 2018, the Company paid rentals of both were $231,288 thousand per year.

Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots. The Company paid the rental based on
usage hours. In 2019 and 2018, the Company paid rentals of about $56,474 thousand and $64,188
thousand, respectively.

235

2,179,056
7,639
67,5295,706,141
132,622502,608
18,401225,078
5,531,849
371,642$

405,468
7,801
70,9004,866,894
126,546

439,652
20,511
297,496
5,521,288
345,777

Foreign
Currencies(In Thousands)$

Foreign
Currencies(In Thousands)

30.7692
35.21133.92310.27784.480330.7692
35.21133.92310.27784.4803

Exchange Rate

30.0300
33.6700
3.85950.27664.304830.0300
33.6700
3.85950.27664.3048Exchange Rate

12,475,919
274,697
278,149
1,352,023
566,964$ 13,527,732
722,232
1,167,107
1,533,814
1,549,187

Carrying
Amount65,437,049
257,211
260,630
1,578,319
570,913$ 15,093,328
619,571868,689
1,530,109
1,599,846

Carrying
Amount- 75 -For the years ended December 31, 2019 and 2018, the Company’s net foreign exchange (losses) gains were$(262,610) thousand and $10,812 thousand, respectively. It is impractical to disclose net foreign exchange
gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions.

Monetary items
USD
EUR
HKD
JPY
RMB

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
RMB

Financial assets

December 31, 2018

Monetary items
USD
EUR
HKD
JPY
RMB

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
RMB

Financial assets

December 31, 2019

The following information was aggregated by the foreign currencies other than functional currencies of theCompany entities and the exchange rates between foreign currencies and respective functional currencies
were disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

35. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES- 76 -The Company mainly engages in air transportation services for passengers, cargo and others. The major
revenue-generating asset is the fleet, which is jointly used for passenger and cargo services. Thus, theCompany’s sole reportable segment is the flight segment. For operating segment reporting in the financial
statements, the Company’s reportable segment comprises the flight and the non-flight businessdepartments.

37. SEGMENT INFORMATION

b. Investment in mainland China: Table 7 (attached).

10) Derivative financial transactions: Notes 7 and 30.

9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 6 (attached).

8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 5 (attached).

7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 4 (attached).

6) Disposals of individual real estates at costs or prices of at least NT$100 million or 20% of thepaid-in capital: None.

5) Acquisitions of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None.

4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: Table 3 (attached).

3) Marketable securities held: Table 2 (attached).

2) Endorsements/guarantees provided: Table 1 (attached).

1) Financing provided: None.

a. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:

36. ADDITIONAL DISCLOSURES

2,000,000$ 3,850,000
1,080,000
3,055,475
2,000,000$ 3,850,000
1,080,000
3,012,668
1,279,827$ 2,129,400
685,444$- 77 -

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s shareholders’ equity.

11,310,754$ 11,310,754
11,310,754
11,310,754

Note 2:

100% subsidiary
54% subsidiary
77.17% subsidiary bydirect and indirect
holdings
100% subsidiary

Nature of Relationship

ActualBorrowingAmount

-

3.54

6.81
1.91
5.33

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant Net Equity ofor Equipment
the Latest
Financial
Statement (%)

Based on the Company’s guidelines, the maximum amount of guarantee to an individual counterparty is up to 20% of the Company’s shareholders’ equity.

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

China Airlines
CAL Park(the “Company”) Taiwan Air Cargo Terminal
Tigerair Taiwan Co., Ltd.

Name

Limit on EachCounterparty’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmount(Note 1)

Note 1:0No.

Endorsement/
Guarantee
ProviderCounterparty

ENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

236
28,276,886$ 28,276,886
28,276,886
28,276,886

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

Y

Y
Y
Y

N

N
N
N

N

N
N
N

Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given byGiven on Behalf
Given by Parent
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

TABLE 1

Shares
TransAsia Airways

Beneficial certificatesFuh Hwa Emerging Market Short-term Income FundFuh Hwa Global Bond Fund

Taiwan Airport Services

Beneficiary certificates
Taishin 1699 Money Market Fund

SharesChina Airlines-

Beneficiary certificatesFranklin Templeton SinoAm Money Market FundFSITC Money Market Fund
Allianz Global Investors Taiwan Money Market Fund
Capital Money Market Fund

Sabre Travel Network (Taiwan)

Hwa Hsia-

SharesTaikoo (Xiamen) Landing Gear Services
HAECO Composite Structures (Jinjiang)

Cal-Asia Investment-

Parent company--

Parent company

SharesChina Airlines

Mandarin Airlines-

SharesEverest Investment Holdings Ltd. - ordinary shares
Everest Investment Holdings Ltd. - preference shares
Chung Hua Express Co.
Jardine Air Terminal Services
The Grand Hi Lai Hotel

Marketable Security Type and Issuer/Name

Relationshipwith the Holding
Company

China Airlines (“Parent company”)

Holding Company Name

MARKETABLE SECURITIES HELDDECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

237- 78 -

Financial assets at FVTPL - current

Financial assets at FVTOCI - non-current

Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial assets at FVTPL - current

Financial assets at FVTPL - current
Financial assets at FVTPL - current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial assets at FVTPL - current
Financial assets at FVTOCI - non-current

Financial assets at FVTOCI - non-current

Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial Statement Account349,523

814,152

1,671,657
1,233,211

2,277,786

7,816,048
497,740
6,444,010
2,842,146-

2,074,628

1,359,368
135,937
1,100,000
12,000,000
4,021

Number of
Shares/Units

$

4,748

7,376

20,25318,045-

81,124
89,14581,06546,035

101,365

18,79673,628
7,363
26,865
-

-

-

-

0.4

-

2.59
5.45

-

13.59
11.00
15.00
0.02

$

4,748

7,376

20,25318,045-

81,124
89,14581,06546,035

101,365

18,79680,991
26,865-

December 31, 2019
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount(%)
Value(Continued)

-

-

-

-

-

Note 2
Note 2-

Note 1Note

TABLE 2--

Relationshipwith the Holding
Company

Amortized cost financial assets

Financial assets at FVTPL - current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

Financial Statement AccountNote 3: The table only lists financial assets that are IFRS 9 regulated.

Note 2: The Company does not issue shares because it is a limited company.

- 79 -

Note 1: The subsidiary’s net asset value was $80,991 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2019.

Government bondPhilippines government bondTigerair Taiwan Co., Ltd.

Marketable Security Type and Issuer/Name

Beneficiary certificates
Prudential Financial Money Market Fund
Prudential Financial Return Fund
Taishin 1699 Money Market Fund

Holding Company Name

Kaohsiung Catering Services

238-

5,407,832
4,493,628
1,106,807

Number of
Shares/Units$

299

85,88570,423
15,035
Not applicable

-

$

299

85,88570,423
15,035

December 31, 2019
Percentage of Market Value
Carrying
or Net Asset
Ownership
AmountValue(%)(Concluded)

-

Note

Financial Statement
Account

Counterparty(Note 2)

$

-

$

-

$

-

-

$

-

- 80 -

Subsidiaries planning initial public offering release stocks.

-

Note 5:-Ending Balance
Number ofAmountSharesPaid-in capital refers to paid-in capital of the indicated parent company. If the shares issued by an issuer have no par value or a par value other than NT$10 per share, the threshold of 20% of paid-in capital, as set out in the preceding item, shall be replaced by 10% of equity attributable toowners of the indicated parent company, as stated in the respective balance sheet.

$

Gain (Loss) on
Disposal

Note 4-

Disposal (Note 3)
Carrying
AmountAmount

The cumulative amount of acquired and disposed of marketable securities are required to be calculated separately to determine whether they are at least NT$300 million or 20% of the paid-in capital.

-

Number of
Shares

Note 3$Acquisition (Note 3)
Number ofAmountSharesThe marketable securities in this table refer to shares, bonds, beneficial certificates and the securities derived from the above items.

-

Beginning Balance
Number ofAmountSharesMarketable securities which are recognized as investments accounts for using the equity method are required to be filled in the second column.

Non-related party

Relationship(Note 2)

Note 2:

SharesTigerair Taiwan Co., Ltd. Investments accounted for (Note 5)
using the equity method

Type and Name ofMarketable Securities(Note 1)TABLE 3Note 1:China Airlines, Ltd.

Company Name

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

239

Taiwan Air Cargo Terminal
Taiwan Airport Services
Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan
Tigerair Taiwan
Taoyuan International Airport Service
Kaohsiung Catering Services
Hua Hsia
CAL Park
Cal Hotel
Global Sky Express
Eastern United International Logistics
China Pacific Laundry Services
China Pacific Catering Services
China Aircraft Services

Taiwan Airport Services

CAL Park

Taoyuan International Airport Service

Mandarin Airlines

Cal Hotel

Tigerair Taiwan

Related Party

China Airlines, Ltd.
(“China Airlines”)

Company Name

Same parent company

Same parent company

Same parent company

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Equity-method investee
Equity-method investee
Equity-method investee

Nature of Relationship

Purchase

Purchase

Purchase

Purchase
Purchase
Sale
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase

Purchase/
Sale

197,179

114,281

189,853

524,457
445,472(1,971,462)
242,114(373,811)
152,9141,220,422
561,443
349,602231,288
135,687(101,421)
216,368
120,088
1,791,003
169,400- 81 -$

Amount

2.53

26.07

2.56

0.39
0.33
1.35
0.18
0.26
0.11
0.90
0.42
0.26
0.17
0.10
0.07
0.16
0.09
1.33
0.13

% of
Total

Transaction Details

1 months

1 months

1 months

30 days
40 days
2 months
2 months
1 months
1 months
40 days
60 days
2 months
2 months
1 months
15 days
2 months
2 months
90 days
30 days

Payment Terms
$

-

-

-

-

-

-

-

-

-

$

(24.389)(382)(27,760)(41,017)(77,970)
158,123(247,997)
42,642(31,210)(347,127)(99,649)(37,860)(127)(40,293)
3,888(23,430)(20,118)(464,582)(27,679)(3.66)(0.53)(3.74)(1.52)(2.90)
1.83(9.21)
0.49(1.16)(12.90)(3.70)(1.41)(1.50)
0.05(0.87)(0.75)(17.26)(1.03)

Note/Account Payable or
Receivable% ofPayment Terms Ending Balance
Total

Abnormal Transaction
Unit PriceTOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

240
-

-

-

-

-

Note

TABLE 4

China Airlines

China Airlines

China Pacific Catering Services

Taoyuan International Airport Service

Parent company

Parent company

Parent company

Subsidiary

Nature of Relationship

347,127

464,582

247,997$ 158,123Ending Balance

3.43

3.90

Note

Note

Turnover Rate$

Amount- 82 -

Accounts receivable and revenue were not directly correlated because of the particular industry characteristics, and therefore the turnover rate was not applicable.

China Airlines

Mandarin Airlines

Note:

Mandarin Airlines

Related Party

China Airlines, Ltd. (“China Airlines”)

Company Name

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

241

-

-

-

-

-

-

-

-

Action Taken

Overdue

340,924

311,356

245,364$ 158,123

Amounts Received
in Subsequent
Period

$

-

-

-

-

Allowance for
Bad Debts

TABLE 5

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

The Company does not issue shares because it is a limited company.

Difference caused by lease arrangement between consolidated entities.

Difference cause by acquisition.

Note 4:Note 5:Catering business

Note 3:Kaohsiung, Taiwan

Airport services and investment

Note 2:

Delica International Co., Ltd.

Kaohsiung Catering
Services

Samoa

Forwarding and storage of air cargo

Adopted the treasury shares method in recognizing investment income or loss.

Taiwan Airport Service (Samoa)

Taiwan Airport Services

Hong Kong

Note 1:

Eastern United International Logistics

CAL-Asia Investment- 83 -Air transportation and maintenance of aircraft
Airport services

Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.
NORDAM Asia Ltd.

Taipei, Taiwan
Taipei, Taiwan

Aircraft maintenanceTaoyuan, Taiwan

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan

Hwa Hsia

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment
Sale and maintenance of hardware and software
Airport services
Airport services
In-flight catering
Hotel business
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Air transportation and maintenance of aircraft
Aircraft maintenance

Main Business and ProductTaoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, USA
Taoyuan, Taiwan
Taoyuan, Taiwan
Territory of the British Virgin Islands
Taipei, Taiwan
Hong Kong International Airport
Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Taoyuan, Taiwan

Location

CAL Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
China Pacific Laundry Services

Investee Company

Mandarin Airlines

China Airlines, Ltd.

Investor Company

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars and Foreign Currencies in Thousands, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

242
US$

HK$

10,200

5,877

3,329

154,330
11,65837,97526,265
JPY
8,000
2,500
1,272,063
1,350,000

77,2701,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500$

December 31,
2019

US$

HK$

10,200

5,877

3,329

200,000
11,6582,450

26,265
JPY
20,4002,500
1,648,387
1,350,000

77,2701,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500$

December 31,
2018

Investment Amount

1,020,000-

1,050,000

15,433,000
469,755

3,797,500

1,600,000
160
250,000
138,906,275
135,000,000

77,270150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
20,626,644
21,494,637
46,500,000
13,750,000

51.00

100.00

35.00

7.72
1.08

49.00

100.00
20.00
25.00
69.45
100.00100.00100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.00
55.00

$

7,867

347,551

42,717

216,243
6,281

37,81325,26810,004
7,294
1,946,328
921,989

88,313

1,552,310
1,494,603
1,517,946
1,276,546
801,071
737,245559,562460,213461,263
276,134
661,170479,259
168,547

Balance as of December 31, 2019
Percentage
Carrying
Number ofofAmountShares/Units Ownership
(%)
$

(4)

23,107

9,678

808,718
156,861

(144)

(480)
(894)
6,392
808,718(206,151)

17,0081,163
204,018
271,552
41,262
511,121291,52230,820195,347
51,828156,861
292,632
16,78727,327Net Income(Loss) of theInvestee$(2)

23,107

3,387

77,587
1,689

(70)

(384)
(480)
1,598
699,039(206,149)

16,857

47,694
191,322
146,642
41,262
256,899
142,846
30,819183,490
10,36574,274
142,886
18,02015,030Investment
Income (Loss)-

Note 3---Note 4Note 4Note 4

Notes 1 and 4

Note 4
Notes 1 and 4
Note 4Note 2
Note 5Note 4-Note

TABLE 6

Landing gear
2,495,195
maintenance services (US$ 83,090)

Composite material

Taikoo (Xiamen) Landing
Gear Services

HAECO Composite
Structures (Jinjiang)

Investment Amount
Authorized by Investment
Commission, MOEA

$650,192 (Note 3)

Accumulated Investment in
Mainland China as ofDecember 31, 2019

$267,886 (US$8,920)

350,240
11,663)Forwarding and storage
60,267of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

(US$

Forwarding and storage $ 10,95,480
of air cargo(RMB 254,480)

Main Business andProduct

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

19,099636)

64,601
2,151)

58,482
1,947)$36,079,270 (Note 4)

Limit on Investment

(US$

(US$

(US$

$
125,705 $(US$4,186)

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2019

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company Name

China Airlines

-

-

-

-

- 84 -$

Inflow

Investment Flow
Outflow

INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars/Renminibi/U.S. Dollars in Thousands, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

243

-

-

-

-

Net Income(Loss) of
the Investee

(US$

(US$

(US$

19,099636)

64,601
2,151)--

58,482
89,573
1,947) (RMB 19,975)$
125,705 $76,711(US$4,186) (RMB 17,107)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2019

5.45

2.589

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

-

-

(RMB

42,7189,923)---

26,286875)(Note 2)

(Continued)

12,606124,071
2,796) (RMB 28,822) (US$84,1372,802)(Note 2)

Accumulated
InwardRemittance ofEarnings as ofDecember 31,
2019$
10,795 $223,683 $(RMB 2,395) (RMB 51,962) (US$Investment
Gain (Loss)

Carrying
Amountas ofDecember 31,
2019

TABLE 7

(US$

-

-

$

Inward$349,906 (Note 4)Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

57,8601,927)$
120,671 $(US$
4,018)

Outward

Remittance of Funds

-

-

(US$

57,86089,573
1,927) (RMB 19,975)

14.00

14.00

% Ownershipof Direct orIndirect
Investment

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2019

(RMB

12,540124,279
2,796) (RMB 28,870) (US$- 85 -

Note 6: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates of refer for the reporting period.

Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.

(Concluded)

42,2401,407)$
10,740 $222,478 $
114,304(RMB 2,395) (RMB 51,682) (US$3,806)

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2019

Note 4: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjustment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.

Note 3: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.

Note 2: The inward remittance of earnings in 2019 amounted to US$2,801,749 and US$875,330.

Net Income(Loss) of theInvestee$
120,671 $
76,711(US$
4,018) (RMB 17,107)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2019

Note 1: China Airlines, Ltd. the “Company” invested in CAL-Asia Investment, which, in turn, invested in a company located in mainland China.

$178,532 (US$5,945)$178,532 (US$5,945)

Indirect(Note 5)Investment Amounts Authorized by
Investment Commission, MOEA

Forwarding and storage
60,267of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

Indirect(Note 5)

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2019

Forwarding and storage $ 1,095,480
of air cargo(RMB 254,480)

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2019

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company

Taiwan Airport Services244

China Airlines Co., Ltd.
ChairmanƝHsieh, Su-Chien