Websites for search：
http://www.china-airlines.com
http://mops.twse.com.tw

Stock code : 2610

Spokesperson & Deputy SpokesmanƝ
SpokesmanLiu, Tsao-Yang
Vice President, CORPORATE COMMUNICATIONS OFFICE
886-3-399-8888
886-3-399-8640
jason.liu@china-airlines.com

Name
Title
Tel
Fax
Email

Deputy Spokesman
Chen, I-Chieh
Vice President, FINANCE DIV.
886-3-399-8888
886-3-399-8313
jeffrey@china-airlines.com

Headquarter, Branches and PlantƝ
Organization Unit

Address

Tel

Headquarter
Taipei Branch

No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan
No.131, Section 3, Nanjing East Road, Taipei City 104, Taiwan

886-3-399-8888
886-2-2715-2233

Cargo Sales & Service, Taiwan

No.3, Aly. 123, Ln. 405, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan

886-2-2715-5151

Kaohsiung Branch

6 Floor, Asia-Pacific Financial Plaza, No.38 Of Xin Guang Road, Lingya District, Kaohsiung City 802, Taiwan

886-7-213-1200

Tainan Branch

Room A, 6 Floor, No.358, Section 1, Tungmen Road, Tainan, Taiwan

886-6-235-8099

Taichung Branch

Room 2, 15th Floor, No.218, Section 2, Taiwan Boulevard, West District, Taichung City 403, Taiwan

886-4-2325-9592

Maintenance Div.

No.15, Hangqin S. Rd., Dayuan Dist., Taoyuan City 337, Taiwan

886-3-383-4251

Cargo Sales & Services Mainland
China

Suite 22i, No.726 Of West Yanan Road, Changning District, Shanghai, China

86-21-2220-3292

Beijing Office
Shanghai Office

Bright China Chang An Building, Tower 2, Unit 1025, No.7 Jianguomen Nei Avenue, Beijing, China
Suite 22a, No.726 Of West Yanan Road, Changning District, Shanghai, China

86-10-6510-2671
86-21-2220-3333

Guangzhou Office

Room 1210, 12th Floor, Teem Tower, No.208 Of Tianhe Road, Tianhe District, Guangzhou, Guangdong, China

86-20-8527-2950

Shenzhen Office

Room 4805, Office Tower, Shun Hing Di Wang Commercial Center, No.5002 Of Shen Nan East Road, Luohu
District, Shenzhen, Guangdong, China

86-755-8246-3560

Xian Office

Room 810, 8th Floor, Gaoxin Building 9, Gaoxin 4th Road, High-Tech Zone, Xi'an, Shaanxi, China

86-29-895-81909

Chengdu Office

Room 1608, South Tower, Baoli Center Building, No.7, Consulate Rd. Chengdu, China

86-28-8602-7508

Zhengzhou Office

Rooms 1101-1102, Tower B, Yuhong International Building, No.59 Of Zijingshan Road, Zhengzhou, Henan, China

86-371-5562-9880

Changsha Office

Room 3404, Building 2, Block C, Kaifu Wanda Plaza, No.589 Of Zhongshan Road, Changsha , Hunan, China

86-731-8224-0871

Shenyang Office
Xiamen Office

Room 2009, Tower E, Fortune Center, No.59 Of North Station Road, Shen He District, Shenyang, Liaoning, China
Unit 3310, 33rd Floor, Bank Center, No.189 Of Xiahe Road , Xiamen, Fujian, China

86-24-3128-7021
86-592-2388-388

Nanjing Office

Room B1-B2, Building 38, Nanjing Center Building, No.1 South Zhongshan Road, Qinhuai District, Nanjing, China

86-25-8467-1050

Ningbo Office

Room 1702, China Citic Building, No.36 Of Zhenming Road, Haishu District, Ningbo, Zhejiang, China

86-574-8775-4090

Hangzhou Office

Room 2307, Building 2, China Qian Tang Aviation Building, No.66, Shimin St., Jianggan District, Hangzhou, China

86-571-8668-4214

Fuzhou Statiom

Room 2508, Zhonggeng Youth Plaza, No.83 Of East Road, Gulou District, Fuzhou, Fujian, China

86-591-8755-9705

Chongqing Station

Room 2202, No.3 Building, Zhongyu Plaza, No.86 Of Hongjin Avenue, Yubei District, Chongqing, China

86-023-8828-0118

Haikou Office

18e, Huanhai Business Building, No.15, Jinmao W. Rd., Haukuo Hainan, China

86-898-6853-9677

Nanchang Station

Room 701, Unit A, No.205 Guangchang S. Rd., Nanchang, Jiangxi Province, China

86-0791-8378-0580

Sanya Station
Wenzhou Station

Room No.110, 5F, Block B, Sanya Aviation City, Sanya Phoenix Int'l Airport, Hainan
Room 2310, Huameng Business Palace, No.2 Of Chezhan Road, Lucheng District, Wenzhou, Zhejiang, China

86-0898-8828-9677
86-0577-8605-2181

Wuxi Station

Room A207, No.18 Airport Second Road, New District, Wuxi City, Jiangsu Province, China

86-0510-8522-8710

Yancheng Station

Room B1207, East Building High-End Business Office (Hbo), Ren Min South Road No.1 , Yancheng, Jiangsu, China

86-515-8996-6950

Qingdao Office

Unit 2801, Office Tower, Shangri-La Centre, No.9 Xiang Gang Zhong Lu, Qingdao, China

86-532-6887-7106

Wuhan Office

Room 1315, 13F, New World International Trade Building, 568 Jianshe Avenue , Wuhan, China

86-27-8555-8172

Changchun Office

Rooms 6006, 6th Floor, Bai-Nau Technology Building, No.1313 Of Gong Nong Road, Chaoyang District,
Changchun, Jilin, China

86-431-8920-7672

Xuzhou Station
Cargo Sales & Services, Japan

Jiangsu Xuzhou, Jingpo West Rd. Jitian Business E Building E110 Room, China
Nittochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan

86-516-8379-0550
81-3-6378-8860

Tokyo Branch

Nittochi-Uchisaiwaicho Bldg. 8F, 1-2-1 Uchisaiwaicho, Chiyoda-ku, Tokyo, 100-0011, Japan

81-3-6378-8855

Osaka Branch

Nakanoshima Mitsui Bldg. 9F 3-3, 3-Chome Nakanoshima Kita-Ku Osaka 530-0005, Japan

81-6-6459-5783

Sapporo Branch

Kita 1 Jo Mitsui Building 3F, Kita 1, Nishi 5, Chuo-ku, Sapporo Hokkaido, 060-0001, Japan

81-11-218-6766

Shizuoka Station

Shizuoka Airport Terminal Bldg. 1F, 3336-4, Sakaguchi, Makinohara-Shi, Shizuoka, 421-0411, Japan

81-548-29-2668

Toyama Station
Kagoshima Station

International Terminal Building 3F, 191 Akigashima, Toyama-Shi, 939-8252, Japan
1355-4 Fumoto, Kirishima, Kagoshima 899-6404, Japan

81-76-461-7200
81-995-57-9898

Miyazaki Station

Miyazaki Airport, Akae Miyazaki 880-0912, Japan

81-985-64-9811

Nagoya Branch
Fukuoka Branch

3F, NMF Nagoya-Fushimi Building, Nishiki 2-9-27, Naka-ku, Nagoya, Aichi, 460-0003, Japan
Daihakata Bldg. 8F, 2-20-1 Hakata Ekimae, Hakata-Ku, Fukuoka 812-0011, Japan

81-52-202-7253
81-92-471-7788

Hiroshima Branch

7F 2-7-10, Ote-Machi, Naka-Ku, Hiroshima-Shi, Hiroshima, 730-0051, Japan

81-82-542-0883

Takamatsu Station

Takamatsu Airport Bldg. 1312-7, Oka, Konan-cho, Takamatsu-shi, Kagawa, 761-1401, Japan

81-87-815-8702

Kumamoto Station

Kumamoto Airport Int'l Terminal Bldg. 1802-2 Oyatsu, Mashiki-machi, Kamimashiki-gun, Kumamoto 861-2204,
Japan

81-96-285-1814

Okinawa Branch
Korea Branch

Gojinsha Naha Matsuyama Bldg. 3F, 2-1-12 Matsuyama, Naha City, Okinawa 900-0032, Japan
12F, Donghwa Bldg. Seosomun-Ro 106, Jung-Gu, Seoul, Korea 04513

81-98-863-1013
82-2-317-8888

Busan Branch

3F, Kyo-Won B/D, Jungang Daero 216, Dong-Gu, Busan, Korea, 48733

82-51-462-8885

Hong Kong Branch

Suites 2701-2705, 27F Devon House, Taikoo Place, 979 King's Road, Hong Kong852-2843-9800

Thailand Branch4Fl., The Peninsula Plaza Bangkok, 153 Rajadamri Rd., Bangkok 10330, Thailand

66-2-250-9898

Bali Branch

Departure Int'l Terminal 2nd FL., No.A0-12B NgurahRai Airport, Tuban-Bali, Indonesia

62-361-935-7298

Malaysia Branch
Penang Branch

Unit 15.01, Level 15, AMODA Building, 22, Jalan Imbi, 55100 Kuala Lumpur, Malaysia
Unit 9.04, Level 9, Menara Boustead Penang, 39 Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia

60-3-2142-7344
60-4-228-9227

Singapore Branch

302 Orchard Road, #14-01 Tong Building Singapore 238862

65-6-737-2144

Surabaya Branch

Intiland Tower, 2nd Floor, Suite 9B, Jl. Panglima Sudirman No.101-103 Surabaya 60271, Indonesia

62-31-547-0898

Cambodia Branch#10, St.596 Toul Kork, Sangkat Beoung Kok II, Khan Toul Kork, Phnom Penh, Cambodia

855-23-883-696/686

Myanmar Branch

No.353/355, Bo Aung Kyaw Street, Kyauktada Township, Yangon, Myanmar

95-1-839-2663

Philippines Branch

G/F Unit-1 Golden Empire Tower 1322 Roxas Boulevard Cor. Padre Faura St., Ermita Manila, Philippines

63-2-354-6700 to 09

Indonesia Branch

Intiland Tower, M1 Floor, Jl. Jend. Sudirman Kav.32, Jakarta 10220, Indonesia

62-21-251-0788

Vietnam Branch

1B, 7F Crescent Plaza 105 Ton Dat Tien St., Dist.7, Ho Chi Minh City, Vietnam84-28-5414-1008

Hanoi Branch
Palau Branch

4th Floor, Opera Business Center, 60 Ly Thai To Street, Hoan Kiem District, Hanoi, Vietnam
P.O. BOX 10027 Koror, Republic of Palau 96940

84-24-3936-6364
680-488-8888

Australia Branch

Suite 1, Level 1, Central Terrace Building, 10 Arrivals Crt. Sydney International Airport Mascot NSW 2020, Australia 61-2-8339-9188

Brisbane Branch

Level 1, Brisbane International Terminal, Airport Drive, Brisbane Airport QLD 4008, Australia

61-7-3860-5611

Melbourne Branch

Level 2, North End, Terminal 2, Melbourne Airport, Tullamarine 3045

61-3-9907-0910

New Zealand Branch

GM60, Level 1, Auckland International Airport, Auckland 2150, New Zealand

64-9-256-8088

India Branch

Office No.323, 3rd Floor, MGF Metropolis, M.G. Road, Gurgaon 122001, Haryana, India

91-124-711-5000

Los Angeles Branch

200 N. Continental Blvd., Suite 100, El Segundo, CA 90245, U.S.A.

1-310-322-2888

New York Branch

633 3rd Ave., 8th Fl., Suite 800, New York, NY 10017, U.S.A.

1-917-368-2000

San Francisco Branch
Honolulu Branch

433 Airport Blvd., Suite 501 Burlingame, CA 94010, U.S.A.
300 Rodgers Blvd., #14, Honolulu, HI 96819, U.S.A.

1-650-931-8000
1-808-955-0088

Anchorage Branch4600 Postmark Drive, Ste. NA142, Anchorage, AK99502, U.S.A.

1-907-249-2300

Canada Branch

Suite 240-10451 Shellbridge Way, Richmond, British Columbia, V6X 2W8, Canada

1-604-242-1168

Cargo Sales & Services The Americas 5651 West 96th Street, Los Angeles, CA 90045, U.S.A.

1-310-646-1260

Guam Branch

518 Pale San Vitores Road, Suite 202-203, Concorde Center, Tumon, Guam 96913, U.S.A.

1-671-649-0861

Netherlands Branch

Officia Gebouw I, De Boelelaan 7, 6th Floor, 1083 HJ Amsterdam, The Netherlands

31-20-646-1001

Germany Branch

Gutleutstrasse 80, 60329 Frankfurt, Germany

49-69-297-0580

Italy Branch

Viale Marco Polo, 71, 3F, Roma, Italy

39-06-474-5045

Cargo Sales & Services, Europe
Austria Branch

Room G2045, Cargo Center Luxair, L-1360 Luxembourg, Luxembourg
Mariahilfer Strasse 123/8 O.G. 1060 Vienna, Austria352-348-363-9500
43-1-8130-156

The United Kingdom Branch

Minstrel House, 1F, 2 Chapel Place, Rivington Street, London, EC2A 3DQ

44-208-587-3688

Stock Transfer AgentƝ
NameƝ CTBC Bank Co., Ltd.
AddressƝ 5F., No.83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan
WebsiteƝ http://www.ctbcbank.com
TelƝ886-2-6636-5566

Overseas Securities ExchangeƝN/A
Corporate WebsiteƝhttp://www.china-airlines.com

AuditorsƝ
NameƝ
Deloitte & Touche
AuditorsƝ Yang, Chen-Hsiu; Huang, Jui-Chan
AddressƝ 20F., No. 100, Songren Rd., Xinyi Dist., Taipei City 110, Taiwan
WebsiteƝ http://www.deloitte.com.twTelƝ886-2-2725-9988

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........................................................................................................... 36
3.4 Information Regarding the Company’s Audit Fee and Independence .................................................................. 80
3.5 Replacement of CPA .............................................................................................................................................. 81
3.6 Audit Independence.............................................................................................................................................. 81
3.7 Changes in Shareholding of Directors, Managers and Major Shareholders.......................................................... 82
3.8 Relationships among the Top Ten Shareholders ................................................................................................... 85
3.9 Ownership of Shares in Affiliated Enterprises ....................................................................................................... 86

IV. Capital Overview ....................................................................................................................................................87
4.1 Capital and Shares................................................................................................................................................. 88
4.2 Bonds .................................................................................................................................................................... 92
4.3 Other Securities‐Related Issues ............................................................................................................................ 94
4.4 Financing Plans and Implementation ................................................................................................................... 94

V. Operational Highlights ......................................................................................................................................... 95
5.1 Business Activities................................................................................................................................................. 96
5.2 Market and Sales Overview ................................................................................................................................ 103
5.3 Human Resources ............................................................................................................................................... 108
5.4 Environmental Protection Expenditure............................................................................................................... 108
5.5 Labor Relations ................................................................................................................................................... 112
5.6 Major Contracts .................................................................................................................................................. 115

VI. Financial Information........................................................................................................................................ 118
6.1 Five‐Year Financial Summary .............................................................................................................................. 119
6.2 Five‐Year Financial Analysis................................................................................................................................. 123
6.3 Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017, and Independent
Auditors’ Report.................................................................................................................................................. 125
6.4 Parent Company Only Financial Statements for the Years Ended December 31, 2018 and 2017 andIndependent Auditors’ Report............................................................................................................................ 125
6.5 Audit Committee’s Report .................................................................................................................................. 126

VII. Review of Financial Conditions, Financial Performance, and Risk Management .........................127
7.1 Analysis of Financial Status ................................................................................................................................. 128
7.2 Analysis of Financial Performance ...................................................................................................................... 129
7.3 Analysis of Cash Flow .......................................................................................................................................... 129
7.4 Major Capital Expenditure Items ........................................................................................................................ 129
7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans andInvestment Plans for the Coming Year................................................................................................................ 130
7.6 Analysis of Risk Management ............................................................................................................................. 130
7.7.Other important Matters .................................................................................................................................... 133

VIII Special Disclosure ............................................................................................................................................. 134
8.1 Summary of Affiliated Companies....................................................................................................................... 135
8.2 Private Placement Securities in the Most Recent Years ...................................................................................... 141
8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years...................................... 141
8.4 Special Notes....................................................................................................................................................... 141
8.5 Situations with Major Impacts on Shareholder Equity or Share Prices............................................................... 141(Appendix 1) Consolidated Financial Statements for the Years Ended December 31, 2018and 2017 and Independent Auditors’ Report ........................................................................ 143(Appendix 2) Parent Company Only Financial Statements for the Years Ended December 31,
2018 and 2017 and Independent Auditors’ Report ............................................................. 198(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 2018
1.2 Business Plan for 2019
1.3 Development Strategies

Letter to Shareholders

1

I. Letter to Shareholders
The operating environment for the aviation industry
is closely related to the global economic atmosphere.
In recent years, economic growth has stimulated
overall air transport demand. The demand growthrate in the Asia‐Pacific region is higher than the
global level and has become momentum driving
global growth. With advantages including increasing
opening of traffic rights and the new southboundpolicy, the air transport market is also flourishing.
Looking at 2018, the passenger flight business andcargo flight business of China Airlines both showed
spectacular performance, with a total number of
91,000 flights, carrying 15.61 million passengers and1.51 million tons of cargo. In terms of passenger
business, after the introduction of the 14th Airbus
A350‐900 in October, 24 next‐generation long‐haul
passenger aircrafts are in use. Through the increaseof flights on European routes, such as Vienna andRome, and next‐generation passenger aircraft taking
over New Zealand/Australia markets, we continue toleverage our product strengths to enhance ourcompetitiveness and overall profitability. For
regional markets, flights have been increased on
existing routes, such as Taoyuan‐Nagoya andTaoyuan‐Hanoi; Kaohsiung and Taichung have also
increased transportation capacity to optimize theefficiency of the flight network. We have also
strengthened inter‐airline cooperation, increased
code‐sharing cooperation with Royal Brunei Airlines
and other airlines, to reinforce our market layout. In
terms of cargo business, benefiting from therecovery of economy, the warming of the freightmarket, the continued growth of demand fore‐commerce goods, and the shipping boom at theend of the year driven by the tense trade relations
between China and the United States, revenue has
increased. In September, the 11th United Statescargo aircraft destination, Columbus, Ohio, beganwith three flights a week, providing more options forshippers.
Providing safe services is a top priority of operationin the aviation industry. China Airlines was awarded
the Operational Safety Audit (IOSA) of theInternational Air Transport Association (IATA) for theeighth time in 2018, ensuring flight safety throughbasic actions in line with international standards. In
addition, the launch of the on‐board service In‐flight
Medical Project provides high‐quality and reliable
journeys and one more protection for passengers.
In addition to its commitment to the operation of
the aviation industry, China Airlines has also taken
advantage of the Group's diversified operations topromote e‐commerce sales and aerospace
maintenance business. The e‐commerce platform
Dynasty Miles Go was officially launched. Also, the2 Letter to Shareholders

re‐invested Taiwanese aircraft maintenancecompany has passed the certification of the Civil
Aeronautics Administration of the Ministry ofTransportation and Communications. The new
hangar will be officially opened in March 2019, andthe Company will sign the Airbus MRO Alliance(AMA) contract with Airbus. The advantages ofmaintenance technology and aviation material
resources will be fully enhanced, bringing in entirely
new opportunities for profit.
Corporate governance is the cornerstone of acompany's sustainable operation. China Airlines iscommitted to promoting corporate governance andenhancing its operational synergy. It also focuses on
aspects of “safeguarding shareholders' rights andinterests,” “equal treatment of shareholders,”“strengthening Board structure and operations,”“improving
informationtransparency,”
and“implementing corporate social responsibility.” In2018, China Airlines was awarded the high honor of
ranking in the top 5% in corporate governanceevaluations held by the Taiwan Stock Exchange.
Looking ahead to 2019, air transport demand
continues to grow, but there are still underlying
concerns, such as the trade war between China andthe US, oil price fluctuations, and fierce market
competition. China Airlines will continue to optimize
its operating efficiency as it enters its 60th
anniversary, with an optimistic but cautious
mindset.

1.1 Operating Performance in2018
Operating revenue in NT dollars (same hereafter)
was NT$150.264 billion, a 7.47% increase over thelast year after‐tax net profit was NT$1.79 billion, fora basic after‐tax net profit of NT$0.33 per share.

1.1.1 Results of the business strategy
 Fleet:As of the end of December, the Company held 73
passenger aircraft (including leased aircraft) and 21
cargo aircraft, for a total of 94. In 2018, China
Airlines introduced four Airbus A350‐900 self‐owned
passenger aircrafts. Seven 747‐400 and three
A340‐300 passenger planes were sold.

 Passenger flights:
Revenue from passenger business was NT$94.248
billion, a 4.07% increase over the last year,
accounting for 62.72% of total operating revenue. Asof the end of 2018, the China Airlines Group flew to
23 countries and 78 passenger destinations,spanning Asia, Europe, the Americas and Oceania.
On average, there are 718 round‐trip flights per
week.

 Cargo flights:
Cargo business income was NT$49.422 billion, a15.02% increase over the last year, accounting for
32.89% of total operating revenue. As of the end of
2018, the China Airlines group flew 18 cargo planes
in cargo operations, flying to 15 countries and 34
destinations. Each week, there were an average of
97 cargo flights.

 Other operating income:
Other operating revenue included in‐flight duty‐freesales revenue, a total of NT$6.594 billion, a 4.92%
increase over the last year, accounting for 4.39% of
total operating revenue.

 Investments and earnings:
As of the end of December, the Company had
investment in a total of 32 companies, in areas ofbusiness such as air business, ground services,logistics, aircraft maintenance, air cargo station
business, etc., which contributed NT$1.919 billion inrevenue over the year.

1.1.2 Business cash flow budget andprofitability analysis
 Cash flow:
Operating revenue was NT$150.264 billion, up
10.449 billion from last year.
Operating costs and expenses were NT$148.417
billion, up NT$15.96 billion from last year.
Pre‐tax net profit was NT$2.315 billion, down
NT$0.773 billion from last year.
After‐tax net profit was NT$1.79 billion, down
NT$0.418 billion from last year.

 Budget execution:

non‐operating activities were NT$2.504 billion, withactual losses from non‐operating activities at
NT$0.468 billion. Actual annual pre‐tax net profit
was NT$2.315 billion, for a budget‐achieving rate of
79.42%.

 Profitability:
Return on assets 1.33%
Return on equity 3.14%
After‐tax profit margin 1.19%
After‐tax earnings per share NT$0.33

1.1.3 Research and development
In view of the rise of the e‐service era, China Airlines
is committed to the development of website
functions and the optimization of the ticket
purchasing system, which will provide a betterwebsite experience and convenient services. In
terms of payment, the China Airlines official website
supports a multi‐currency payment function to makeit more convenient for passengers; in addition, in
response to the fact that mobile phones havebecome mainstream for modern people to collectinformation and make transactions, the mobile
phone ticket purchasing process has been revised tomake the operations more convenient forpassengers and to provide passengers withexperience consistent with the experience on
desktop web pages. In recent years, revenue fromadditional services has become increasingly
important in the aviation industry. The Company
provides travel insurance purchase function in South
Korea, Hong Kong, and other markets, to provide
more value‐added services for passengers. At thesame time, China Airlines also continues to promoteadvance customs clearance, going paperless,Electronic Airway Bill (e‐AWB) and other solutions,to achieve the sustainable goal of low carbon
emissions and energy conservation.
The Company's information strategy development in2018 had seven major directions: going mobile, bigdata, artificial intelligence, cloud services,
information security, virtual and augmented reality,
and Internet of Things. We continued to grasp thepulse of the industry and utilize digital technology tounderstand customer value, master profit‐earing
trends, find opportunities for innovation, strengthen
information security risk management, and enhance
the Company's operational competitiveness.

Projected operating revenue was NT$144.545 billion,
and actual operating revenue was NT$150.264
billion, for a 103.96% attainment; projected
operating costs and fees were NT$139.126 billion,
and actual operating costs were NT$148.417 billion,
for a spend rate of 106.68%. Projected losses from

Letter to Shareholders3

1.2 Business Plan for 2019
The aviation industry operating environment isdeeply affected by global political and economic
factors. Based on the International Monetary Fund(IMF) projections, affected by the trade war, China's
economic growth slowdown and the Brexit, theoverall global economic growth rate in 2019 will be
3.5%, slightly lower than 3.7% in 2018; andaccording to IATA projections, in terms of passenger
transport, the global and Asia‐Pacific growth rate inpassenger volume will be 6.0% and 7.5%,
respectively, and the growth rate of transportcapacity will be 5.8% and 7.1%, respectively, in 2019,
both slightly lower than last year's growth rate.
Supply and demand will gradually become balanced,
and market competition will continue to be fierce. In
terms of cargo business, IATA estimates that thegrowth rate in 2019 will be 3.7%, which is slightly
lower than last year by 0.4%. It is estimated that themarket situation of oversupply will continue. The
prospects of global air transport market is cautiously
optimistic. China Airlines will continue to combine
the advantages of passenger and cargo aircrafts tomeet the challenges.
(Note: IATA will update the above growth rate
prediction data each quarter)

1.2.1 Passenger Service
China Airlines has continuously evaluated themarket development of the Southeast Asian routes,
the long‐haul route markets of New Zealand,
Australia, Europe and America, and strengthened
the transit hub position of Taoyuan Airport; as forthe cross‐strait route, China Airlines has closely
followed market movements and adjusted thetransport capacity in a timely manner.

 Cross‐Strait Routes:
Limited by the slowdown in cross‐strait travel
demand and affected by the traffic rights restrictions,
China Airlines launched the Taoyuan‐Chongqing
route at the end of October 2018. In order tocontinuously optimize the efficiency of the aviation
network and actively increase the revenue
contribution of each route, China Airlines actively
responds to market movements and maintains the
profit rate of the routes through the adjustment of
the aircraft models and the flexible regulation of thetransportation capacity based on travel demand andpassenger composition. In the future, we willcontinue to adjust the transportation capacity
depending on cross‐strait policy development andmarket conditions. In addition, in cooperation withthe slot time progress of Shanghai’s Hongqiao and

4 Letter to Shareholders

Pudong Airports, we will launch new routes, such as
Songshan‐Hongqiao and Taichung‐Pudong, toincrease profit.

 Northeast Asian Routes:
Japan and South Korea are still the top choices for
Taiwanese tourists. In order to actively win overincreasing market demand, China Airlines has
increased its Taoyuan‐Nagoya route from 11 flights
per week to 12 flights per week from the end of
October 2018; this will be increased to 14 flights per
week beginning at the end of March 2019. Moreover,in order to meet the needs of people traveling toJapan from central and southern Taiwan, the new
Taichung‐Tokyo Narita route was launched in June
2018. In July, flights of Taichung‐Ryukyu route wereincreased from 4 flights per week to 5 flights per
week. At the end of October 2018, the flights on the
Kaohsiung‐Osaka route were increased from 9
flights per week to 11 flights per week. Seasonal,
holiday/festival, and thematic charter flights were
specially arranged for seasonal demand tostrengthen the market share and competitiveness ofChina Airlines in Taiwan.

 European Routes:
In order to enhance the efficiency of its aviation
network extension in Europe, expand the market
scale, and secure its leading position in the
Taiwan‐Europe market, from the end of March 2018,
China Airlines has increased the flights on the
Taoyuan‐Vienna route from 3 flights per week to 5
flights per week. And in July 2018, the flights on the
Taoyuan‐Rome route were increased from 2 flights
per week to 3 flights per week. In the future, a more
tightly‐woven and convenient European aviation
network will be provided.

 Australia and New Zealand Routes
To increase contribution to the New Zealand andAustralia aviation network and take the initiative tograsp the opportunity for increasing revenue, China
Airlines specially adjusted aircraft models for
Brisbane, Auckland, and Melbourne during the peaktravel seasons to New Zealand and Australia,
enhancing the supply of seats through thedesignation of peak seasons. 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.

 Southeast Asian Routes:
In cooperation with the government's new
Southbound Policy, from the end of March 2018,
China Airlines has increased flights on theTaoyuan‐Bangkok route from 23 flights per week to
28 flights per week, and increased the flights on the
Kaohsiung‐Bangkok route from 5 flights per week to
7 flights per week. In July of the same year, flights on
the Taoyuan‐Penang route were increased from 6
flights per week to 7 flights per week, and theKaohsiung‐Hong Kong‐Jakarta route was launchedwith 7 flights per week. At the end of October 2018,flights on the Taoyuan‐Hanoi route were increased
from 7 flights per week to 14 flights per week.
Beginning at the end of March 2019, flights on the
Taoyuan‐Phnom Penh route will be increased from 5
flights per week to 7 flights per week. China Airlines
will continue to pay attention to the various market
movements in the region and evaluate in a timely
manner the feasibility of additional transportation
capacity input.

 Long‐Haul Routes:
In order to actively increase the efficiency of the
new destination Ontario, California, in China Airlines'
aviation network and to expand on costumer
sources, the flight schedule of Ontario has been
especially optimized from September 2018. The
main adjustment was the time of the return flightfrom the US to Taiwan. Moreover, from the end of
October 2018, the aircraft model will be changed to
the Airbus A350‐900 from the original Boeing
777‐300ER; also, in order to continue to stimulate
the North American tourism market, flights on the
Taoyuan‐Honolulu route will be increased beginning
May 2019, from 2 flights per week to 3 flights per
week, providing a variety of choices for visitors to
the United States.

1.2.2 Cargo Service
The global trade boom has slowed down since theend of 2018. IATA assesses that the growth of
freight demand will slow down in 2019 and theoverall market will remain similar to 2018, which ispredicted to be a year where the market supply
exceeds demand, and the air transport market willcontinue to be full of challenges. However, as theCompany actively expands the passenger and cargo
destinations, under the mutual support of passenger
and cargo aircrafts and efficient revenue
management, the margins for profitability will havethe opportunity to continue to grow. Furthermore,while continuously optimizing the efficiency of thepassenger and cargo aviation network, expanding
potential markets, strengthening cooperation withexpress delivery companies and other airlines,
continuous development of special products, such ase‐commerce goods, precision machinery, and cold
chain products, improvement of service quality, andstrengthening of freight information development

are also major development strategies for China
Airlines; strategies in response to the market of2019 are described as follows: Long‐Haul Routes
At the end of March 2019, the number of flights will
be maintained at 37 per week, and we will continue
to cooperate with customer needs to discuss
customized services, with a view to increasing the
4th flight per week of the scheduled and charteredcargo flights to Columbus, Ohio, United States, andto actively strive for opportunities of annual
chartered flight cooperation. As for inter‐airline
cooperation, we will continue to strengthen the
expansion of emerging markets, such as Central andSouth America, through close cooperation with
United Airlines. In addition to extending the serviceof the aviation network, belly‐hold capacity of thepassenger aircrafts will also be increased.

 European Routes:
Currently, 6 cargo flights per week have beenplanned, and we will continue to evaluate the mostsuitable relay station for European cargo flights; also,
we are actively evaluating the 7th Europe routecargo flight per week to meet market demand andsecure revenue for the aviation network. In line withthe resuming of passenger flights to England, we willcontinue to develop e‐commerce express delivery
and postal delivery, fresh goods, and collaboration
with United Airlines to make full use of thebelly‐hold capacity of Airbus A350‐900.

 Regional routes:
54 flights are planned every week. In response to
the growth of sources of goods in Asia, thetransportation capacity of cargo flights in Singapore,
Penang, Ho Chi Minh City, and Hanoi will be
increased as part of the Southeast Asia layout. The
number flights will be gradually increased from 48
per week in 2016 to 54 in the 2019 summer
schedule. Through the increase in the proportion ofsources of goods within the region, the profitabilityof Southeast Asian cargo flights will be effectively
improved. In addition, for the cross‐strait cargoflight routes, potential destinations will continue tobe evaluated to strengthen the layout of cross‐strait
routes. As for Hong Kong and Northeast Asia, in
addition to maintaining 15 flights and 5 flights per
week, respectively, we will also strive fornon‐scheduled chartered flight business and join
forces to develop high‐priced sources of goods.

Letter to Shareholders

5 Improving revenue management andexpending chartered flight business andhigh‐growth source of goods:
In 2019, we will continue to improve revenue
management. Regarding the different transportationneeds of special cargo, such as time limit, volume,and special ground treatment, we will continue toenhance price differentiation and increase theadded value of transportation services by utilizing
the large cargo loading advantages and professional
services of our Boeing 747‐400 all‐cargo aircrafts; wewill also strengthen the promotion of bidding
mechanisms for shipping space in peak seasons toenhance unit revenue.
In 2018, the chartered flight business achieved
brilliant results. In response to customer demand, a
total number of 159 scheduled and non‐scheduled
customized chartered flights businesses were
promoted. In 2019, we will continue to deepen ourdevelopment of emerging markets, such as
Southeast Asia, flexibly adjust the aviation networkin response to market changes, promote thecustomized chartered flight business, and maximize
the benefits of the cargo fleet.
The Company continues to grasp the pulse of themarket and expand potential markets forhigh‐growth source of goods, such as semiconductor
precision machinery, engine and aviation materials,
temperature‐controlled cold chain, biotechnology
and pharmaceuticals, and other special cargo. In
addition, to respond to the development ofcross‐border e‐commerce, besides strengthening
cooperation with express delivery companies andother airlines, the air and marine transport ofe‐commerce postal delivery has also achieved
multiple growth in quantity in 2018. In 2019, theCompany will continue to grasp the logistics trend
and expand our business territory.

development has also led to the congestion of
airports in major cities around the world; with thesaturation of airlines’ aviation network layout, theaviation market competition will continue to befierce, which will cause an impact on the overall
revenue.
In the future, China Airlines will develop by adopting
a balanced and stable strategy. In terms ofpassenger transportation, we will continue to workwith multiple brands and capture market sharealong with Mandarin Airlines and Tiger Air bydifferentiating target customers, to maintain theGroup’s dominant position. We will also pay close
attention to market changes to adjusttransportation capacity, consolidate, and deepen
market cultivation, continue to develop potential
destinations, strengthen inter‐airline cooperation,
optimize the layout of aviation network, andcontinuously improve the product quality of the
fleet. In the future, we will cooperate with theconstruction plan of Taoyuan Airport and startarranging the development plan of China Airlines
Group after it is stationed in Terminal 3,
strengthening overall development momentum. In
terms of cargo transport, we will strengthen thedevelopment of freight information, promotecustomized services and charter business, and solicit
high‐yield special goods to improve revenue
management performance and enhance service
quality.
China Airlines will continue to improve its operations,and strengthen its external competitiveness throughoptimizing its products, aviation network and service
quality. We will also continue to integrate Group’s
internal resources to achieve the synergy ofdiversified operations, and to realize our vision of“becoming the top airline choice in Taiwan.”

1.3 Development Strategies

Chairman: Hsieh, Su‐Chien

In recent years, benefiting from the rapid economic
growth of developing countries, which has driven
the demand of the overall air transport market,
while the countries gradually loosen their air trafficrights policies, the development of aviation industry
has been accelerated. However, the rapid

President: Hsieh, Su‐Chien

6 Letter to Shareholders

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.

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 Taipei‐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.

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

2000: Launched Canada, Australia, and New Zealandroutes; Taipei‐Guam, Taipei‐Manila,
Kaohsiung‐Manila, Hakodate charter, andTaipei‐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 Taipei‐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 Taipei andthe 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: Taipei ‐ Brisbane ‐ Auckland; Taipei ‐Osaka ‐ New York; flights to and from Taipei and
Wuhan, Sanya, Yancheng, Haikou, Nanchang and
Dalian; Taicheng to Chongqing and Nanchang;
Kaohsiung to Changsha, Chongqing, Beijing, andKuala Lumpur. Officially joined SkyTeam, becoming
the first Taiwanese airline member of aninternational airline alliance.
2012: New routes: Songshan to Wenzhou and Gimpo
Airport, Taipei to Kagoshima, Shizuoka and Toyama,
added Auckland leg to the Taipei‐Sydney route, andTaipei to Seoul and Yangon. Joined SkyTeam Cargo,
becoming the first Taiwanese airline to join aninternational air cargo alliance. Renovated thecabins 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, the Sports
Activists Award from Sports Affairs Council, First
Place in Management magazine’s Consumer Brand
Survey, and the 2012 Energy Conservation andCarbon Reduction Action Label Excellence Award.
The China Airlines Maintenance Facility received ISO
14001 Environment Management System
Certification. Launched the world's first trans‐Pacificclimate observation aircraft. Became the world's
first airline to display our carbon footprint andcalories 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 Taipei‐Takamatsu route,
Chiayi‐Shizuoka charter flights, Taipei‐Hawaii directflights, Taipei‐Urumqi and Lijiang routes. Launched
Taipei‐Ishigaki, Tainan‐Hong Kong, and Taipei‐Busanroutes as well as Songshan‐Matsuyama charter
flights. Launched the Taipei‐Nanjing‐Zhengzhou
cargo route and Taipei‐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 Taipei to Changchun, Hefei,

Company Profile

9

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 Taipei‐Wuxi; Kaohsiung to Changzhou,
Kumamoto, and Fukuoka; Taipei‐Melbourne with anextension to Christchurch; and Tainan‐Osaka flights.
Launched social media customer services, a first for
Taiwan. Established an airplane maintenancetraining 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:
2015 TCSA Taiwan Corporate SustainabilityAward, 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 Taipei‐Yangzhou route andTaipei‐Shenzhen cargo route. Inaugurated Chinese
passenger transit through Taiwan for outboundChina Airlines flights. Increased free baggage
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 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
2016.

10 Company Profile 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.
 Other:
Selected as a Dow Jones Sustainability Indicesconstituent stock, the first such honor for a
Taiwanese company and emerging market airline.
2017: Inaugurated the Taipei‐London route, becoming theonly airline in Taiwan to offer nonstop service toLondon. Partnered with Air France on a codeshare
nonstop flight from Taipei 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. Flew Taiwanese satellites tothe US on four occasions. Hosted the 2017 AAPA
annual conference to empower development in the
Asia‐Pacific airline industry. Provided the second
A330‐300 to work on plans for greenhouse 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 Readers' 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.
 Other:
Selected for the Dow Jones Sustainability Index
for the second consecutive year.

2018: The new US destination Taipei‐Ontario, California,
route formally went into operation. Served as one of
the ten major members in the IATA Nominating
Committee in 2018. Launched Kaohsiung‐HongKong‐Jakarta and Taipei‐Chongqing passenger
transportation routes. Developed the cargotransport destination in Columbus, Ohio, UnitedStates. Joined hands with Japan Airlines indeveloping the new destinations 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.” CAL Park wasawarded the Diamond Level of Green Building
Label, with an annual electricity savings of 23,000
kWh. Ranked among top 5% in the 4th Corporate
Governance Review China Airlines’ in‐flightmagazine Dynasty received the 2018 APEX Awards
for Publication Excellence in the US.
 Corporate Social Responsibility:
China Airlines Group donated 10 million NT$ 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. Cooperated with ClimateCare, aBritish professional environmental facility, tolaunch the “ECO Travel” carbon exchange
program.
 Product Design:Awarded the “Best Premium Economy Class
Amenities Kit” of the Onboard Hospitality Award
by OBH Magazine.
 Other:
Selected as a constituent stock in the Dow Jones
Sustainability Index (DJSI). Awarded the Taiwan
Corporate Sustainability Award.
2019: Added new flights to Taipei‐Palau route. Developed
cargo transport destination in Nagoya, Japan. Signed
a letter of intent with Chung Yuan Christian
University to jointly cultivate aviation talents.
Approved by the US Transportation Security
Administration to join the precheck program.
Evaluated as role‐model company for global airlines
by the International Carbon Disclosure Project.
Selected as a constituent stock in the “TW ESG
Index.” The first cold chain transportation ofpharmaceuticals in Taiwan to achieve international
certification.

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 27, 2019)

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 theannual business plan.

Secretarial Office, Board Responsible for holding Board of Directors meetings, collating and sending meetingof 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 Development Responsible for drafting the Company’s medium and long‐term strategic operating
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; planning medium andlong‐term design and development of passenger cabins and entertainment systems;
purchasing, selling, and leasing of aircraft; and supervising the operational
performance and management of invested enterprises.

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.

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 and receipt
of prospectuses and official documents, and document management.

Cabin Crew Div.

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

14 Corporate Governance ReportDepartment
Ground Services Div.

Functions
Responsible for establishing ground services operating standards, development of theground 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 ofin‐flight service products based on customer feedbacks and market trends.
Service Quality

Established and implements the Company’s ISO 9001 quality management system

Assurance Dept.

and implements service quality education, internal quality auditor training, andmeasures to encourage better understanding of quality‐related issues. Monitors
passenger satisfaction surveys and on‐time targets, investigates and analyses
passenger satisfaction in relation to Company goals, and plans and implements
passenger service quality checks.

Passenger Sales &Responsible for supervising the passenger transport network planning and route

Marketing Div.

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 trainings at alllevels.

Information

Combines information technology with business knowledge to promote

Management Div.

computerization within the Company to upgrade operational competitiveness.

Human Resources Div.

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 &Writes the Company’s Occupational Health and Safety Manual and regulations;

Health Dept.

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 OHSAS 18001 and CNS 15506
occupational health and safety certification following SGS audit to effectively control
occupational incident risk and improve occupational health and safety performance.

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

Corporate Governance Report15

Department

Functionsand 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, coordinates

Control Div.

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

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 05‐02ACenterrequirements. 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
APR 27, 2019
Title

Name

China Aviation
Development
Foundation

Nationality/ Country Genderof Origin

Date FirstElectedR.O.C.

07/07/1988 06/27/2018‐

Date
ElectedTerm(Years)Shareholding when
ElectedShares3

1,867,341,935

Representative:Male

07/06/2016 06/27/2018

3

48,517China Aviation
Development
Foundation

Hsieh, Su‐Chien

Chairman

R.O.C.

R.O.C.

‐

07/07/1988 06/27/2018

3

1,867,341,935

Representative:

Charles C.Y., Chen

Director

R.O.C.

Male

07/01/2000 06/27/2018

3

190,166%

Spouse & Minor
Current Shareholding
Shareholding
Shares%34.13% 1,867,341,935 34.45%

0.00%

%

‐

‐

48,517 0.00%

34.13% 1,867,341,935 34.45%

0.00%

SharesShareholding by
NomineeArrangement
Shares%‐‐

190,166 0.00% 155,849 0.00%

Other Position‐‐

Chairman, Taiwan Air
Cargo Terminal Ltd.
Senior Vice Presidentof Marketing, China
Airlines Ltd.
Director, Taiwan
Region and General
Manager of Taipei
Branch Office, China
Airlines Ltd.
General Manager,
Australia Branch
Office, China Airlines
Ltd.
General Manager,
0 0.00% Indonesia Branch
Office, China Airlines
Ltd.
General Manager,
Kaohsiung Branch
Office, China Airlines
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)

‐

‐

‐

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

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

Chairman &None
President, China
Airlines Ltd.
Chairman,
Mandarin Airlines,
Ltd.
Director &President, CAL
Park Co., Ltd.
Director, CAL Hotel
Co., Ltd.
Director, CAL‐Asia
Investment Inc.
Director,
CAL‐Dynasty
International, Inc.
Director, Dynasty
Properties Co., Ltd.
Director, Taoyuan
International
Airport Services
Co., Ltd.

‐

‐

None

None

‐

‐

‐

‐

Chairman, Eyon
Holding Group
Vice Chairman,
Taiwan Air Cargo
Terminal Ltd.
Vice Chairman,
Taian InsuranceCo., Ltd.
Director, Epistar
Corp.
Director, Shihlin
Papaer Co., Ltd.
Chairman, Wan
Hai International
Pte. Ltd.
President,
Chen‐YungFoundation
Vice Chairman,
Wan Hai Lines(Singapore) Pte
Ltd.

None

None

None

Corporate Governance Report17TitleName

Nationality/ Country Genderof Origin

Representative:

Ting, Kwang‐Hung

R.O.C.

Representative:

Chen, Han‐Ming

R.O.C.

Ko, Sun‐ta

Representative:

R.O.C.

Male

Male

Male

Date FirstElected

Date
ElectedTerm(Years)Shareholding when
ElectedShares01/28/2008 06/27/2018

07/26/2016 06/27/2018

06/27/2018 06/27/2018

3

%

0

3

0

3

3,737

0.00%

0.00%

0.00%

Representative:

Wei, Yung‐yeh

National
Development
Fund, Executive
Yuan

R.O.C.

Male

06/27/2018 06/27/2018

3

0

0.00%

R.O.C.

‐

06/15/2012 06/27/2018

3

519,750,519

9.50%

Current Shareholding
Shares%Spouse & Minor
Shareholding
Shares

0 0.00%3,737 0.00%

0 0.00%9.59%

Lin, Su‐Ming

Representative:

Male

06/15/2012 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

0 0.00%

Director, Yuan‐Chin
Chairman, Prime
None
Development Co.,
Development Co.,
Ltd.
Ltd.
Member, Rotary Club Supervisor,of Taipei Tunhua
Chang‐Jia M&E
Engineering Corp.
0 0.00% BA (Hons)
Architecture,
Director, Chyn‐Tay
University of
Bearing Co., Ltd.
Plymouth, UK
MSc, Birmingham City
University, UK
Chairman, K Hotes NoneGroup
Chairman, Kodak
Trading Co., Ltd.
Chairman, Kota
Enterprise Co., Ltd.

None

None

0 0.00%PT Lecturer, National
Open University
PT Lecturer, National
Open College
0 0.00% President, Keelung
Found for Children &Families
MBA, Keio UniversityJapan
Jet Airplane
Maintenance Group,
Air Force Technical
SchoolMember ofNone
Council, China
Airlines Employees
Union
Foreman, Line
Maintenance
Department,
Engineering &Maintenance
Division, China
Airlines

None

None

‐

‐

None

None

‐

Director
R.O.C.

Other Position

None

0 0.00%‐Experience(Education)

Chairman, Central
Member, Risk
None
Trading &Committee, China
Development Corp.
Airlines Ltd.
BA in Finance, Boston Group Chairman,
University, U.S.A.
Phu My Hung
Holdings Group
Chairman, Hiep
Phuoc Power Co.,
Ltd.
Chairman, Macro
Technologies Inc.
(Vietnam) Ltd.
Chairman, Phu My
Hung Asia Holdings
0 0.00%Corp.
Vice Chairman,
TVBS Media Inc.
Director, Phu My
Hung
Development
Corp.
Visiting Professor,
College ofManagement of
National Taiwan
Normal University

0 0.00%0 0.00%519,750,519%

Shareholding by
NomineeArrangement
Shares
%0 0.00%0 0.00%

‐

‐

‐

‐

‐

Member, Tax Reform Member, Risk
None
Commission,Committee, China
Executive Yuan
Airlines Ltd.
Member,Public Director,
Administration
Taipei Exchange,
Appeals Commission, R.O.C.
Taipei City
Independent
Government
Director, Nan Shan
Deputy Dean, College Life Insurance Co.,of Management,
Ltd.
0 0.00% National Taiwan
Director, iPASSUniversity
Corp.
Chairman,Professor,
Department and
Department &Graduate Institute of Graduate InstituteAccounting, National of Accounting,Taiwan University
National Taiwan
Ph.D. in Accounting, University
Arizona State
University, U.S.A.

TitleName

Nationality/ Country Genderof Origin

Representative:

Wang, Shih‐szu

R.O.C

Chung, 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
ElectedShareholding when
ElectedSharesFemale 06/27/2018 06/27/2018

Male

Term
(Years)

06/15/2012 06/27/2018

Female 06/27/2018 06/27/2018

Female 06/27/2018 06/27/2018

3

3

3

3

%

0

0

0

0

0.00%

0.00%

0.00%

0.00%

Current Shareholding
Shares

%0 0.00%0 0.00%0 0.00%0 0.00%Spouse & Minor
Shareholding
Shares

%0 0.00%0 0.00%0 0.00%0 0.00%Shareholding by
NomineeArrangement
Shares%Experience(Education)

Other Position

Deputy Mayor,
Director General,
Tainan City
Tourism Bureau of
Tainan City
Government
Government
Chairperson,
Research,
Development and
Evaluation
Commission of Tainan
City Government
Director General,
Ketagalan Foundation
Director General,
0 0.00% Information
Department ofKaohsiung City
Government
Director General,
Judicial Reform
Foundation
Director General,
Taiwan Associationfor Human Rights
Master, International
Development Policy,
Duke University

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

Chairman, China Steel Chairman, Risk
None
Chemical Corp.
Committee, China
Chairman, Universal Airlines Ltd.
eXchange Inc.
Member, Audit
Executive Vice
Committee, China
President, China Steel Airlines Ltd.
0 0.00% Corp.
Vice President of
Finance, China Steel
Corp.
MBA, Arizona State
University, U.S.A.

None

None

Consultant,Legislative Council
OfficeDirector, Shian CPA
Firm
Adjunct Asso.
Professor, Chinese
Culture University
Controller, Amagic
Holographics, Inc.
0 0.00% Senior Associated
CPA, Wu, Liang, and
Huang CPAs
Staff Accountant,
AAA (Auto Club of S.
California)
MBA, University ofCalifornia, Irvine,
U.S.A.

Chairman, Audit
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.

None

None

Independent Director Chairman,
Noneof First Financial
Remuneration
Holding Co., Ltd.
Committee, China
Independent Director Airlines Ltd.
of Taiwan Fertilizer
Member, Audit
Co., Ltd.
Committee, China
Committee ofAirlines Ltd.
Member, Risk
Securities andCommittee, China
Futures Investors
Airlines Ltd.
Protection Center
Consultant ofMaster of Laws,
National Chung Hsing Public Service
Pension Fund
University
Management
0 0.00%Board, Ministry of
Civil Service,
Examination Yuan
Lawyer of Lian
Yung Law Office
Independent
Director of
Formosa Advanced
Technologies Co.,Ltd.
Independent
Director of HuaNan Securities Co.,
Ltd.

None

None

Note 1: The average term of the members of the 21st Board of Directors as Directors of the Company was 5 years.
Note 2: The three Independent Directors of the 21st Board of Directors have not been appointed for more than 9 consecutive years.

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

Major Shareholders

China Aviation Development Foundation

Non‐corporate organization, not applicable

National Development Fund, Executive Yuan

Non‐corporate organization, not applicable

Professional qualifications and independence analysis of directors
Criteria

Name

Meets One of the Following Professional Qualification Requirements, Together
Independence Criteria (Note 1)with at Least Five Years Work Experience
An Instructor orHigher Position
in a Departmentof Commerce,
Number of Other Public
Law, Finance,
A Judge, Public Prosecutor, Attorney,
Companies in Which
Has Work Experience inAccounting, or Certified Public Accountant, or Other
the Individual is
the Areas of Commerce,
Other Academic Professional or Technical Specialist
Concurrently Serving as
Law, Finance, or
1 2 3 4 5 6 7 8 9 10
Department
Who has Passed a National
an Independent
Accounting, or Otherwise
Related to the
Examination and been Awarded a
Director
Necessary for theBusiness Needs Certificate in a Profession Necessary
Business of the Companyof the Company for the Business of the Company
in a Public or
Private JuniorCollege, College
or University

‐

‐



‐ ‐  ‐ ‐  ‐

0



‐



 ‐  ‐

0

‐

‐



 ‐0Chen, Han‐Ming

‐

‐



 ‐0

Ko, Sun‐ta

‐

‐



 ‐0

Wei, Yung‐yeh

‐





‐  ‐0

Hsieh, Su‐ChienCharles
C.Y.,Chen
Ting,
Kwang‐Hung

Lin, Su‐Ming







 ‐1

Wang, Shih‐szu

‐

‐



 ‐0Chung, Lo‐Min
Chang, Hsieh
Gen‐senShen, Hui‐Ya

‐

‐



 

0

‐





 1 
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 any of its affiliates. Not applicable in cases where the person is an independent
director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50%of the voting shares.
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 thepersons in the preceding three subparagraphs.
5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number ofoutstanding shares of the Company or who holds shares ranking in the top five holdings.
6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which hasa financial or business relationship with the Company.
7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership,company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any
affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who
exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration
Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx”.
8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
9. Not been a person of any conditions defined in Article 30 of the Company Act.
10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.

20 Corporate Governance Report3.2.2 Management TeamAPR 27, 2019
Title

President

Auditor General,
General Audit
OfficeDeputy Auditor
General, General
Audit OfficeSenior Vice
President(VF)

Senior Vice
President
(VV)

Name

Hsieh, Su‐Chien

Fang, Juo‐Ling

Ho, Hui‐Fen

Chang, Young

Wang,
Chen‐Min

Nationality/
Country Of Gender
OriginR.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Male

Date
Effective

Shares

06/24/2016

Female 01/01/2018

Female 02/01/2018

Male

Male

Shareholding

06/24/2016

01/01/2019％

48,517 0.00%

8,000 0.00%

0 0.00%0 0.00%35,621 0.00%

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％SharesExperience (Education)

Other Positions％

Managers Who Are
Spouses Or Within Two
Degrees Of Kinship
Title

Employee Stock
OptionCertifica
Name Relationtes

Chairman, Taiwan Air
Cargo Terminal Ltd.
General Manager,
Australia Branch
0 0.00%Senior Vice President Of
Marketing
Bachelor’s Degree fromSoochow University

Chairman & President,
China Airlines Ltd.
Chairman, Mandarin
Airlines, Ltd.
Director, CAL Hotel Co.,Ltd.
Director, CAL‐Asia
Investment Inc.
Director & President, CAL
Park Co., Ltd.
Director, Taoyuan
International Airport
Services Co., Ltd. Director,
CAL‐Dynasty International,
Inc.
Director, Dynasty
Properties Co., Ltd.

None

None

None

None

0 0.00%Vice President,
Administration Div.
Deputy Auditor General,
0 0.00% General Audit Office
Master’s Degree from
Georgia State University,
U.S.A.

Supervisor, Taiwan Airport
Service Co., Ltd.
Supervisor, China Pacific
Catering Services Ltd.
Supervisor, CAL Park Co.,
Ltd.
Supervisor, Taiwan Aircraft
Maintenance And
Engineering Co., Ltd.
Supervisor, CAL Hotel Co.,
Ltd.

None

None

None

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 fromSoochow University

None

None

None

None

0 0.00%Chairman, Kaohsiung
Airport Catering Services
Ltd.
Chairman, Taiwan Airport
Service Co., Ltd.
Chairman, Taiwan Airport Director, Taoyuan
Services Co., Ltd.
International Airport
Concurrently, President, Services Co., Ltd.
Director, Tigerair Taiwan
Taiwan Airport Services
Co., Ltd.
Co., Ltd.
0 0.00%President, Taoyuan
Director, Mandarin Airlines,
Ltd.
International Airport
Services Co., Ltd.
Director, Arport Air
Bachelor’s Degree from Fu Terminal (Xiamen) Co., Ltd.
Director, Arport Air Cargo
Jen University
Service (Xiamen) Co., Ltd.
Director, Taiwan Aircraft
Maintenance And
Engineering Co., Ltd.
Director, CAL Park Co., Ltd.

None

None

None

None

0 0.00%

Director, CAL Hotel Co.,Ltd.
Vice President, Passenger Director, Mandarin Airlines,
Sales Div. & Passenger
Ltd.
Marketing Div.
Director, Taiwan Air Cargo0 0.00% General Manager, Korea Terminal Ltd.
BranchDirector, Tigerair Taiwan
Bachelor’s Degree fromCo., Ltd.
Director, Taiwan Aircraft
Feng Chia University
Maintenance And
Engineering Co., Ltd.

None

None

None

None

0 0.00%

Corporate Governance Report21TitleSenior Vice
President(VO)

Senior Vice
President(VE)

Senior Vice
President(VW)

Data Protection
Officer, DPO
Team

Vice President,
Human
Resources Div.

Name

Kao,
Shing‐Hwang

Wang, Houng

Lo, Ya‐Mei

Wu, Hsiao‐Sui

Yeah,
Shao‐Ting

Nationality/
Country Of Gender
OriginR.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Male

Male

Date
Effective

Shares

06/01/2011

08/16/2017

Female 06/24/2016

Male

Male

Shareholding

07/21/2018

04/01/2019％

62,809 0.00%

12,069 0.00%

0 0.00%0 0.00%868 0.00%

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

Other Positions

％

Title

Employee Stock
OptionCertifica
Name Relationtes

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

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

None

None

None

None

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

Chairman, Taiwan Aircraft
Maintenance And
Engineering Co., Ltd.
Director, Mandarin Airlines,
Ltd.
Director, China Aircraft
Services Ltd.
Director, Taikoo (Xiamen)
Landing Gear Services Co.,Ltd.
Director, Haeco Composite
Structures (Jinjiang) Co.,Ltd.
Director, Taoyuan
International Airport
Services Co., Ltd.
Director, NORDAM Asia
Ltd.

None

None

None

None

0 0.00%General Manager, China
Pacific Catering Services
Ltd.
Confidential Consultant,
0 0.00%Executive Yuan
Master’s Degree from
National Taiwan
University

Director, CAL‐Asia
Investment Inc.
Concurrently, President,
CAL‐Asia Investment Inc.
Director, CAL Hotel Co.,Ltd.
Director, Mandarin Airlines,
Ltd.
Director, Taoyuan
International Airport
Services Co., Ltd.

None

None

None

None

52 0.00%

General Manager, Korea
BranchGeneral Manager,
0 0.00%
Honolulu Branch
Master’s Degree from
Cranfield University, UK

None

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 from
Chinese Culture University

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

None

0 0.00%Assistant Vice
President,
Human
Resources Div.

Lee, Pei‐Chen

R.O.C.

Female 04/01/2019

11,975 0.00% 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%22 Corporate Governance Report

SharesManagers Who Are
Spouses Or Within Two
Degrees Of Kinship

General Manager, Human
Resources Development
Dept., Human Resources
Div.
General Manager,
0 0.00%None
Administration Dept.,
Ground Services Div.
Master’s Degree from
National Taiwan Normal
University
Vice President, Corporate
Safety Office
Assistant Vice President,
0 0.00% Flight Operations Div.
None
Bachelor’s Degree from
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 from
Tunghai University

TitleAssistant Vice
President, Flight
Operations Div.

Vice President,
SystemOperation
Control Div.

Assistant 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.

Assistant Vice
President,
Finance Div.

Name

Chen,
Chwen‐Der

Chou,
Jyh‐ShyanJeng,
Jong‐Shinn

Huang,
Hsiang‐Piao

Peng, Pao Chu

Chen, Pei‐Ti

Chen, I‐Chieh

Yen, Yang

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

Date
Effective

Shares

08/01/2018

02/01/2017

08/01/2013

08/01/2017

Female 01/01/2019

Female 11/01/2018

Male

Shareholding

02/16/2017

Female 05/01/2018％

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％SharesExperience (Education)

Other Positions％

Managers Who Are
Spouses Or Within Two
Degrees Of Kinship
Title

Employee Stock
OptionCertifica
Name Relation
tes

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

None

None

None

None

9,171 0.00% 7,382 0.00%

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

None

None

None

None

None

1,494 0.00%

0 0.00%General Manager, Base
Maintenance Department,
Maintenance Div.
General Manager, LineNone
0 0.00%Operation Department,
Maintenance Div.
Associate’s Degree from
Lung Hwa College

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 from
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 from
National Taiwan
University

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

None

None

None

None

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

None

None

None

None

0 0.00%Supervisor, Dynasty
Aerotech International
Corp.
Supervisor, CAL Hotel Co.,
Vice President,
Ltd.
Investment Development
Supervisor, Mandarin& Management Div.
Airlines, Ltd.
General Manager,
Supervisor, Arport Air
0 0.00% Vietnam Branch
Terminal (Xiamen) Co., Ltd.
Concurrently, General
Supervisor, Arport Air
Manager, Hanoi Branch
Cargo Service (Xiamen) Co.,
Master’s Degree fromLtd.
National Taipei University
Supervisor, China Pacific
Laundry Services Ltd.
Supervisor, 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 from The
Ltd.
City University of New
York, U.S.A.

None

None

None

None

19,299 0.00%

1,000 0.00%

8,434 0.00%

0 0.00%6,161 0.00%

0 0.00%0 0.00%

Corporate Governance Report23TitleAssistant Vice
President,
Finance Div.

Vice President,
Corporate Safety
OfficeAssistant Vice
President,
Corporate Safety
OfficeVice President,
Legal & Insurance
Div.

Vice President,
Corporate
Communications
OfficeAssistant Vice
President
Corporate
Communications
OfficeName

Huang, Hui Na

Chen, I‐Ko

Yu, Yueh Han

Chien,
Feng‐Nien

Liu, Tsao‐Yang

Fang, Heng‐Ru

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

Chung,
Ming‐Jyh

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

SharesFemale 09/01/2017

Male

Male

Male

Male

Male

Male

Male

Shareholding

03/01/2016

12/06/2018

01/03/2017

11/05/2018

10/20/2018

04/16/2019

07/21/2018

24 Corporate Governance Report％

16,661 0.00%

23,541 0.00%

0 0.00%0 0.00%60,488 0.00%

1,656 0.00%

0 0.00%638 0.00%

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％SharesExperience (Education)

Other Positions％

Managers Who Are
Spouses Or Within Two
Degrees Of Kinship
Title

Employee Stock
OptionCertifica
Name Relation
tes

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

None

None

None

None

0 0.00%Assistant Vice President,
Corporate Safety OfficeVice President, Safety
Office, Mandarin Airlines,
0 0.00%
None
Ltd.
Associate’s Degree from
United College ofEngineering

None

None

None

None

0 0.00%General Manager, Safety
Department Corporate
Safety OfficeVice President Of Safety,
Security, Quality &0 0.00%
Environment, Tigerair
Taiwan Co., Ltd.
Master’s Degree from
National Sun Yat‐sen
University

None

None

None

None

None

0 0.00%

Director Of Legal Office,Taiwan Financial Asset
Service Corporation
Head Prosecutor,
0 0.00% Taichung Prosecutors
OfficeMaster’s Degree from
National Taiwan Ocean
University

None

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 from
Chinese Culture University

None

None

None

None

0 0.00%General Manager,
Anchorage Branch
Assistant Vice President,
0 0.00% Flight Operations Div.
Master’s Degree from
Washington State
University, U.S.A.

None

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 fromRMIT University, AU

None

None

None

None

None

0 0.00%

Deputy Auditor General,
General Audit Office
President Taiwan Airport
0 0.00% Services Co. Ltd.
Master’s Degree from
National Taiwan
University

Director, Dynasty Aerotech
International Corp.

None

None

None

None

TitleAssistant Vice
President,
Administration
Div.

Name

Chen, Jo‐Ching

Nationality/
Country Of Gender
OriginR.O.C.

Date
Effective

Shareholding
SharesFemale 10/01/2015％

0 0.00%Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％Shares

None

None

None

Director, Sabre Travel
Network (Taiwan) Ltd.

None

None

None

None

None

None

None

None

None

Director, China Pacific
Laundry Services Ltd.

None

None

None

None

None

None

None

None

None

Director, Tigerair Taiwan
Co., Ltd.
Director, Taiwan Airport
Service Co., Ltd.
Director, Global Sky
Express Ltd.
Director, Dynasty Hotel Of
Hawaii, Inc.
Director, Dynasty
Properties Co., Ltd.
Director, China Aircraft
Services Ltd.
Director, Taiwan Air Cargo
Terminal Ltd.

None

None

None

None

Supervisor, NORDAM Asia
Ltd.
Director, Kaohsiung Airport
Catering Services Ltd.

None

None

None

None

None

None

None

None

None

0 0.00%Chairman, China PacificMarketing Director,
Laundry Services Ltd.
Taiwan Region
Director, China Pacific
General Manager,
Catering Services Ltd.
0 0.00%Germany Branch
Director, Kaohsiung Airport
Master’s Degree from The Catering Services Ltd.
University of Queensland Director, Delica
International Co., Ltd.

None

None

None

None

0 0.00%General Manager,
Purchasing Department
Administration Div.
General Manager,
0 0.00% Personnel Administration None
Department, Human
Resources Div.
Associate’s Degree from
Ming Chuan College

None

None

None

None

Male

05/01/2015

24,917 0.00%

0 0.00%0Assistant Vice
President,
Liu, Duan‐Shiuh
Information
Management Div.

R.O.C.

Male

04/20/2017

92,608 0.00%

0 0.00%0Vice President,
Cabin Crew Div.

Hong,
Tsu‐Kuang

R.O.C.

Male

05/04/2017

11,816 0.00%

0 0.00%0Assistant Vice
President, Cabin
Crew Div.

Fang, Yuan‐Hua

R.O.C.

Male

08/04/2018

30,348 0.00%

0 0.00%0

R.O.C.

Male

01/21/2019

11,803 0.00%

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

R.O.C.

Female 02/02/2017

54,297 0.00%

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

R.O.C.

Female 12/01/2018

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

Assistant Vice
President,
In‐Flight Service
Supply Chain &Marketing Div.

Chiu,
Chang‐Hsin

Kao, Shu‐Chuan

R.O.C.

R.O.C.

Male

12/18/2017

Female 08/16/2016

3,049 0.00%

7,879 0.00%

Title

Employee Stock
OptionCertifica
Name Relation
tes

None

0 0.00%R.O.C.

Chang,
Cheng‐Hao

Other Positions

General Manager, Services
Items Planning
Department, In‐Flight
Service Supply Div.
None
0 0.00%
Mast Auditor, General
Audit Office
Master’s Degree from
University of Michigan

Vice President,
Information
Lu, Shih‐Ming
Management Div.

Vice President,
Corporate
Development
OfficeExperience (Education)％

Managers Who Are
Spouses Or Within Two
Degrees Of Kinship

Assistant Vice President,
Next Generation Travel
Experience Program,
Corporate Development
Office0.00%
Assistant Vice President,
Ground Services Div.
Master’s Degree from
National Chengchi
University
Assistant Vice President,
Ground Services Div.
General Manager,
Information Planning
0.00% Department, Information
Management Div.
Master’s Degree from
National Taipei Universityof Technology
Assistant Vice President,
Flight Operations Div.
General Manager, Food &Beverage Services
0.00%
Department, In‐Flight
Service Supply Div.
Bachelor’s Degree fromSoochow University
President, Dynasty Hotel
Of Hawaii, Inc
General Manager,
0.00%
Qingdao Office
Master’s Degree fromRMIT University, AU

Vice President, Cargo
Sales & Marketing
Cargo Sales, Marketing &Services Div.
0 0.00%President, Taiwan Air
Cargo Terminal Ltd.
Master’s Degree from
Cranfield University, UK

General Manager, Austria
BranchAssistant Vice President,
0 0.00% Finance Div.
Master’s Degree from
George Washington
University, U.S.A.
Special Assistant of
President Office,Mandarin Airlines
0 0.00%Bachelor’s Degree from
National Taiwan
University

Corporate Governance Report25TitleName

Nationality/
Country Of Gender
OriginDate
Effective

Shareholding
Shares％Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％SharesAssistant Vice
President,
In‐Flight Service
Supply Chain &Marketing Div.

Yu, Yau

R.O.C.

Female 11/01/2018

34,154 0.00%

0 0.00%0Vice President,
Ground Services
Div.

Chen, Wei‐Tau

R.O.C.

Male

11/07/2018

36,165 0.00% 2,196 0.00%

0Assistant Vice
President,
Ground ServicesDiv.

Hsiao, Kuo Chih

R.O.C.

Male

04/20/2017

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

Liu, Der‐Chuan

R.O.C.

Male

10/01/2016

172 0.00%

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

Sheu, Yuh‐Shy

R.O.C.

Male

10/01/2016

328 0.00%

0 0.00%0Assistant 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%

0Vice President,
Maintenance Div.

Sun, Jia‐Min

R.O.C.

Male

09/16/2017

62,602 0.00%

0 0.00%0Assistant Vice
President,
Maintenance Div.

Hsiao, Jui‐Fu

R.O.C.

Male

09/16/2017

0 0.00%0 0.00%0Vice President
Quality,
Assurance Div.

Li, Chih‐Wei

R.O.C.

Male

09/16/2017

10,295 0.00%

0 0.00%0Vice President,
Engineering Div.

Lee, Jung‐Hui

R.O.C.

Male

09/16/2017

10,298 0.00%

0 0.00%0

26 Corporate Governance Report

Experience (Education)

Other Positions％
Assistant Vice President
Corporate
Communications Office
General Manager,
Corporate Affairs
0.00%
None
Department, Corporate
Communications Office
Master’s Degree from
National Sun Yat‐Sen
University
General Manager,
Hiroshima BranchPresident, Taiwan Airport Director, China Pacific
0.00%
Laundry Services Ltd.
Services Co. Ltd.
Bachelor’s Degree from Fu
Jen Catholic University
Assistant Vice President,
Information Management
Div.
General Manager,
None
0.00%
Sapporo Branch
Bachelor’s Degree from
National Cheng Kung
University
Director, Taiwan Air Cargo
Terminal Ltd.
Vice President, Cargo
Director, Dynasty Aerotech
Sales & Marketing Div.
International Corp.
Vice President, Cargo
Director, Global Sky
0.00%
Services & Logistics Div.
Express Ltd.
Bachelor’s Degree from Fu
Director, Eastern United
Jen University
International Logistics(Holdings) Ltd.
General Manager, Cargo
Sales & Services, Mainland
China
General Manager, Cargo
None
0.00% Sales Management
Department, Cargo Sales,
Marketing & Services Div.
Bachelor’s Degree fromFeng Chia University
General Manager, Cargo
Sales Management
Department, Cargo Sales,
Marketing & Services Div.
General Manager, Cargo
Revenue & Route
None
0.00%
Management
Department, Cargo Sales,
Marketing & Services Div.
Master’s Degree from
National Taipei Universityof Technology
Vice President,
Engineering Div.
Director, Dynasty Aerotech
Vice President, Corporate
International Corp.
Safety OfficeDirector, Taiwan Aircraft
0.00%
Master’s Degree from
Maintenance And
National Taiwan
Engineering Co., Ltd.
University of Science And
Technology
General Manager, Line
Maintenance Department,
Maintenance Div.
General Manager, Line
None
0.00%
Operation Department,
Maintenance Div.
Master’s Degree from
Kainan University
Assistant Vice President,
Maintenance Div.
General Manager, LineNone
0.00% Operation Department,
Maintenance Div.
Master’s Degree from
Kainan University
Vice President Quality,
Assurance Div.
Director, Taiwan Aircraft
Assistant Vice President,
Maintenance And
0.00%
Maintenance Div.
Engineering Co., Ltd.
Master’s Degree from
Tatung University

Managers Who Are
Spouses Or Within Two
Degrees Of Kinship
Title

Employee Stock
OptionCertifica
Name Relation
tes

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

None

None

None

TitleVice President,
TaiwanVice President,
The Americas

Vice President,
Japan

Vice President,
EuropeVice President,
Mainland China

Vice President,
Oceania

Name

Tong,
Huai‐Ming

Lee,
Hsien‐Kuang

Chang,
Ming‐Way

Han, Liang
Chung

Chang,
Chih‐Chieh

Chen,
Chung‐Ming

Nationality/
Country Of Gender
OriginR.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

R.O.C.

Date
Effective

SharesFemale 08/16/2016

Male

Male

Male

Male

Male

Shareholding

12/16/2014

10/02/2017

06/12/2017

10/08/2018

05/10/2017％

Spouse &Shareholding
Minor
by Nominee
Shareholding Arrangement
Shares％SharesExperience (Education)

Other Positions％

Managers Who Are
Spouses Or Within Two
Degrees Of Kinship
Title

Employee Stock
OptionCertifica
Name Relation
tes

50,878 0.00% 15,946 0.00%

Vice President, Cabin
Crew Div.
General Manager,
0 0.00%Kaohsiung Branch
Graduated from Taipei
First Girls High School

Director, Sabre Travel
Network (Taiwan) Ltd.
Director, Yestrip Co., Ltd.

None

None

None

None

25,000 0.00%

0 0.00%Vice President, Europe
Concurrently, General
Manager, Netherland
Branch0 0.00% Assistant Vice President,
Passenger Sales Div.
Bachelor’s Degree from
National Taiwan Ocean
College

Chairman, Dynasty Hotel Of
Hawaii, Inc.
Chairman, Dynasty
Properties Co., Ltd.
Concurrently, President,
Dynasty Properties Co., Ltd.
Director, CAL‐Dynasty
International, Inc.
Concurrently, President,
CAL‐Dynasty International,
Inc.

None

None

None

None

0 0.00%Vice President, Corporate
Development OfficeVice President, Ground
Director, Dynasty Holidays,
0 0.00%Services Div.
Inc.
Bachelor’s Degree from Fu
Jen University

None

None

None

None

0 0.00%Senior Vice President
President, Mandarin
Airlines Co., Ltd.
0 0.00%None
Master’s Degree, Businessof Administration,
University of Pittsburgh

None

None

None

None

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

None

None

None

None

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

None

None

None

None

30,512 0.00%

11,498 0.00%

96,553 0.00%

32,779 0.00%

Note: 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.

Corporate Governance Report27

3.2.3 Remuneration of Directors, President, and Vice President
Remuneration of Directors
Remuneration

Title

Name
(Note 1)ChairmanHo, Nuan‐Hsuan

Director

Hsieh, Su‐Chien

Director

Charles C.Y., Chen

Director

Ting, Kwang‐Hung

Director

Chen, Han‐Ming

Director

Ko, Sun‐Ta

DirectorWei, Yung‐Yeh

Director

Lin, Su‐Ming

Director

Wang, Shih‐Szu

DirectorJong, Jia‐Shi

Director

Lee, Kuo‐Fu

Director

Cheng, Chuan‐Yi

Director

Huang, Hsiu‐Gu

Independent
Director

Chung, Lo‐Min

Independent
Director

Chang, Hsieh
Gen‐SenIndependent
Director

Shen, Hui‐Ya

Independent
Director

Luo, Hsiao‐Hsien

Independent
Director

Ting, Tin‐Yu

Base Compensation (A)(Note 2)

Severance Pay (B)Bonus to Directors (C)(Note 3)

Allowances (D)(Note 4)

CAL

Consolidated
Subsidiaries
of CAL(Note 7)

CAL

Consolidated
Subsidiaries of
CAL(Note 7)

CAL

Consolidated
Subsidiaries of
CAL(Note 7)

CAL

Consolidated
Subsidiaries
of CAL(Note 7)

6,432

6,432

0

0

0

0

5,757

7,375

Ratio of Total
Remuneration(A+B+C+D) to Net
Income (%) (Note 10)
Consolidated
Subsidiaries
CAL
of CAL(Note 7)

0.68%

0.77%

*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 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), Chunghwa Telecom Co., Ltd. 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; Chunghwa Telecom Co., Ltd., juridical person director, and Mr. Huang,
Hsiu‐Gu, its representative, resigned as Director on January 19, 2018; Mr. Cheng, Chuan‐Yi resigned as Director on May 7, 2018; Terms of Directors of
Mr. Jong, Jia‐shi, Mr. Lee, Kuo‐Fu, Mr. Luo, Hsiao‐Hsi and Mr. Ting, Tin‐Yu expired on June 27, 2018.
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 Association, 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$1,000,000.
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$693,000. 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.

28 Corporate Governance ReportUnit: NT$ thousands

Dec 31,2018

Relevant Remuneration Received by Directors Who are Also Employees
Salary, Bonuses, and Allowances(E)(Note 5)
Consolidated
Subsidiaries
of CAL(Note 7)

CAL

8,997

9,986

Consolidated
Subsidiaries
of CAL(Note 7)

CAL

0

Ratio of Total Compensation(A+B+C+D+E+F+G) to Net Income Compensation Paid to(%) (Note 10)
Directors from an
Invested Company
Consolidated
Other than theConsolidated
Subsidiaries of CAL
Subsidiaries of Company’s Subsidiary(Note 7)
CAL
(Note 11)
CAL
(Note 7)
Cash
Stock

Employees’ Compensation (G)(Note 6)

Severance Pay (F)

CAL
Cash

Stock

0

0

0

0

0

1.18%

1.33%

0

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. On March 20, 2019, the Company’s Board of Directors approved the 2018 Employee Compensation
Proposal.
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 2018 individual financial statement net income (after tax) totaled
NT$1,790,361,000.
Note 11:(1) Compensation paid to directors from an invested company other than a Company subsidiary.
(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 Director Hsieh, Su‐Chien, all other directors received a travel allowance.
(2) Transportation subsidies for Director Lee, Kuo‐ Fu, Director Ting, Kwang‐Hu, and Director Wei, Yung‐Yeh were partially or fully donated to the China
Airlines Employee Union.
(3) Directors who also serve as employees of the Company are Director Hsieh, Su‐Chien; Director Wei, Yung‐Yeh; Director Jong, Jia‐shi; and Director Lee,Kuo‐ Fu.

Corporate Governance Report29Director Remuneration by Compensation Level
Total of (A+B+C+D)
Range of Remuneration

Under NT$2,000,000

NT$2,000,001‐
NT$5,000,000
NT$5,000,001‐
NT$10,000,000
Total

CAL
(Note 8)

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

Consolidated Subsidiaries of
CAL(Note 9) H

CAL
(Note 8)

Consolidated Subsidiaries of
CAL(Note 9) I

Hsieh, Su‐Chien; Charles
Charles C.Y., Chen; Ting,
Hsieh, Su‐Chien; Charles
Charles C.Y., Chen; Ting,
C.Y., Chen; Ting, Kwang‐Hu; C.Y., Chen; Ting, Kwang‐Hu;
Kwang‐Hu; Chen,
Kwang‐Hu; Chen, Han‐Ming;
Chen, Han‐Ming; Ko,
Han‐Ming; Ko, Sun‐Ta;
Chen, Han‐Ming; Ko,
Ko, Sun‐Ta; Wei, Yung‐Yeh;
Sun‐Ta; Wei, Yung‐Yeh; Lin, Sun‐Ta; Wei, Yung‐Yeh; Lin,
Wei, Yung‐Yeh; Lin,
Lin, Su‐Ming; Wang,
Su‐Ming; Wang, Shih‐Szu;
Su‐Ming; Wang, Shih‐Szu; Su‐Ming; Wang, Shih‐Szu;
Shih‐Szu; Jong, Jia‐shi;Jong, Jia‐shi; Lee, Kuo‐Fu; Jong, Jia‐shi; Lee, Kuo‐Fu;
Jong, Jia‐shi; Cheng,
Cheng, Chuan‐Yi; Huang,
Cheng, Chuan‐Yi; Huang,
Chuan‐Yi; Huang, Hsiu‐Gu;
Cheng, Chuan‐Yi; Huang,
Hsiu‐Gu; Chung, Lo‐Min;
Chung, Lo‐Min; Chang,Hsiu‐Gu; Chung, Lo‐Min;
Hsiu‐Gu; Chung, Lo‐Min;
Chang, Hsieh Gen‐Sen;
Chang, Hsieh Gen‐Sen;
Hsieh Gen‐Sen; Shen,
Chang, Hsieh Gen‐Sen;
Shen, Hui‐Ya; Luo,
Shen, Hui‐Ya; Luo,
Hui‐Ya; Luo, Hsiao‐Hsi;
Shen, Hui‐Ya; Luo,
Hsiao‐Hsi; Ting, Tin‐Yu
Ting, Tin‐Yu
Hsiao‐Hsi; Ting, Tin‐Yu
Hsiao‐Hsi; Ting, Tin‐Yu‐‐

Lee, Kuo‐Fu

Lee, Kuo‐Fu

Ho, Nuan‐Hsuan

Ho, Nuan‐Hsuan

Ho, Nuan‐Hsuan; Hsieh,
Su‐Chien

Ho, Nuan‐Hsuan; Hsieh,
Su‐Chien

18

18

18

18

30 Corporate Governance ReportPresident and Senior Vice President Remuneration
Salary (A)(Note 2)Name
(Note 1)

Title

CAL

Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President
Senior Vice
President(Note 3)

Consolidated

Consolidated

Consolidated

Subsidiaries of

Subsidiaries of

Subsidiaries of

CAL

CAL

CAL

(Note 5)President

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

Hsieh, Su‐Chien
Lo, Ya‐Mei
Kao, Shing‐Hwang
Chang, Chih‐Chieh(Note 10)

18,997

18,997

0

0

9,284

13,553

Wang, Houng
Chang, Young

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

Under NT$2,000,000
NT$2,000,001 ‐ NT$5,000,000
NT$5,000,001 ‐ NT$10,000,000
Total

Name of President and Senior Vice President
CAL (Note 6)
Consolidated Subsidiaries of CAL (Note 7)E‐‐Lo, Ya‐Mei; Chang, Chih‐Chieh;

Lo, Ya‐Mei; Chang, Chih‐Chieh;Wang, Houng; Chang, Young

Wang, Houng

Hsieh, Su‐Chien; Kao, Shing‐Hwang
6

Hsieh, Su‐Chien; Kao, Shing‐Hwang;
Chang, Young
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 salary, 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$4,646,000. 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. On March 20, 2019, the Company’s Board of
Directors approved the 2018 Employee Compensation Proposal.
* The content is provided for information disclosure, not tax purposes.

Corporate Governance Report31Unit: NT$ thousands December 31, 2018
Ratio of total compensation(A+B+C+D) to net income (%)(Note 8)

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

CAL
Cash

Stock

57

0

57

CAL

0

Consolidated
Subsidiaries of
CAL (Note 5)

1.58%

Compensation paid to the Presidents andSenior Vice Presidents from an Invested
Company Other Than the Company’s Subsidiary(Note 9)1.82%0Note 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 andsenior 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 2018 individual financial statement
net income (after tax) totaled NT$1,790,361,000.
Note 9: This column represents compensation paid to presidents and senior vice presidents from an invested company other than a Company
subsidiary.
Note 10: Mr. Chang, Chih‐Chieh was dismissed from the position of Senior Vice President on October 8, 2018.

32 Corporate Governance ReportEmployees’ Compensation of the Management Team
Unit: NT$ thousands
Title

Name

President
Hsieh, Su‐Chien
Senior Vice
Lo, Ya‐Mei
President
Senior Vice
Kao, Shing‐Hwang
President
Senior Vice
Wang, Houng
President
Senior Vice
Chang, Young
President
AuditorFang, Juo‐Ling
GeneralData
Wu, Hsiao‐Sui
Protection(Assumed Post on 07/21/2018)
Officer
Vice
Chien, Feng‐Nien
President
Vice
Chen, I‐Ko
President
ViceLai, Ming‐Hui
President
Vice
Wang, Chen‐Min
President
Vice
Liu, Der‐Chuan
President
Vice
Liu, Tsao‐Yang
President
Vice
Chen, Kang‐Reuy
President
Vice
Chung, Ming‐Jyh
President
Vice
Chen, I‐Chieh
President
ViceHong, Tsu‐Kuang
President
Vice
Chiu, Chang‐Hsin
President
Vice
Chou, Jyh‐Shyan
President
Vice
Chen, Wei‐Tau
President(Assumed Post on 11/07/2018)
Vice
Peng, Pao Chu
President
Vice
Lu, Shih‐Ming
President
ViceSun, Jia‐Min
President
Vice
Lee, Jung‐Hui
President
Vice
Li, Chih‐Wei
President
DeputyAuditorHo, Hui‐Fen
GeneralAssistant Vice Yu, Yueh Han
President(Assumed Post on 12/06/2018)
Assistant Vice Chen, Chwen‐Der
President(Assumed Post on 08/01/2018)
Assistant Vice Tung, Hsing‐Hua
President(Assumed Post on 03/16/2018)
Assistant Vice
Huang, Hsiang‐Piao
President
Assistant Vice
Jeng, Jong‐Shinn
President
Assistant Vice Chen, Pei‐Ti
President(Assumed Post on 05/16/2018)
Assistant Vice
Ouyang, John
President
Assistant Vice Wei, Shi Jong
President(Assumed Post on 03/31/2018)

Employees’
Employees’
Compensation in
Compensation in Cash
Stocks

0

477

Total

477

Dec 31, 2018

Ratio of Total Amount to Net
Income (%)

0.92%

Corporate Governance Report33TitleName

Employees’
Employees’
Compensation in
Compensation in Cash
Stocks

Total

Ratio of Total Amount to Net
Income (%)

Assistant Vice Shann, Da‐Sin
President(Assumed Post on 01/01/2018)
Assistant Vice Fang, Cheng‐Ru
President(Assumed Post on 10/20/2018)
Assistant Vice
Yeah, Shao‐Ting
President
Assistant Vice
Chen, Jo‐Ching
President
Assistant Vice Yen, Yang
President(Assumed Post on 05/01/2018)
Assistant Vice
Huang, Hui Na
President
Assistant Vice Fang, Yuan‐Hua
President(Assumed Post on 08/04/2018)
Assistant Vice
Kao, Shu‐Chuan
President
Assistant Vice
Yu, YauPresident
Assistant Vice
Hsiao, Kuo Chih
President
Assistant Vice
Hung, I‐Lan
President
Assistant Vice
Wang, Wei
President
Assistant Vice Liu, Shou‐Shu
President(Assumed Post on 12/01/2018)
Assistant Vice
Liu, Duan‐Shiuh
President
Assistant Vice
Hsiao, Jui‐Fu
President
Vice
Ku, Yueh‐Han
President(Dismissed on 01/01/2018)
Assistant Vice Chu, Te‐Hsiu
President(Dismissed on 01/08/2018)
Assistant Vice Lin, Ming‐Hsiu
President(Dismissed on 01/11/2018)
Assistant Vice Liao, Wei‐ChihPresident(Dismissed on 03/01/2018)
Assistant Vice Lin, Hsiao‐Feng
President(Dismissed on 03/26/2018)
Auditor
Chung, Chuar‐Duan
General(Dismissed on 04/30/2018)
Assistant Vice Hsueh, Po‐Wen
President(Dismissed on 07/01/2018)
Assistant Vice Lu, Shwu‐Huoy
President(Dismissed on 07/17/2018)
Assistant Vice Pan, Wen‐Tsung
President(Dismissed on 07/30/2018)
Assistant Vice Lai, Hsiang‐Kuang
President(Dismissed on 09/25/2018)
Senior Vice
Chang, Chih‐Chieh
President(Dismissed on 10/08/2018)
Vice
Peng, Long‐Min
President(Dismissed on 11/05/2018)
Assistant Vice Tsai, Chih Hung
President(Dismissed on 12/06/2018)
Note 1: Individual names and titles are disclosed, but the distributed compensation is disclosed as a grand total.
Note 2: On March 20, 2019, the Company’s Board of Directors approved the 2018 Employee Compensation Proposal.
Note 3: The management team includes:(1) Presidents and their equivalent(2) Vice presidents and their equivalent(3) Assistant vice presidents and their equivalent(4) Chief financial officers(5) Chief accounting officers(6) Other persons authorized to manage affairs and sign documents on behalf of the Company

34 Corporate Governance Report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.
CAL

2017
Consolidated Subsidiaries of CAL

CAL

2018
Consolidated Subsidiaries of CAL

Directors

1.11%

1.21%

1.18%

1.33%

Presidents and SeniorVice Presidents

1.38%

1.54%

1.58%

1.82%

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 Association, the Board of Directors is authorized to set the chairman’s
remuneration in accordance with the Company’s policies regarding manager compensation andbased on the extent of his or her participation in Company operations. The travel allowances andremuneration of other directors are determined the Board in reference to the compensation 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 basedon Company employee salary related regulations. Bonuses and employee compensation arecalculated based on the Company’s overall operating performance and the employee’s individual
performance achievement rate.

C. Procedure for estabishing 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.

Corporate Governance Report35

3.3 Implementation of Corporate Governance3.3.1 Board of Directors:
From January 1, 2018, through April 27, 2019, a total of thirteen meetings of the Board of Directors were held.
Average attendance rate was 92%. Director attendance is detailed below:
Title

Name
(Note 1)

Attendance in
PersonBy ProxyAttendance Rate (%)(Note 2)ChairmanHo, Nuan‐Hsuan

12

0

100%

Chairman

Hsieh, Su‐Chien

13

0

100%

Director

Charles C.Y., Chen

12

1

92%

Director

Ting, Kwang‐Hung

8

5

62%

Director

Chen, Han‐Ming

13

0

100%

Director

Ko, Sun‐Ta

10

0

100%

DirectorWei, Yung‐Yeh

9

1

90%

Director

Lin, Su‐Ming

12

1

92%

Director

Wang, Shih‐Szu

6

4

60%

Director

Lee, Kuo‐ Fu

3

0

100%

Director

Cheng, Chuan‐Yi

2

0

100%

DirectorJong, Jia‐shi

3

0

100%

Director

Huang, Hsiu‐Gu

0

0

‐

Independent Director

Chung, Lo‐Min

13

0

100%

Independent Director

Chang, Hsieh Gen‐Sen

10

0

100%

Independent Director

Shen, Hui‐Ya

9

1

90%

Independent Director

Luo, Hsiao‐Hsien

3

0

100%

Independent Director

Ting, Tin‐Yu

3

0

100%

36 Corporate Governance Report

Juridical Person Shareholder
Represented

Remarks

Reappointed as juridical person
China Aviation Development director representative on June27, 2018; Dismissed on April 2,
Foundation
2019.
Reappointed as juridical person
China Aviation Development director representative on June27, 2018; elected as Chairman
Foundation
on April 2, 2019.
Reappointed as juridical person
China Aviation Development
director representative on June
Foundation27, 2018.
Reappointed as juridical person
China Aviation Development
director representative on June
Foundation27, 2018.
Reappointed as juridical person
China Aviation Development
director representative on June
Foundation27, 2018.
Newly appointed as juridical
China Aviation Development
person director representative
Foundation
on June 27, 2018.
Newly appointed as juridical
China Aviation Development
person director representative
Foundation
on June 27, 2018.
Reappointed as juridical person
National Development Fund
director representative on June
(Executive Yuan)
27, 2018.
Newly appointed as juridical
National Development Fundperson director representative(Executive Yuan)
on June 27, 2018.
Newly appointed as juridical
China Aviation Development person director representativeon July 13, 2015; Dismissed on
Foundation
June 27, 2018.
Newly appointed as juridical
China Aviation Development person director representativeon July 26, 2016; resigned on
Foundation
May 7, 2018.
Newly appointed as juridical
China Aviation Development person director representativeon August 9, 2016; dismissed
Foundation
on June 27, 2018.
Reappointed as juridical person
director representative on June
Chunghwa Telecom Co., Ltd.
26, 2015; resigned on January
19, 2018.
Reappointed as Independent‐
Director on June 27, 2018.
Newly appointed as‐
Independent Director on June27, 2018.
Newly appointed as‐
Independent Director on June27, 2018.
Reappointed as Independent‐
Director on June 26, 2015;
Dismissed on June 27, 2018.
Newly appointed as
Independent Director on June‐
26, 2015; Dismissed on June27, 2018.

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.
Whether Independent Director
Meeting Dates
Agenda content
Had a Dissenting Opinion or Qualified
OpinionJanuary 24, 2018: 14th meeting of the 20th Board of“Kaohsiung Airport Catering Services Ltd.” share
Directors
acquisition proposal
General Audit Office, General Auditor, retirement due toMarch 22, 2018: 15th meeting of the 20th Board ofage
Directors

2018 CPA Appointment and Remuneration

May 10, 2018: 16th meeting of the 20th Board of
Directors

June 27, 2018: 1st meeting of the 21st Board of Directors
July 11, 2018: 1st temporary meeting of the 21st Boardof Directors
August 9, 2018: 2nd meeting of the 21st Board of
Directors
Novenber 8, 2018: 3rd meeting of the 21st Board of
Directors
January 21, 2019: 4th meeting of the 21st Board of
Directors
March 20, 2019: 5th meeting of the 21st Board of
Directors

Review of Qualifications of the 21st Director Nominees
Lifting of Non‐compete Restriction on the 21st
Directors‐electPosition Change of Auditor General in the General Audit
OfficeElection of the Chairman of the 21st Board of Directors
Appointment of President
Appointment of Risk Management Committee Membersof the 21st Board of Directors
Appointment of Remuneration Committee Members ofthe 21st Board of Directors
Issuance of Domestic Unsecured Ordinary Corporate
Bonds
Share Buy‐back of the Company
Revision of “Operational Procedures for Loaning Funds toOthers”
Lifting of Non‐compete Restriction on Holding Concurrent
Posts for Wang, Chen‐Min, Senior Vice President
2019 CPA Appointment and Remuneration
Revision of “Procedures for the Acquisition or Disposal of
Assets”
Revision of “Procedures Governing Derivatives Trading”

Unanimously passed by all independent
Directors

April 2, 2019: 5th temporary meeting of the 21st Board
Election of new Chairmanof Directors(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
Chairman and Managers' 2017
Other than Chairman Ho, Nuan‐Hsuan and Director Hsieh,
Chairman Ho,
January 24, 2018: 14th meeting
Year‐end Bonus, 2018 Lunar
Personal interest in
Su‐Chien, who were recused as provided by law and did not
Nuan‐Hsuan; Directorof the 20th Board of Directors
New Year Incentive and 2018
participate in discussions or voting, passed unanimously by
this matter
Hsieh, Su‐Chien
Salary Adjustment
all 11 directors in attendance.
The Directors recused due to interests involved left themeeting in turn and did not participate in the discussion
Chairman Ho,and voting of the related matters. The review was
Nuan‐Hsuan; Director
conducted by the remaining attending Directors. Except for
Hsieh, Su‐Chien;
Review of Qualifications of the
Mr. Liu, Hui‐Tsung, who did not provide relevant evidencing
Personal interest in
Director Chen,
21st Director Nominees
documents required by Article 192‐1, Paragraph 4 of thethis matter
Han‐Ming; Director
Company Act and was not included in the candidates ofCharles C.Y. ,Chen;
Directors according to the law, the remaining 12 nominees
Director Lin, Su‐Ming
have been approved to be listed in the roster of candidates
May 10, 2018: 16th meeting offor the 21st Board of Directors.
the 20th Board of Directors
Chairman Ho,
Nuan‐Hsuan; Director
Other than the three Independent Directors Chung, Lo‐Min,
Hsieh, Su‐Chien;
Luo, Hsiao‐Hsien and Ting, Tin‐Yu, the remaining attending
Lifting of Non‐compete
Director Charles
Directors recused themselves due to interests involved. The
Personal interest in
Restriction on the 21st
C.Y. ,Chen; Director
Independent Director Chung, Lo‐Min proceeded with thethis matter
Directors‐electChen, Han‐Ming;
discussion and voting on behalf of the Chairman, and the
Director Lee, Kuo‐ Fu;
matter has been approved after the review.
Director Jong, Jia‐Shi;
Director Lin, Su‐Ming
Except for Director Hsieh, Su‐Chien, who recused according
June 27, 2018: 1st meeting of
Director Hsieh,
Personal interest into the law and did not participate in discussion or voting,Appointment of President
the 21st Board of Directors
Su‐Chien
this matterthe remaining 11 attending Directors approved tore‐appoint Mr. Hsieh, Su‐Chien as President.
Chairman Ho, Nuan‐Hsuan and Director Hsieh, Su‐Chien2017 Employee Compensation
Chairman Ho,recused due to interests involved and did not participate in
Personal interest in(Bonus) of the Chairman and
Nuan‐Hsuan; Director
discussion or voting; the meeting was chaired byAugust 9, 2018: 2nd meeting of
this matter
Independent Director Shen, Hui‐Ya, and the remaining 10
Managers
Hsieh, Su‐Chienthe 21st Board of Directors
attending Directors approved the matter.

Corporate Governance Report37

Traveling Expense Standards
for Military, Civil or Teaching
Personnel Serving as Part‐timeDirectors of the Company

Except for Director Wang, Shih‐Szu, who recused according
to the law due to interests involved and did not participate
in discussion or voting, the remaining 11 attending
Directors approved the matter.
Chairman Ho, Nuan‐Hsuan and Director Hsieh, Su‐Chien
Chairman and Managers' 2018
Chairman Ho,
January 21, 2019: 4th meeting of
Personal interest inrecused due to interests involved; the meeting was chaired
Year‐end Bonus and 2019
Nuan‐Hsuan; Director
the 21st Board of Directors
this matterby Independent Director Chung, Lo‐Min and the remaining
Lunar New Year Incentive
Hsieh, Su‐Chien
10 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.
(2) 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”.
Director Wang,
Shih‐Szu

Personal interest in
this matter

4. Independent director attendance record for 2018 through April 27, 2019:
Dates
01/24
03/22
05/10
06/27
07/11
08/09
08/23
10/03
11/08
12/21
01/21
03/20
04/02
Name
/2018
/2018
/2018
/2018
/2018
/2018
/2018
/2018
/2018
/2018
/2019
/2019
/2019
Chung,













Lo‐MinChang,
‐
‐
‐










Hsieh
Gen‐Sen
Shen,
‐
‐
‐









○
Hui‐Ya
Luo,



‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Hsiao‐Hsien
Ting, Tin‐Yu



‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Note: Indicates a endance 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.

38 Corporate Governance Report3.3.2 Audit Committee:
The Audit Committee convened eight meetings from January 1, 2018 through April 27, 2019. Committee member
attendance is detailed below:
Title

Name

Attendancein Person

By ProxyAttendance Rate (%)

Independent Director(Chairman)

Chang, Hsieh
Gen‐Sen

6

0

100%

Independent Director

Chung, Lo‐Min

9

0

100%

Independent Director

Shen, Hui‐Ya

6

0

100%

Independent Director

Luo, Hsiao‐Hsien

3

0

100%

Independent Director

Ting, Tin‐Yu

3

0

100%

Remarks

Newly appointed as Independent Director
on June 27, 2018.
Appointed as Independent Director onJune 26, 2015, and reappointed on June27, 2018.
Newly appointed as Independent Director
on June 27, 2018.
Appointed as Independent Director onJune 26, 2015, and Dismissed on June 27,
2018.
Appointed as Independent Director onJune 26, 2015, and Dismissed on June 27,
2018.

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 (annual and semi‐annual financial reports), the appointment (dismissal) of a CPA and its
independence and performance, the auditing of Company's internal control system, the compliance with related laws, regulations and rules of theCompany (such as: internal control system, acquisition or disposal of assets, derivative commodity transactions, loaning funds to others, providing
endorsements or guarantees for others), and other matters included in its statutory functions (appointment and dismissal of financial supervisors orinternal chief 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
Meeting Dates
Agenda content
and company's
Directors decision
handling of the Board's
opinionApproved by all
attending Directors inJanuary 24, 2018
Acquisition of Shares in “Kaohsiung Airport
the 14th meeting of
4th Extraordinary Meeting of the Audit
Catering Services Ltd.”the 20th Board ofCommittee of the 20th Board of Directors
Directors on January
24, 2018.
2017 Financial Report and Consolidated
Financial Report
Approved by all
2018 CPA Appointment and Remuneration
attending Directors in2017 Surplus Earnings Distribution
March 22, 2018the 15th meeting ofProvision of Financing Endorsement and11th Meeting of the Audit Committee ofthe 20th Board of
Guarantee to Taiwan Aircraft Maintenancethe 20th Board of Directors
Directors on March 22,
and Engineering Co., Ltd. with a limit of 2
2018.
billion NT$
2017 Internal Control System Effectiveness
Audit and Statement
Approved by all
attending Directors in
Passed to the Board of
May 10, 2018
Position Change of Auditor General in thethe 16th meeting of
Directors upon
12th Meeting of the Audit Committee ofGeneral Audit Officethe 20th Board ofunanimous approval by
the 20th Board of Directors
Directors on May 10,
all members in2018.
attendance.
Approved by all
August 9, 2018attending Directors in
Q2 2018 (Including First Half of the Year)
1st Meeting of the Audit Committee ofthe 2nd meeting of theConsolidated Financial Reportthe 21st Board of Directors
21st Board of Directors
on August 9, 2018.
Approved by all
November 8, 2018
Amendment of “Operational Procedures
attending Directors in
2nd Meeting of the Audit Committee offor Loaning Funds to Others”
the 3rd meeting of thethe 21st Board of Directors
Change of CPA by Deloitte & Touche
21st Board of Directors
on November 8, 2018.
Approved by all
January 21, 2019attending Directors in
3rd Extraordinary Meeting of the Audit
Listing Application Plan of Tigerair Taiwan
the 4th meeting of theCommittee of the 21st Board of Directors
21st Board of Directors
on January 21, 2019.
March 20, 20192018 Financial Report and Consolidated
Approved by all
3rd Meeting of the Audit Committee of
Financial Reportattending Directors in

Corporate Governance Report

39the 21st Board of Directors

2018 Surplus Earnings Distribution
the 5th meeting of the2019 CPA Appointment and Remuneration
21st Board of Directors
Revision of “Procedures for the Acquisition
on March 20, 2019.
or Disposal of Assets”
Revision of “Procedures Governing
Derivatives Trading”
2018 Internal Control System Effectiveness
Audit and Statement(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 independent directors in the Company receiving a monthly audit report, audit managers will provide reports on the progress of work on
the annual audit plan and semi‐annual audits to the directors.
(2) At each quarterly Board of Auditors meeting, CPA reports and explains financial report audit and audit results to directors.
(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 by independentcommunication
Primary matter
Results
Company’s processing status
director
As the Taiwan Aircraft
1. The managerial department has provided theMaintenance andAccountant to explain audit
explanation and response forthwith during
Approved by all
Engineering Co., Ltd. has
results of the 2017 financial
the meeting.
not commenced
attendingreport, and take questions
2. Continued to submit for the Board ofoperations, please pay
Independent
from the attendees of the
Directors’ approval, and completed the 2017
March 22, 2018
Directors
attention to themeeting for discussion.
financial report announcement andAudit Committee
capitalization of its related
declaration on March 31, 2018.
expenses.

May 10, 2018
Audit Committee

August 9, 2018
Audit Committee

November 8, 2018
Audit Committee

The adoption of introduction
plan and schedule in IFRS 16
LeasesNone

Noted by all
attendingIndependent
Directors

None

Accountant to explain theaudit results of Q1 2018
financial report and theamendments to the laws
and regulations, and takequestions from theattendees of the meeting fordiscussion.

Please pay attention to
the coming into effect of2019 new IFRS 16 Leaseand its influence on thecompilation of 2018
annual report.

Noted by all
attendingIndependent
Directors

1.The managerial department has provided the
explanation and response forthwith during
the meeting.
2. Announcement and declaration of Q1 2018
financial report was completed on May 15,
2018.

The adoption of progress
report in IFRS 16 Leases

None

Noted by all
attendingIndependent
Directors

None

Accountant to explain theaudit results of Q2 2018
financial report and theimpact of new IFRS on
financial reports, and takequestions from theattendees of the meeting fordiscussion.

To pay attention tooperation performance ofthe first half year, and theimpact of changes in fuelcosts on airline profit andloss and cost analysis.
For explanation related tothe advanced payment for
aircraft purchasing in thefinancial report, pleaseindicate that the ATR
aircraft purchasing casebelongs to Mandarin
Airlines.

Approved 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 Q2 2018 financial reportannouncement and declaration on August
14, 2018.

The adoption of progress
report in IFRS 16 Leases

None

Noted by all
attendingIndependent
Directors

None

Accountant to explain theaudit results of Q3 2018
financial report,
amendments to the laws
and regulations, anddescription of the 2018
financial report audit plan
and key audit matters, andtake questions from theattendees of the meeting fordiscussion.

To pay attention tochanges in the accounts
payables and otherreceivables in the balance
sheet and the statementof comprehensive income,that is, the contents of thecustomer relationship inother none‐type asset
items, and ask the
managerial department toprovide explanation.

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 Q3 2018 financial reportannouncement and declaration on November
14, 2018.

None

Noted by all
attendingIndependent
Directors

None

The adoption of progress
report in IFRS 16 Leases

40 Corporate Governance ReportMarch 20, 2019
Audit Committee

Accountant to explain audit
results of the 2017 financial
report, and take questions
from the attendees of themeeting for discussion.

To pay attention to theimpact of rising oil prices
on the operational aspect
and the reasons forchanges in operating
expenses for twoquarters; it is also
recommended to adjust
the expression of somefinancial statements
according to the principleof consistency.

Noted by all
attendingIndependent
Directors

1.The managerial department has provided the
explanation and response forthwith during themeeting.
2.Continued to submit for the Board of
Directors’ approval, and completed the 2018
financial report announcement anddeclaration on April 1, 2019.

The adoption of progress
report in IFRS 16 Leases

None

Noted by all
attendingIndependent
Directors

None Communication between independent directors and internal audit supervisor:
MatterMeans of
Proposal by independentcommunication
Primary matterdirector
2017 Internal Control
System Effectiveness
Audit and Statement

None

Internal audit business
report for the second
half of 2017

None

May 10, 2018
Audit Committee

Internal audit business
report for Q1 2018

None

August 9, 2018
Audit Committee

Internal audit business
report for the first halfof 2018

None

Internal audit business
report for Q3 2018

To ask the managerial
department to provide
relevant regulations regarding
the financial derivatives
trading for the purpose ofhedging after the meeting.

March 22, 2018
Audit Committee

November 8, 2018
Audit Committee

January 21, 2018
Audit Committee

2019 audit plan

To pay attention to whether
there is articulation between
the risk of internal operations
reported by the Risk
Management Committee andthe audit planInternal audit business
report for Q4 2018

To pay attention to whether
there is a control mechanism
for online sales.

2018 Internal Control
System Effectiveness
Audit and Statement

None

Internal audit business
report for January andFebruary 2019

None

March 22, 2018
Audit Committee

ResultPrimary matter
Approved by all
attendingmembers andreported to theBoard of Directors.
Approved by all
attendingmembers andreported to theBoard of Directors.
Approved by all
attendingmembers andreported to theBoard of Directors.
Approved by all
attendingmembers andreported to theBoard of Directors.
Approved by all
attendingmembers andreported to theBoard of Directors.
1. Explained by
the managerial
department.
2. Discussed andvoted by all
attendingmembers andapproved toreport to theBoard ofDirectors.
Approved by all
attendingmembers andreported to theBoard of Directors.
Approved by all
attendingmembers andreported to theBoard of Directors.
Approved by all
attendingmembers andreported to theBoard of Directors.

Proposal by independent director
Resolved by the Board of Directors on March 22,
2018. The 2017 Statement of Internal Control
was announced and declared on March 23 anddisclosed in the 2017 annual report.

Reported to the Board of Directors on March 22,
2018.

Reported to the Board of Directors on May 10,
2018.

Reported to the Board of Directors on August 9,
2018.
1. The managerial department has provided
relevant materials of financial derivatives
trading procedures of the Company after the
meeting.
2. Reported to the Board of Directors on
November 8, 2018.

Resolved by the Board of Directors on
November 8, 2018, and completed theannouncement and declaration of 2019 internal
audit plan on December 4.

Reported to the Board of Directors on January
21, 2019.

Resolved by the Board of Directors on March 20,
2019, and the 2018 Statement of Internal
Control was announced and declared on March
22 and disclosed in the 2018 annual report.

Reported to the Board of Directors on March 20,
2019.

Corporate Governance Report413.3.3 Risk Committee:
The Risk Committee convened five meetings from January 1, 2018, through April 27, 2019. Committee member
attendance is detailed below:
Title

Name

Attendance in Person

By ProxyAttendance Rate (%)

Remarks

Chung, Lo‐Min

3

0

100%

Appointed on July 11, 2018.

Chang, Hsieh
Gen‐Sen

3

0

100%

Appointed on July 11, 2018.

Shen, Hui‐Ya

3

0

100%

Appointed on July 11, 2018.

Director

Ting, Kwang‐Hung

5

0

100%

Director

Lin, Su‐Ming

4

1

80%

Director

Charles C.Y. ,Chen

1

1

50%

Director

Huang, Hsiu‐Gu

0

0

‐

Independent
Director

Luo, Hsiao‐Hsien

2

0

100%

Independent
Director(Chairman)
Independent
Director
Independent
Director

Appointed on May 6, 2014;
reappointed on July 11, 2018.
Appointed on May 6, 2014;
reappointed on July 11, 2018.
Appointed on August 11, 2016;
Dismissed on June 27, 2018.
Appointed on May 6, 2014;
resigned on January 19, 2018.
Appointed on May 6, 2014;
Dismissed on June 27, 2018.

Other mentionable items:
1. Key functions of the Risk Committee:
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, and other risks, and submits its conclusions andrecommendations to be resolved by the Board of Directors. Good operational effectiveness has been achieved.
2. The operation of the Risk Committee:
Meeting Dates

January 31, 2018
11th Meeting of the Risk
Management Committee of the20th Board of Directors

April 19, 2018
12th Meeting of the Risk
Management Committee of the20th Board of Directors

August 9, 2018
1st Meeting of the Risk
Management Committee of the
21st Board of Directors

November 7, 2018
2nd Meeting of the Risk
Management Committee of the
21st Board of Directors

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

Agenda content
Safety management report
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
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
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
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
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

42 Corporate Governance Report

Risk Committee resolution results
and company action on Risk
Committee opinions

Results of Board of Directors
decision

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

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

3.3.4 Corporate Governance Implementation Status and Deviations from “theCorporate Governance Best‐Practice Principles for TWSE/TPEx Listed
Companies”
Status of Implementation

Evaluation Item

1. Did the Company
establish its
Corporate
Governance Best
Practice Principles inaccordance with
Corporate
Governance
Best‐PracticePrinciples for
TWSE/TPEx Listed
Companies anddisclose those
Principles?
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?

Deviations
from “theCorporate
Governance
Best‐PracticePrinciples for
Yes NoBrief Explanation
TWSE/TPEx
ListedCompanies”
and ReasonsThe “Corporate Governance Principles” of the Company has been established in compliance with the “Corporate Governance Best‐Practice No Difference
Principles 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)Does China Airlines keep maintain alist of the major
Company
shareholders andthe ultimate
owners of theseshareholders?

No Difference(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.

(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?

No Difference(3) The Company has established Operational Procedures for Endorsements/Guarantees, Operational Procedures for Lending Funds toOthers, 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 Corporate Development Office is responsible for overseeing implementation at invested
enterprises and should 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, race, nationality, birth date and cultural
background, etc.), experience and skills (e.g., aviation, sea freight, transportation, finance and accounting, law and insurance,
academia, electricity, technology, and public utilities), operation and management, leadership and decision‐making, and crisis
management ability. In order to strengthen the Board's functions 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 beequipped with, which are as follows:

Corporate Governance Report43Status of Implementation

Evaluation ItemYes NoBoard of Directors
and put said
policies into
practice?

Deviations
from “theCorporate
Governance
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

 The ability to make operational judgment.
 The ability to perform accounting and financial analysis.
 The ability to conduct management administration.
 The ability to conduct crisis management.
 Industrial knowledge.
 Perspective of the international market.
 The ability to lead.
 The ability to make decisions.
Moreover, the status of diversity among China Airlines' current Board members is as follows:
Diversified
Core
Name
of board
memberHsieh,
Su‐ChienCharles
C.Y. ,Chen
Ting,
Kwang‐Hung
Chen,
Han‐Ming
Ko, Sun‐Ta
Wei,
Yung‐Yeh
Lin, Su‐Ming
Wang,
Shih‐Szu
Chang, Hsieh
Gen‐Sen
Chung,
Lo‐MinShen, Hui‐Ya

APR 27, 2019

GenderOperations
Management

Perform
Accounting
And
Financial
Analysis

Male



○













Male



○













Male



○













Male

Female







○
○
○

○





































Female

















Male





○



















Male
Male
Male

FemaleConduct
Management
Administration

Conduct
CrisisManagement

Industrial
Knowledge

Perspectiveof theInternational
MarketLead

Make
Decisions

Note: Indicates the director has the capability ○ indicates the director has some capability.
 Reviewing the list of 11 Directors of the 21st Board of Directors of the Company, there are 3 female members (2 of whom are
Independent Directors) and 1 Representative Director of the laborers recommended by the Company's labor union. The entire
Board of Directors has the ability to perform business judgments, leadership and decision making, operation and management,
crisis handling, and has industrial knowledge and outlook on professional fields and international markets; Charles C.Y., Chen andTing, Kwang‐Hu have contributed to public welfare; Shen, Hui‐Ya has expertise in legal affairs; Wang, Shih‐Szu is the current deputy
mayor of Tainan City Government; and the three Independent Directors, Chang, Hsieh Gen‐Sen, Chung, Lo‐Min, and Shen, Hui‐Ya,
have expertise in financial, accounting and legal affairs, respectively.
 18% of Directors and 27% of Independent Directors of the Company are employees; the average term of Directors is 5 years;
among them, the experience of 2 Independent Directors is below 2 years and 1 Independent Director has experience of 7 years; as
for the age distribution of Board members: 2 Directors aged between 65 to 70 years, 4 Directors aged between 56 to 64 years, 3
Directors aged between 55 to 55 years, and 2 Directors aged between 40 to 45 years. Moreover, the Company also focuses ongender equality in the composition of the Board of Directors; the ratio of female Directors has reached 27%.
(2)In addition to the establishment of
the Remuneration
Committee andAudit Committee
as required bylaw, did theCompany
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?

(2) In addition to setting up the Audit Committee and the Remuneration Committee according to law, in order to improve the risk
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 approvedby the Board of Directors. The Committee answers to the Board of Directors and assists the Board of Directors in reviewing theestablishment, 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. Good
operational effectiveness has been achieved.

No Difference(3) The Company approved the “Regulations Governing the Board Performance Evaluation” in the 4th meeting of the 21st Board of No Difference
Directors on January 21, 2019, and it has been disclosed on the Company's official website. 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 Boardof Directors and the performance evaluation of individual Board members. The evaluation shall be completed by the end of January of
the following year, and the results of which shall be submitted by the Human Resources Division to be reported in the Board meeting
held by the end of March.
In January 2019, the Company completed the 2018 Board Performance Evaluation in accordance with the above regulations, andreported the self‐evaluation results at the 5th meeting of the 21st Board of Directors on March 20, 2019 as follows: Entire Board of Directors
i Evaluation items:
10 items in total, including 5 major aspects, i.e., the degree of participation in the Company's operations, the improvement ofBoard of Directors’ decision‐making quality, the composition and structure of the Board of Directors, the continuing education of
Directors, and internal control.
ii Results of self‐evaluation: Above standards.

44 Corporate Governance ReportStatus of Implementation

Evaluation ItemYes NoDeviations
from “theCorporate
Governance
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

 Individual Board members
i 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 expertise andcontinuing education, and internal control.
ii Results of self‐evaluation: Above standards.
In addition, the implementation of the performance evaluation of the Board of Directors of the Company may be performed by an
external professional independent institution or a team of external experts and scholars every three years.
(4)Does the Company 
periodically assess
the independenceof external CPAs?

(4) The Audit Committee and the Board of Directors of the Company regularly assess the independence and competence of theaccountants 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:
Item Assessed

Assessment Results
Yes

No

No Difference

Conforms to
independence?

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
Yesenterprise.
6. Has not provided any non‐auditing services to the Company that couldYesaffect complete 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 3rd meeting of the 21st
Audit Committee on March 20, 2019, a report will be made to the 5th meeting of the 21st Board of Directors on the appointment ofaccountants.
4. Has the Company set 
up a full‐ (or part‐)
time corporate
governance unit or
personnel to be incharge of corporate
governance affairs(this may include but
is not limited tofurnishing directors
and supervisors
information requiredfor businessexecution, handling
matters relating toboard meetings andshareholders
meetings according
to laws, handling
corporate
registration andamendment
registration, andproducing minutes ofboard meetings andshareholders’meetings)?

5. Has the Company
establishedcommunication
channels withstakeholders(including but notlimited to

The Company approved the establishment of the “Chief Corporate Governance Officer” in the 6th meeting of the 21st Board of Directors No Difference
on May 8, 2019, which is served by the Vice President, Chien, Feng‐Nien, who has the professional qualifications and conducts lega relatedaffairs 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 withinformation required to perform their duties, assisting Directors in complying with the laws and regulations, and other matters provided inlaws, regulations, the Company’s articles of association, or contracts.
“Chief Corporate Governance Officer” supervises the relevant units carrying out corporate governance matters:(1)In 2019, Chief Corporate Governance Officer concentrates on the following matters 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:
i.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 or sealedby the Chairman and recorder of each meeting, and be distributed to the members of the meeting within 20 days after the meeting.
ii.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 the Company's
business characteristics and Directors' requirements.
iii.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.
iv.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.
(2)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.
(3)In addition, the Finance Division shall be responsible for the handling of matters related to the shareholders' meetings (the planning andconvening of the shareholders' meetings, the production of meeting minutes and other stock affairs related business). It shall provide
sufficient information to the shareholders to ensure that the shareholders' rights and interests are well protected.
From January 1, 2018 through April 27, 2019, Chief Corporate Governance Officer hasn’t attended any course yet.
The Company has contact information of the spokesperson and responsible unit of each issue on the Company's official website, whichfacilitates stakeholders contacting the corresponding contact person according to different issues. In addition, a “Stakeholders Section” isset up on the website and the communication channels (including contact person, E‐mail, and telephone number) for different
stakeholders are provided therein, to appropriately respond to various issues, including corporate social responsibility. See below for
details:

No Difference

Corporate Governance Report45

Status of Implementation

Evaluation ItemYes Noshareholders,
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?

Brief Explanation

Item
Category

Employees

Focus of Communication

Employee feedback andsatisfaction rates

Contact Person

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

Passenger Service
Passenger dedicated phoneline: +886(0)‐2‐412‐9000

Customers

Investors

Partners(Suppliers)

Society

6. Has the Company
appointed aprofessional
shareholder services
agent to handle
shareholders meeting
matters?

Deviations
from “theCorporate
Governance
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Customer thoughts andfeelings

Reports on operating
results, maintaining
good communication

Status of suppliersupply/shipment andsustainable risk

Show concern for
disadvantaged groups,
increase social
connection, spurtransparent
communication

Cargo Service
Mr. Lin
Tel: +886(0)‐3‐3998263
Aircraft Maintenance
Mr. ChouTel: +886(0)‐3‐3987215
Finance Div.
Mr. Yang
Tel: +886(0)‐3‐3998331
Finance Div.
Mr. Lin
Tel: +886(0)‐3‐3998361
General Products
Administration Div.
Miss Xiao
Tel: +886(0)‐3‐3999136
Aircraft Parts
Engineering Div.
Mr. TsaiTel: +886(0)‐3‐3834251
Ext.7507
e‐Shopping / Duty Free
In‐Flight Service Supply Chain& Marketing Div.
Miss Lee
Tel: +886(0)‐3‐3993871
CSR
Corporate Development
OfficeMr. ChungTel: +886(0)‐3‐399‐8530
Charitable activities
Corporate Communications
OfficeMr. LeeTel: +886(0)‐3‐399‐8639

Channel Of Communication And
Response
Labor‐Management Conference
Union
Employee concerns mailbox(Wecare listens mailbox, Speak
Out employee communication
mailbox, Team+ real‐timeinformation platform)
Website for retired employees
and those who have left
employment
Customer satisfaction surveys
Global business meetings
Taiwan district businessmeetings
Discussions with travel agencies
Company website, industry
social responsibility network,
Facebook, email, and message
Customer‐service hotline

Frequency
Quarterly
Real time

Real time

Real time
Real time
Annually
Annually
Quarterly
Real time
Real time

Corporate customer visits

Occasional

Shareholders meeting
Shareholder hotline/mailbox
Corporate customer hotline

Annually
Real time
Real time
Once every
three years(once a year
since 2018)

Corporate information meeting

Telephone, email

Occasional

Consultative conferences

Occasional

Business visits

Occasional

Site inspections

At least once
every 6 months

Hold activities for the public
good, participate in activities insociety

Occasional

Press Releases

Occasional
every month

Network mailbox

Occasional,
daily

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

46 Corporate Governance Report

No DifferenceStatus of Implementation

Evaluation ItemYes No7. Information
disclosure(1)Has the Company established apublic website todisclose financial,
operational, andcorporate
governanceinformation?
(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)?
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)?

Deviations
from “theCorporate
Governance
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation(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’ Meeting, 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(2) The Company has set up an English language website "China Airlines Corporate Website (https://www.china‐airlines.com/tw/en), with No Difference
the Office of Public Relations as the spokesperson who is responsible for gathering and disclosing company information on a monthly
basis and for announcing corporate information to the outside world, including press releases, new interviews and press conferences.

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:(1) Information:a. The Company updated all its internal information networks in 2018, optimizing the platform user interface and enhancing
information security, while also integrating provision of information via documents and periodically planning electronic bulletinboards for “News Focus, What's Going on in the Company, China Airlines Light, and Activities” with text and media. These share
the Company's latest operations information and decision making progress, while notifying employees of important information
using email blasts.
b. The Wecare Listens mailbox, Speak Out employee communication mailbox, Team+ real‐time information platform and otherdiversified channels provide employees with ample direct channels to express their opinions and complaints.
(2) 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.
(3) Systemic:
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 13
were handled in 2018.
4. Supplier relations:
Based on the Company regulations in “Work Rules for Purchasing and Acceptance of Ordinary Goods”, except in the case of patents andurgent purchases, all bids are public and disclosed on the Company website, establishing a transparent and open process with a faircompetitive environment for transactions.
In addition, according to the Company’s “Regulations Governing the Management of Ordinary Goods Suppliers,” reviews andevaluations of suppliers’ qualification, credit, and ability must be carried out for suppliers’ operational risks at different stages. Reviewsof 97 suppliers in total were completed in 2018. According to the operation of Collaborative Value Task Force under the CSR policy of theCompany, risk assessment of “Supply Chain Sustainability Questionnaire (SAQ)” is conducted annually for key first‐tier suppliers. The
questionnaire includes aspects like legal, environmental, social and quality, and information security. 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 2018, the Company surveyed 72 suppliers (mainly key first‐tier suppliers) according to the supplier's sustainable supply chain
mechanism. The questionnaire response rate was nearly 60%, and the average supply chain sustainability performance score was 91.79
points, showing that most of the Company's suppliers have internalized 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

Corporate Governance Report47

Status of Implementation

Evaluation ItemYes NoBrief Explanation

Deviations
from “theCorporate
Governance
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasonsrequested that every supplier sign the “Supplier Code of Conduct” when bidding, and to jointly undertake to create a sustainableindustrial environment. In the future, we will continue to promote the procurement of Green Mark certified products. By the end of
2018, we have completed green procurement of approximately NT$4,490,000 in total.
5. Stakeholder interests:
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.65 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 theBoard of Directors, assisting the Board in oversight of the setting, and results and adaptive measures related to company risk
management strategies. See P.42 for operation details.
Moreover, to establish a solid internal governance system, the Company has additionally set up “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 proactively uses electronic questionnaires to obtain information on passenger satisfaction. In 2018, a total of 803 valid
customer satisfaction surveys were performed, and after statistical analysis, products and services were examined and improved as aresult, raising the overall level of customer satisfaction.
9. Company purchase of liability insurance for directors and supervisors:
The Company purchased liability insurance for all Directors in both 2018 and 2019 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
16th meeting of the 20th Board of Directors on May 10, 2018 and the 5th meeting of the 21st Board of Directors on March 20, 2019,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:
Except when establishing functional committee (Risk Management Committee) not required by laws, the number of Company’s members is no fewer than three, and more than half of themembers are Independent Directors. In addition, on January 21, 2019, the Board of Directors approved the “Regulations Governing the Board Performance Evaluation” and completed the2018 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; theBoard members diversification policy and its implementation; the operation status of functional committees other than those required by laws; and the implementation status of ethicalcorporate management, etc., have also been disclosed.

48 Corporate Governance Report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)

Criteria Meets One of the Following Professional Qualification
Requirements, Together with at Least Five Years’ Work
Experience
An instructor or
higher position A judge, public
in a department prosecutor, attorney, Has work
Certified Publicof commerce,
experience inlaw, finance,
Accountant, or other the areas ofaccounting, or professional orcommerce, law,other academic technical specialist
finance, ordepartment
who has passed anational examination accounting, or
related to theotherwisebusiness needs and been awarded a necessary forof the Company certificate in a
profession necessary the business ofin a public orfor the business of the the Company
private juniorcollege, college Company
Nameor university

Independence Criteria (Note 2)

1

2

3

4

5

6

7

Number of Other
PublicCompanies inWhich theIndividual isRemarks
Concurrently
Servingasa8
Remuneration
Committee
MemberIndependent
Director Shen, Hui‐Ya       
1‐(Chairman)
Independent Chang, Hsieh       
1‐
Director
Gen‐sen
He,
Other

‐

       
0‐Jyun‐Huei
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 affiliated companies. Not applicable in cases where the person is an independent director of the parent
company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
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 persons in thepreceding three sub‐paragraphs.
5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding
shares of the Company, or who holds shares ranking in the top five holdings.
6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has afinancial or business relationship with the Company.
7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or
institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of theCompany, or a spouse thereof.
8. 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: http://www.china‐airlines.com.

Corporate Governance Report49

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 three meetings over the past year (from January 1, 2018
through April 27, 2019). Committee member attendance is detailed below:
Title

Name

Attendance in
PersonBy ProxyAttendance Rate (%)

Remarks

Independent
Shen, Hui‐Ya
40100%
Appointed on July 11, 2018; new appointment.
Director(Chairman)
Independent
Appointed on July 24, 2015, and dismissed on June
Luo, Hsiao‐Hsien
10100%
Director
27, 2018.
Independent
Chang, Hsieh
40100%
Appointed on July 11, 2018; new appointment.
Director
Gen‐senOther
He, Jyun‐Huei
50100%
Appointed on July 11, 2018; reappointment.
Independent
Appointed on July 24, 2015, and dismissed on June
Ting, Tin‐Yu
10100%
Director
27, 2018.
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:
Meeting dates of theHandling of members’
Matters discussed
Resolution
Remuneration Committee
opinions by the Company
January 24, 2018
Chairman and Managers' 2017
Approved by all attending members
10th Meeting of theYear‐end Bonus, 2018 Lunar New
to be reported to the Board of
No further business
Remuneration Committee ofYear Incentive and 2018 Salary
Directors for discussion.
the 20th Board of Directors
Adjustment
2017 Employee Compensation(Bonus) of the Chairman andManagers
July 26, 2018
Traveling Expense Standards for
Approved by all attending members
1st Meeting of theMilitary, Civil or Teaching Personnel
No further businessto be reported to the Board of
Remuneration Committee ofServing as Part‐time Directors of the
Directors for discussion.
the 21st Board of Directors
Company
Flight and Cabin Allowance
Adjustment for Senior Vice
President (VO)
Regarding the regular review ofAfter reviewing thepolicies, systems, standards, andoverall appropriateness,structures for performancethe businessevaluation, salary, andmanagement unit has
Regular Review of Policies, Systems,
compensation of Directors andsubmitted it forStandards and Structures forManagers, the businessdiscussion in the 3rd
Performance Evaluation, Salary andOctober 26, 2018
management unit was asked to
Meeting of theCompensation of Directors and2nd Meeting of thereview the overall appropriatenessRemuneration
Managers
Remuneration Committee ofby the end of the year, and submit
Committee of the 21st
it for the Committee’s discussion
the 21st Board of Directors
Board of Directors on
before submitting it to the Board of
December 27, 2018.
Directors.
Increase of Traveling Expense
Approved by all attending members
Standards for Military, Civil or
No further businessto be reported to the Board of
Teaching Personnel Serving as
Directors for discussion.
Part‐time Directors of the Company
Regular Review of Policies, Systems,
Standards and Structures for
Performance Evaluation, Salary andDecember 27, 2018
Approved by all attending members
Compensation of Directors and3rd Meeting of theto be reported to the Board of
No further business
Managers
Remuneration Committee of
Directors for discussion.
Proposal of Salary andthe 21st Board of Directors
Compensation for the New SeniorVice President (VV)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

50 Corporate Governance Report3.3.6 Corporate Social Responsibility
Implementation Status

Evaluation Item

1. Corporate governance implementation(1)Has the Company established corporatesocial responsibility policies or a CSR
system and reviewed the effectiveness of
implementation?

Yes

No

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

(1) At the 6th meeting of the 20th Board of Directors on May 12, 2016, the Board
No Difference
passed revisions to the “China Airlines Co., Ltd. Corporate Social Responsibility
and Sustainable Development Best Practice Principles” and has since taken thisdocument as the highest guiding principle in the Company's implementation of
CSR.
The Corporate Sustainability Committee is the Company's highest governing bodyto promote sustainability; it is responsible for planning sustainable development
direction, strategy and target setting. The Committee holds at least two meetings
per year regularly to review the target implementation rate and follow up on
subsequent improvement; it also reports the results of annual sustainable
governance to the Board of Directors according to “Corporate Social
Responsibility and Sustainable Development Best Practice Principles.” The resultsof sustainable implementation for 2018 are as follows: Continued to implement the Sustainable Development Goals (SDGs) and set
short‐term, medium‐term and long‐term sustainability goals for the task forceof each value based on the Company's sustainability strategy.
 Connected with the international community and supported the diversificationof Directors. Three new female Directors from the fields of industry, the public
sector, and academia have joined the Board, enhancing the overall
decision‐making quality of the Board of Directors of China Airlines.
 Revised internal sustainable related regulations in accordance withinternational standards and trends, and improved the promotion results andquality of sustainable governance.
 Participated in the aviation industry's sustainability related conferences,
mastered latest promotion trends, and gave back to the relevant responsible
task force of each value to improve the relevant sustainability improvement
results.
 Entered into the 2018 Dow Jones Sustainability Index (DJSI) and the FTSE4Good
Emerging Index; scored leadership level in the global aviation industry by CDP,
and won the Taiwan Corporate Sustainability Awards.
 Published and compiled the Company's sustainable corporate governancecommitments, annual CSR KPIs, implementation results, and the Chinese andEnglish version of Corporate Social Responsibility (CSR) Report planned for the
future, which were disclosed on the Company's official website and thecorporate social responsibility website.

(2)Does the Company regularly hold CSR
training?

(2) The Company organizes sustainability related education and training irregularly
every year. In 2018, two batches of CSR education and training were
implemented. The promotion of the first batch started in September 2018 and its
training rate reached 100%. The second batch of education and training wasplanned for implementation in 2019, which will continue to cultivate theCompany's sustainability DNA and shape its corporate sustainable culture.

(3)Has the Company designated full‐ (orpart‐) time personnel to implement
corporate social responsibility policy withsenior management authorized by the
Board of Directors to manage them, anddo they give status reports to the Board of
Directors?

(3) The Company has set up a Corporate Sustainability Committee in 2014, which is No Differencesolely responsible for the promotion of sustainability and is the highest
governance organization for sustainability governance promotion, with the
President sitting as its Chairman. There are six major task forces in theCommittee, 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.” Theirmain responsibilities are strategy formulation, business planning, and promotionof 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 PracticePrinciples. The results of the 2018 CSR operation and the 2019 CSR operation plan
were reported in the 4th meeting of the 21st Board of Directors on January 21,2019.

(4)Has the Company established reasonable
remuneration policies and integrated theemployee performance evaluation system
and CSR policies and established a clear
and effective incentive and discipline
system?

(4) According to the Company's Articles of Association, if the Company is profitable in No Difference
the year, no less than 3% of the profit shall be appropriated for employeecompensation. However, if the Company still has accumulated losses, the offset
amount shall be retained in advance. In addition to the relevant operational
regulations (including performance appraisal, year‐end bonus, rewards andpunishments, salary and allowance) specified in the manual of personnel
department, the Company also provides reasonable remuneration, related
benefits and insurance every year according to the overall salary policy andincome. Also, there are performance salary adjustments and promotion salaryadjustment regulations in place. The performance of employees is regularly
evaluated three times each year. In addition to assessing common core functions,different function evaluating indicators and assessment methods are also

No Difference

Corporate Governance Report51

Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

designed according to professional characteristics, so as to truly reflect the actual
work situation of employees. In 2018, the actual average salary adjustment for all
employees was 3%.
2. Sustainable environmental development(1)Has the Company endeavored to makemore efficient use of resources and use
renewable materials that have a lower
impact on the environment?



52 Corporate Governance Report

Performing compliance obligations and fulfilling environmental
protection and energy conservation responsibilities.

Complying with environmental laws and regulations(1) China Airlines is committed to improving the efficiency of the use of various No Difference
resources; multiple actions to that end are described below:
1. Following its reception of “Diamond Grade” Green Building Mark awarded by
the Ministry of the Interior in 2017 for the introduction of the “Elevator Power
Regeneration Device” with a number of power‐saving measures in the
Executive Center Building, the Company has continued to strengthen waste andwater resource management in 2018 and received the highest “diamond
grade” certification for the crew training building.
2. Moreover, in order to continue to achieve the goal of low‐carbon operationand support the government's renewable energy policy, China Airlines
launched the assessment operation of building solar photovoltaic equipment at
China Airlines Headquarters in 2016, inviting relevant units of the industry andpublic sector to participate in the negotiation of relevant issues to eliminate
safety concerns, such as worries over solar photovoltaic equipment affecting
aircrafts’ take‐off and landing. After such worries were alleviated, the relevant
units consented. It is expected a solar photovoltaic system of approximately
99KW will be installed in the CAL Park’s flight simulator building, andconstruction will be finished and the system will be activated in 2019.
3. In order to maintain the goal of “zero carbon growth” after 2020 and increase
the use of renewable energy, the Company took the lead in the domestic
aviation industry by using sustainable alternative aviation fuels to refuel the
new A350‐900 aircrafts for the return flights to Taiwan since November 2017.
By the end of 2018, the refueling operations of 5 flights have been completed.
4.Implementation of environmental management and carbon management
strategies
Promotion
Concepts
Policies
Plans of action
strategies(1)Regular regulatory
requirements(1)Understanding
checks andenvironmental
self‐commitment
protection trends
reviews
in Taiwan and(2)Actively
abroad, andparticipating in
improving thedomestic andnegotiation
foreign industry
channel andand government
platform formeetings to grasp
stakeholders.
the trends of(2)Actively
regulations.
participating in(3)Implementation ofinternational
checking
cooperation andmechanism forunderstanding
management
mainstream
systemissues.
compliance(3)Perfecting
obligation
management /(4)Participation insupervision and
DJSI, CDP, andevaluation
other leadingmechanism
international
evaluations

Implementation Status

Evaluation Item

Yes

No

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

Establishing environmental and energy management systems, and management performance indicators.

Conserving the Earth's resources(1)Continuously
improving theoperational
quality of thecorporateenvironmental
and energy
management
system(2)Developing andimplementing
environmental
performance andcarbon reduction
targets(1)Understanding
updates to ISO
standards,
implementing andperfecting theimprovement ofenterprise
Environmental
Management
System, EMS.
(2)Improving thechecking,
oversight andevaluation
mechanism forenvironmental,
energy, andcarbon emission
risks(3)Establishing andimplementing
various energy
conservation,
carbon reduction
andenvironmental
performancetargets.
(4)Implementing
internal audit andmanagement
reviewmechanisms andconducting third
party verification.
(5)Establishing a Task
Force onClimate‐Related
Financial
Disclosures (TCFD)
system(6)Establishing a
corporate“Environmental
Management
Information
System” tounderstand anddocument
historicalenvironmental
performance.

Implementing environmental and energy conservation
education to foster employees’ environmental awareness.

Improving eco‐efficiency(1)Creating
diversified
guidance andcommunication
channels(2)Establishing
incentive
programs tomotivatecolleagues topractice anddevelopenvironmental
protection ideas.

(1)Implementing
environmental
and energy‐saving
education for all
employees(2)Organizing anannual“environmental
protection
education
seminar” and“environmental
protection
competition”(3)Establishing aplatform to
Corporate
promoteGovernancenewknowledge ofenvironmental
protection andenergyReport53

Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Implementing green supply chain management to enhance overall
eco‐efficiency.
Creating a low‐carbon operating environment toestablish continual improvement of energy andenvironmental performance.

Fulfilling social responsibility

54 Corporate Governance Report

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons(1)Establishing a
supply chain risk
assessment andmanagement
system(2)Establishingenvironment andenergymanagement
capacity forcompanies of theGroup(1)Optimizing
devices
performance(2)Promoting
energy‐saving
education andestablishingcorporateenergy‐saving
culture.
(3)Introducing
low‐carbon andrenewableenergy facilities(4)Establishing a
reward system for
proposals(1)Cultivating theGroup’s and key
suppliers’
environmental
talent(2)Holding value
chain
environmental
protection andenergy saving
education andtraining(3)Performing supply
chain risk
assessment
operation(4)Organizing
conferences andregular meetingsfor contractors
and suppliers tocommunicate
China Airlines'
sustainability andenvironmental
protection
requirements.
(1)Checking andoptimizing energy
equipment andmanagement
measures(2)Establishing andimplementing
energyconservation
management andeducational
programs(3)Mastering
technology andregulatory trends,
and introducing
renewable energy
equipment in atimely mannerImplementation Status

Evaluation Item

Yes

No

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

Supporting green design and procurement to promote environmental
sustainability.

(1)Deepening theawareness ofplanners inenvironmental
protection andenergyconservation(2)Promoting green
procurement andgreen consumer
culture(1)Including service
procedures in the
EMS operation,and strengthening
personnel
training.
(2)Including
environmental
protection andenergy saving
effects as the key
considerations for
procurement(3)Establishing andpromoting “Green
Fares‐Carbon
Exchange Service”(4)Using
environment‐frien
dly certified
on‐board spare
products andsellingenvironment‐frien
dly duty‐freeproducts(5)Diversifying thepromotion ofgreen consumerawareness

5. Energy savings and carbon reduction
In order to be able to contribute to environmental conservation, the Company
has actively participated in and responded to environmentally relevantorganizations and initiatives at home and abroad, in addition to complying withthe requirements of civil aviation and environmental protection regulations andself‐improvement of risk management mechanisms; this strengthens andoptimizes the power of our actions in environmental protection, reduces
pollution to the environment, cherishes the limited resources of the Earth,while at the same time leading the aviation industry to jointly protect ourhomeland through the Company’s influence. Since 2012, energy conservationand carbon reduction measures have been implemented. In 2018, a total of 59
environmental management KPIs were promoted, with 56,940 metric tons ofaircraft fuel conserved, 123 metric tons of fuel reduced for ground vehicles,
837,000 kWh of electricity conserved, 3,000 metric tons of water conserved,
and 150 metric tons of waste reduced. The total annual carbon reduction wasapproximately 144,882 metric tons of CO2e. The various categories of data are
as follows:
AmountCarbonNote: CO2e
Item
Unit
conserved(metric tons CO2e) conversion factor
Aircraft
Metricfuel
56,940144,114
2.523
tons
savings
Ground
2.263 (gasoline);
fuel
123 Kiloliters326
2.606 (diesel)savings
Electricity
837
MWh
442
0.554
conserved
Water
1,000
3
‐
0.162
conservati
metric tons
on
Waste
150 Kiloliters‐‐
reduction
Annual carbon reduction

144,882(Metric tons CO2e)

6. Water conservation and wastewater treatment
The Company's total water usage in 2018 was 148,216 units, up 4.93% from2017. The main reason was rupture and leakage of water pipelines caused by
the construction around the maintenance facility; it was repaired immediately
after discovery; the water use ratio of air conditioning was higher due to thecontinuous high temperature in summer. In order to continuously improve themanagement of water resources, and to understand the current status of China
Airlines' overall water use situation, it was proposed to strengthen relevant
management and supervision measures to track the current status of various
water usage and implement water resource risk and opportunity identification
operations.

Corporate Governance Report55Implementation Status

Evaluation Item

Yes

No

Brief Explanation

General maintenance / domestic use

56 Corporate Governance Report

General industrial / domestic waste

Ground operations

The waste water generated during the maintenance work of the aircrafts will
impose a burden on the environment, so it needs to be properly processed
before it can be discharged into natural water. The Company's maintenancepark has two sewage treatment plants set up and in operation under the
principle of “full recycling,” to treat the electroplating wastewater generated
from engine repair operations (including: chromium, cadmium, and other heavy
metals) and organic wastewater generated from aircraft maintenance
operations, respectively. The wastewater was discharged to the Taoyuan
Airport drainage system after three stages of treatment. Its management isperformed on the first‐line and front‐line control by dedicated handlingpersonnel who have passed the training and verification; regularly checking thewater temperature, hydrogen ion, electrical conductivity, grease, andhexavalent chromium of the discharged water; and conducting closemonitoring by incorporating it into the enterprise environmental risk level 2
and 3 supervision and evaluation checking mechanism.
Water resource information
Item
2015
2016
2017
2018
Heavy metal
9,577
10,667
8,579
10,014wastewater (tons)
Organic wastewater
8,867
15,518
14,647
10,443(tons)
Total volume ofwastewater
18,444
26,18523,226
20,457discharge (tons)
Note 1: Domestic sewage has been taken over according togovernment environmental protection regulations and collectedin the sewage system to the sewage treatment plants in Taoyuan
Airport, Taipei City and Kaohsiung City for proper processing.
Note 2: The source of water is supplied by the water company
7. Waste management
The Company processes waste management in accordance with the five
following principles: Refuse, Reduce, Reuse, Recycle, Repair. It has set a goalfor 100% resource reclamation of waste and has annually increased its waste
reuse rate. Recognizing that air cargo is a core business of the airline industry,
the Company actively participates in seminars with the IATA cabin waste task
group. The Company has collected the total weight of cabin waste andrecyclable items since 2017; it has annually expanded its scope of groundservices since 2018 to be used as basis for management strategy formulation.
2015
2016
2017
Operation
Item (kg)requirements Non‐recyclable Non‐recyclable Non‐recyclable
amountamountamountContract
380,662
419,689
456,997
qualifieddisposalcontractors forperiodic
disposal, keep
record for
proof ofproperhandling, andregularly
submit reportaccording toregulatory
requirements(physical /incineration /thermaltreatment).

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and ReasonsImplementation Status

Evaluation Item

Yes

No

Brief Explanation

Chromium‐containing batteries

Aircraft and ground emergency power generation
Aircraft and engine maintenance use
requirements

Hazardous industrial waste

Food and beverage and other in‐flight service supplies for in‐flight services

General industrial / domestic waste

In‐flight services

Total(2)Has China Airlines established anenvironmental management system thatis specifically designed with theCompany's operations in mind?



Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and ReasonsContract
qualifieddisposalcontractors forperiodic
disposal, keep
record for
proof ofproperhandling, andregularly
submit reportaccording toregulatory
requirements(chemical
treatment /solidification
and burial).
Contract
qualifieddisposalcontractors forperiodic
disposal,
perform
offshoreprocessing,and regularly
submit reportaccording toregulatory
requirements.
The on‐board
kitchen waste
is entrusted tothe qualified
vendors forclearing,
handling, anddestroying in
full, according
tointernational
sanitary
regulations;after
remainingdomestic
waste iscollected fromthe aircraft, it
is first sorted
andcategorized,
and then sent
to theincinerator
plant of the
airportcompany forincineration.

12,72813,43016,758

1,445

1,920

1,782

‐

‐

3,417,870

394,835

435,039

3,893,407(2) In order to integrate environmental protection operations into the daily No Difference
operational risk management operations of the enterprise, the Company 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 ofCorporate Governance Report57Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasonsenvironmental and energy risk management, and become comprehensively in linewith the standard thinking of international enterprises’ sustainable development
governance. System standards covered by China Airlines’ environmental
management mechanism:
ISO 14001:2015
ISO 50001:2011
ISO 14064‐1:2006
Environmental
EnergyStandard Greenhouse gas inventory
management
management
and management systemsystemsystem2012
Time of2013
2009(Note)
introduction(1)Aircraft /engine(1)Global aviation fuel(1)Aircraft /maintenance(2)Ground operations inoperationengineTaiwan, including CAL
maintenance(2)Flight
Park, maintenance
operation
operation andScopefacility, Taipei branchmanagement (2)Flight(floors B1, 1, 2, and 9),
operation and(3)Cargo service
Songshan Park, andmanagement(4)Passenger
Kaohsiung branch.
transport
service
Note: ISO 14001:2008 was introduced in 2012, and ISO 14001:2015 version
transferring operation was completed in 2017
In addition, the Company recognized climate issues’ direct impact on andimportance to the aviation industry, in addition to supporting and responding to
the voluntary carbon reduction initiative promoted by the International Civil
Aviation Organization (ICAO), the International Air Transport Association (IATA)
and Civil Aviation of the Republic of China, and setting up the Company’s threemajor targets of the stage regarding flight and ground operations; the Company
further introduced the Task Force on Climate‐Related Financial Disclosures (TCFD)
guidance structure in 2018, with the plan to set up a TCFD task force to conduct
early risk response, opportunity management, and other active managements,
and to deepen carbon management operations and climate resilience. In
addition, the Company was also invited by TCFD in September 2018 to publicly
sign and endorse the TCFD project, becoming the first airline in Taiwan to sign.
(3)Does the Company pay close attention to
the potential impacts of climate change on
operations; has it undertaken an
examination of greenhouse gas emissions;and has it established a carbon andgreenhouse gas reduction strategy?



58 Corporate Governance Report(3) Since 2009, the Company has actively implemented ISO 14064‐1 greenhouse gas No Difference
management operations, conducted inventory on greenhouse gas emissions fromthe operation of the organization, and implemented third party verification
operations. In 2012, the Company actively established carbon risk management
mechanism in response to international trends, and actively responded to the
Carbon Disclosure Project (CDP). Later in October 2014, the Company announced
its voluntary greenhouse gas reduction targets, actively promoting
self‐management before the launch of the global carbon management
mechanism announced by the ICAO. The Company has been actively supportingand implementing the three‐stage targets of the IATA, with 2019 being the baseyear:
1. An average improvement in fuel efficiency of 1.5% per year before 2020;
2. Achieving carbon‐neutral growth in 2020 (CNG2020);
3. Reducing emissions to 50% of the 2005 level by 2050, to facilitate theachievement of targets in the greenhouse gas reduction strategy of Taiwan's
civil aviation industry.
The Company's long‐term goals of energy saving and carbon reduction are as
follows:
2020
2025
2030
(1)To increase aviation(1)To implement the(1)To implement thefuel efficiency byincreasing ofincreasing ofaviation fuelaviation fuel1.5% every year
efficiency by 1.5%
efficiency by 1.5%
(2)To reduce groundevery year and theevery year and thecarbon emissions byzero growth ofzero growth of
38% compared tocarbon emissions
carbon emissions
that in 2009
for CORSIA
for CORSIA(3)To reduce the
CNG2020
CNG2020
general ground(2)To reduce ground(2)To reduce ground
waste output by 2%
carbon emissions
carbon emissions
compared to that inby 42.34%
by 40.43%
2018, and tocompared to that incompared to that
increase the2009
in 2009
recycling rate of(3)To reduce the(3)To reduce theindustrial waste to
general groundgeneral ground40%
waste output by
waste output by 7%
12% compared tocompared to thatthat in 2018, and to
in 2018, and toImplementation Status

Evaluation Item

Yes

No

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Brief Explanation

increase therecycling rate ofindustrial waste to45%(4)To reduce groundwater consumption
by 5% compared tothat in 2018
4. Social welfare(1)Has the Company establishedmanagement policies and procedures inaccordance with relevant laws andregulations and international human rights
conventions?

increase therecycling rate ofindustrial waste to50%(4)To reduce groundwater consumption
by 7% compared tothat in 2018

(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 have an employee
complaint mechanism and channels anddoes it take care of said complaints
appropriately?

No Difference(2) To guarantee employee interests and provide a healthy and safe working
environment, and create a friendly workplace, the Company has set “Rules for
Employee Complaint” and “Rules for Employee Safety Reporting Incentives”. It has
also provided diversified channels of communication that all employees arefamiliar with, including a “Speak Out” area, periodic labor‐management
consultations and various dedicated complaint mailboxes (including Wecare,
workplace sexual harassment, professional ethics, etc.) and handles all employee
complaints according to a set process.

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

(3) 1. Staying up‐to‐date with international standards through dual certification on No Difference
April 20, 2016, the Company obtained OHSAS 18001:2007 and CNS
15506:2011 and other occupational safety and health management systemverification documents, and passed SGS re‐inspection in 2018. At the sametime, in order to be in accord with the international practice, the Company
introduced the latest occupational safety and health guidelines to build amore complete occupational safety and health system and management
system. The Company obtained ISO45001:2018 and TOSHMS qualified
certification in April 2019.
2. Occupational safety and health committee for two‐way effective
communication
China Airlines has established an Occupational Safety and Health Committee
in accordance with law. The committee is tasked with the objective ofpreventing occupational hazards and protecting the safety 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 of designated units,
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 toreview and analyze the Company's occupational incidents and to report andfollow up on subsequent safety and health management plans. A total of 20
safety and health proposals were reviewed, coordinated and provided withsuggestion in the meetings in 2018, and all them have been concluded.
Relevant meeting minutes were announced on the Company's internal
website.
3. Full AQD for comprehensive risk assessment
Taking advantage of China Airlines’ Aviation Quality Database (AQD) of all
personnel to reflect the hidden hazards of the operating environment andimplement risk assessment to reduce occupational accidents; in 2018, a totalof 107 AQD safety and health related cases were received, and 107 cases
were improved and settled, for an improvement rate of 100%.
4. Strengthening safety and health education and popularizing safety and healthconcepts
Strengthening the promotion of safety and health education at all levels.
Every three years, each personnel shall receive at least 3 hours of educationand 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 threehours of safety and health education and training every three years; assistingin the training of safety and health officers at all levels to disseminate safety
and health knowledge; holding the necessary education and training for
newly hired labor, transferred labor, safety and health management
personnel, special operators, and supervisors to work and prevent disasters,
so that each personnel knows how to protect themselves and others.
5. Hierarchical safety and health management, and establishment of safety andhealth officers at all levels

Corporate Governance Report59Implementation Status

Evaluation Item

Yes

No

Brief Explanation

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons

Implementing safe and healthy work; Initiating a safety and health hazard
identification proposal system to expand the participation in safety andhealth to all personnel; establishing safety and health officers at all levels to
guide the risk assessment of all levels of units and conduct prevention andimprovement, building the concept of corporate community.
6. Implementing safety and health education training
i. A total of 5 batches of new general personnel’s safety and health educationand training were implements, with a total of 126 persons.
ii. Safety and health E‐Learning education and training for new supervisors.
iii. Education and training of all members of the Occupational Safety and
Health Committee.
iv. Occupational safety and health training for in‐service employees.
v. First‐aid personnel training.
vi. Safety and health training for special operators.
7. Organizing health promotion activities
i. There have been 16 health promotion activities in CAL Park, with a total of
456 participants.
ii. There have been 7 health promotion activities at the Taipei branch, with a
total of 198 participants.
iii. There have been 7 health promotion activities at the Kaohsiung branch,with a total of 153 participants.
iv. Free flu shots: A total of 236 people in Taipei, 1,623 people in Taoyuan,
and 87 people in Kaohsiung.
v. The free MMR vaccine for front‐line staff was administered to 1,341
people.
(4)Has the Company established amechanism enabling periodic
communication with employees and areasonable method of informing
employees of those operational changes
that could significantly affect their work?

(4) The Company holds a quarterly labor‐management conference, and has also
No Difference
established a “Speak Out” area, Wecare mailbox and other means for employees
to share their questions or concerns with the Company. In 2018, a total of 24
cases were handled to completion, providing both labor and management with
rapid access to important operational information and multiple channels ofcommunication to exchange opinions. Major topics in the Company werecommunicated in a timely manner, and information concerning employee
interests was posted to the internal website or sent to employee mailboxes.
Through these multiple channels of communication and effective work processes,
harmony is maintained between labor and management, so that there is good,common understanding of company operations.

(5)Has the Company established an effective
career skill development training programfor employees?

(5) In order to cultivate the Company's human resources, the Company has a
No Difference“Training Advisory Committee,” which is responsible for the planning of annual
education and 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 visionand management 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 2018, a total of NT$295 million was invested in
the training and development. The total number of training hours exceeded
54,584 hours.

(6)Has the Company established policies
regarding R&D, procurement, production,
operations, and service processes andcomplaint procedures to safeguard therights of customers?



No Difference(6) 1. Consumer interests policy:
In addition to the stipulation of service commitments, transportation terms andconditions and disclaimer clause according to the laws, the Company has alsoestablished an “Information Security Policy” and disclosed it on the Company's
website, committed to protecting the privacy and related rights of all
customers' personal information. Moreover, the Company added a personal
information management task force in 2018 and introduced an external
professional consultant team to assist in the completion of the EU GDPR privacy
protection system in 2018 in response to the EU General Data Protection
Regulation (GDPR).
2. Consumer complaint procedure:
The Company provides consumers channels for complaints about products andservices, including: the Company website (including a special stakeholder area,
customer response, service satisfaction survey), Facebook page, email customer
service, global office addresses and telephone numbers for service lines.
Customers may also write in directly; all complaints receive a response after
handling.

60 Corporate Governance ReportImplementation Status

Evaluation Item

Yes

No

Brief Explanation(7)Does the Company's product and service
marketing and labeling adhere to relevantlaws and regulations and international
standards?

(7) The services and products the company provides all adhere to the laws andregulations of various countries. As of the end of 2015, the Company had
complied with US DOT's accessible web page regulations for airlines, and had
developed WCAG AA‐level accessible web pages. These provide a means forcustomers who have difficulty using traditional web pages to access theinformation on the pages using alternative means, effectively making the page
more user‐friendly and giving customers greater convenience. At the same time,internet transactions provide a payment platform that conforms to the industry
standard (PCI DSS), ensuring the security of consumer credit card information.

(8)Prior to entering a business relationshipwith a supplier, does the Company first
determine whether or not the supplier has
any record of negatively impacting societyor the environment?

(8) Potential CAL suppliers must issue a “tender declaration” prior to submitting atender. CAL requires that suppliers meet conflict of interest avoidance principles,anti‐bribery regulations, and supplier integrity standards, while at the same time
following all local laws. CAL carefully assesses suppliers’ impact on theenvironment and society and their image, including their reputation and any
record of previous illegal activities.

Deviations
from “theCorporate
SocialResponsibility
Best‐PracticePrinciples for
TWSE/TPEx
ListedCompanies”
and Reasons
No Difference

No Difference(9) The Company has set a “Supplier Code of Conduct” and specifically stipulates that No Difference(9)Do the Company's contracts with its major 
suppliers include provisions for
suppliers must provide a safe, healthy working environment, guarantee mutual
terminating the agreement at any time inrespect, dignity and fairness for labor, and respect professional ethical standards;
the event that the suppliers are involved
in all circumstances, when supplying products or services, all actions must fulfill
in any activities that violate Company CSR
legal and ethical requirements and promise responsibility to society and thepolicies and that significantly adversely
environment; in the event of any violations of these basic rules, the Company
impact the environment or society?
terminates the bilateral business relationship.
4. Strengthening information disclosure(1)Does the Company disclose on its website
No Difference
The China Airlines website features a dedicated CSR section to highlight our relatedand TWSE Market Observation Post
programs and we have disclosed our “CSR Report” and “GHG Emissions and Reduction
System relevant and reliable information
Information” on the Taiwan Stock Exchange Market Observation Post System.
about Company CSR?
5. 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 with international
practice, the Company has added to and amended the Company's “Corporate Social Responsibility and Sustainable Development Best Practice Principles” inMarch 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 from 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.
6. Other important information for facilitating the understanding of CSR and its implementation:(1) Environmental protection: In order to fully implement the scope of corporate social responsibility, comply with the government's direction of CSR promotion
and to be in line with the international practice, the Company has added to and amended the Company's “Corporate Social Responsibility and Sustainable
Development Best Practice Principles” 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 from three major aspects: environmental, social, and governance(economic) (ESG); there has been no operational difference in this year. For related information, please refer to the Company's corporate social responsibility
website.
(2) Social welfare: The Company has conducted public welfare teaching activities for a long time, including the “Friendly Campus” education promotion programfor remote elementary schools and the “Common Knowledge Platform Public Welfare Project” of Global Views magazine. In 2018, volunteer teaching social
welfare activities were held in such schools as Chuwei Elementary School, Hsihai Elementary School, Shanfong Elementary School, and Kuolin Elementary
School in Dayuan District. In 2018, 12 volunteer teaching sessions were conducted with the participation of 66 volunteers and benefiting more than 900
children. In addition, the public welfare event “Love All Around," which was held on the initiative of the Company's cabin crew; in 2018 activities were held in
New Taipei City Wulai Elementary School, 4 elementary and junior high schools in Pingxi District of New Taipei City, and 3 times in Hualien County Sioulin
Elementary School, with the participation of 183 volunteers, benefiting more than 420 children.
(3) A disastrous earthquake occurred on February 6, 2018 in Hualien. The Company immediately donated NT$10 million in the name of the Group to assist in
disaster relief and subsequent reconstruction, and encouraged the local residents and friends from police and fire departments who joined in disaster relief.
The Company also invited NBA star point guard Jeremy Lin to give a public welfare speech to internal employees, and share his mental journey while
courageously pursuing his dreams with colleagues; the speech is expected to produce more positive energy in colleagues. In addition, we have maintained
long‐term cooperation with the Huashan Social Welfare Foundation. We regularly sponsor care gifts and assist in organizing holiday banquets for elderly
people who are disabled, have dementia, or have no one to rely on. In addition, through “Make‐A‐Wish Taiwan,” we also continue to provide sick children
with special in‐flight services. We are in the fifth year of expanding sponsorship of our “Common Knowledge Platform Public Welfare Project” with Global
Views magazine publisher Commonwealth Publishing. We are also engaged in public welfare sponsorships including the “Fisher's Association of Taoyuan
District Year‐end Dinner," the “Eden Social Welfare Foundation's Fifth Touching Life Festival," “End Violence Against Children (EVAC) of World Vision Taiwan,"“Taiwan NGOs for CRC," and “The Children Charity Association’s Year‐End Charity Concert.” In 2018, we cooperated with the Garden of Hope Foundation for
the first time, and held the “Abused Children's Dreams‐Come‐True Public Welfare Delegation.” We arranged for 25 teenagers and children to travel to Hong
Kong on the launch flight of the Company's A350 Airbus co‐branding painted aircraft for a three‐day, two‐night journey‐a dream come true for the children.
(4) Promotion of CSR: Moving towards our vision of becoming the top airline choice in Taiwan, the Company is committed to promoting the tourism industry
chain of Taiwan and supporting the government's various tourism programs to enhance Taiwan's international visibility. In 2018, the Company supported andpromoted tourism in Taiwan with concrete actions: we participated in various domestic and international travel exhibitions; sponsored the Tourism Bureau
and the Taiwan Visitors Association in organizing the 2018 Taiwan Lantern Festival in Chiayi and 2018 Fulong International Sand Sculpture Art Festival;
supported a delegation of Taiwanese cooks to participate in the Culinary World Cup in Luxembourg; sponsored the 2018 Taiwan Plus project of The General
Association of Chinese Culture; and cooperated with one of Taiwan's eminent hotels, the Grand Mayfull Taipei, in sponsorship.
7. If the Company CSR report has received certification from relevant certification bodies, please detail below:
The limited level verification of the 2018 Corporate Social Responsibility (CSR) Report was completed in May 2019 by KPMG in accordance with the GRI guidelines
and the ISAE3000 assurance standard.

Corporate Governance Report613.3.7 Ethical Corporate Management
Implementation Status
Evaluation ItemYes No1. Establishment of ethical operation
policies and programs(1)Do the Company's Articles ofAssociation and external documents
explicitly express its ethical policies
and methods and are the Board andmanagement committed to the active
implementation of thesecommitments?

Brief Explanation

Deviations from “theEthical Corporate
Management
Best‐Practice Principles
for TWSE/TPEx Listed
Companies” and Reason(1) CAL has established Ethical Corporate Management Best Practice Principles andProcedures for Ethical Management and Guidelines for Conduct, which werepassed 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, and commitments. They are published on the CAL website and the
Taiwan Stock Exchange Market Observation Post System.

No Difference(2)Has the Company established andimplemented programs to prevent
unethical conduct and do these
programs clearly specify relevant
procedures, conduct guidelines, and adiscipline and appeals system for ruleviolations?

(2) The Company has established the “Procedures for Ethical Management andGuidelines for Conduct” and clearly laid out each item of forbidden unethicalbehavior, a reporting system, and a discipline system, and implements this in
the operations of each unit. Moreover, the Company has also set up a unit
dedicated to integrity in management (Human Resources Div.) withresponsibility for periodic reports to the Board of Directors. Such matters havebeen reported in the 3rd meeting of the 21st Board of Directors on November 8,
2018.

No Difference(3)Does the Company implement
preventative measures for each item
under Clause 2, Article 7 of the EthicalCorporate Management Best PracticePrinciples for TWSE/TPEx Listed
Companies or other operations thathave higher risk of unethicalbehavior?
2. Implementing ethical corporate
management(1)Does the Company evaluate theethical records of the businesses
with which it has dealings andinclude clear ethical corporate
behavior provisions in contracts
with such counterparties?

(3) China Airlines’ Ethical Corporate Management Best Practice Principles expressly
state that the scope of these regulations shall cover all business operations witha higher risk of unethical behavior, while also strengthening related measures toprevent those situations listed under Clause 2, Article 7 of the Ethical Corporate
Management Best Practice Principles for TWSE/TPEx Listed Companies.

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

No Difference(2)Has the Company established anorganization under the direct
jurisdiction of the Board of Directorsthat promotes ethical management
principles and also regularly reports
to the Board concerning
implementation?

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

(2) The Company's Div. of Human Resources is the specialized unit promoting
integrity in operations. It is responsible for collecting and organizing informationon the status of integrity in operations for the various units, and reports annuallyto the Board of Directors. Moreover, the Company encourages reporting of
unethical behavior or improper behavior, and has established and announced an
independent reporting mailbox with the General Audit Office investigating cases,
how each is handled and following up on reviewing improvement measures andreporting to the Board of Directors.
(3) CAL Procedures for Ethical Management and Guidelines for Conduct expressly
state that 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.

(4) In order to implement ethical management, the Company has establishedeffective accounting and internal control systems, which are reviewed annually
by internal auditors. The unit under review shall issue a corrective plan for eachissue discovered during the audit and follow ups will be held regularly to review
implementation.
(5) The Company promotes ethical behavior and corporate ethics when new
employees assume office, and conducts E‐Learning online courses forsupervisors dispatched in Taiwan and abroad. The “Ethical Corporate
Management Best Practice Principles," the “Procedures and Guidelines ofConduct for Ethical Management” and other documents have been disclosed on
the Company's internal and official website for the reference of internal andexternal personnel.
In order to strengthen employees' understanding of the Company's corporate
culture of ethical management, employees have been receiving training since2017 through the E‐learning system. The training situation for the last two years
is as follows:
1. 2017:i.Trainee(s): The Company's domestic units, except for flight and cabin crew
members.
ii.Number of trainees: 6,473 persons.
iii.Number of completions: 6,230 persons.
iv.Completion rate: 96.25%。

No Difference(4)Has the Company implementedeffective accounting and internal
control systems and does it have aninternal auditing unit or independentaccountant periodically review them?
(5)Does the Company periodically holdinternal and external ethicalcorporate behavior training?

62 Corporate Governance Report

No Difference

No DifferenceImplementation Status
Evaluation Item

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?

Yes No(2)Has the Company established aninvestigation SOP for violation
reporting and a relevant
confidentiality mechanism?

(3)Does the Company have any
measures in place to protect
individuals from possible
mistreatment arising from reporting
violations?
4. Strengthening information disclosure(1)Does the Company disclose thecontent of our Ethical Corporate
Management Best Practice Principles
and their effectiveness on our
website and the TWSE Market
Observation Post System?



Deviations from “theEthical Corporate
Management
Best‐Practice Principles
for TWSE/TPEx Listed
Companies” and Reason

Brief Explanation

2. 2018:i.Trainee(s): Current foreign branch office/agency staff (excluding foreign
cabin crew members and personnel on leave of absence during
training).
Number of trainees: 1,596 persons.
Number of completions: 1,356 persons.
Completion rate: 85%。
ii.Trainee(s): Taiwanese and foreign cabin crew members (excluding
personnel on leave of absence during training).
Number of trainees: 3,439 persons.
Number of completions: 3,439 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, thereporting 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 andexternal personnel. The reported cases will be handled by the General Audit
Office of the Company and the circumstances of the report, its handling
methods, follow‐up review, and improvement measures will be reported to theBoard of Directors.
(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 andpunishments, an appeals system, violation reporting confidentiality mechanism,
and investigation SOP.
(3) According to CAL Procedures for Ethical Management and Guidelines for
Conduct, employees who process violation reports must sign a written
statement pledging to maintain confidentiality of the reporters and the details of
the case. CAL also promises to protect the whistleblower from being improperly
punished due to the reporting.
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

No Difference

No Difference

No Difference

5. 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.

Corporate Governance Report63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 to Integrity 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 set 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/index.html).

3.3.9 Resignation or Dismissal of the Company’s Key Individuals, Including the
Chairman, CEO, and Heads of Accounting, Finance, Internal Audit andR&D:
April 27, 2019
Reason for Resignation or
Dismissal

Title

Name

Date ofAppointment

Auditor
GeneralChung, Huar‐Duan

12/26/2015

04/30/2018

Retirement due to age

ChairmanHo, Nuan‐Hsuan

06/24/2016

04/02/2019

Removal of juridical person

Date of Dismissal

3.3.10 Other Important Information Regarding Corporate Governance
A. The organization and operations of Company internal auditing are disclosed on
the Company website: http://www.china‐airlines.com.
B. Certifications of the personnel related to the company's internal audits:
International Internal Auditor Certificate: 1 person, Institute of Internal Auditors‐Chinese Taiwan
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: 1 person, 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:International Internal Auditor Certificate: 6 people, Institute of Internal Auditors‐Chinese Taiwan
Internal Auditor Certificate: 4 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: 3 people, R.O.C. Financial Planning Personnel
Proficiency Test Passing Certificate: 4 people, R.O.C. Stock Affairs Specialist Proficiency Test Passing
Certificate: 6 people, USA Certified Public Accountant License: 1 person, R.O.C. Basic EnterpriseInternal Audit Proficiency Test Passing Certificate: 5 people.

64 Corporate Governance Report

D. Company Director Continuing Education:
From January 1, 2018, through April 27, 2019
Title

Chairman

Director

Director

Director

Director

Director

Director

Name

Traininghours

Date(s)3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

11/08/2018

Training by: Taiwan Corporate
Governance Association

3hr

01/08/2018

Taiwan Institute of Directors

3hr

07/03/2018

Taiwan Institute of Directors

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

11/08/2018

Training by: Taiwan Corporate
Governance Association

3hr

11/09/2018

Taian Insurance Co. Ltd.

3hr

09/28/2018

3hr

11/08/2018

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

11/08/2018

Training by: Taiwan Corporate
Governance Association

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

10/04/2018

Wbcsd Global Network Partner

3hr

10/15/2018

3hr

11/08/2018

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

10/04/2018

Wbcsd Global Network Partner

3hr

10/15/2018

3hr

11/08/2018

3hr

07/11/2018

Hsieh, Su‐ChienCharles C.Y.,
Chen

Ting,
Kwang‐Hung

Chen, Han‐Ming

Ko, Sun‐Ta

Wei, Yung‐Yeh

Lin, Su‐Ming

Sponsoring Organization

Taiwan Academy of Banking and
Finance
Training by: Taiwan Corporate
Governance Association

Financial Supervisory
Commission, R.O.C.
Training by: Taiwan Corporate
Governance Association

Financial Supervisory
Commission, R.O.C.
Training by: Taiwan Corporate
Governance Association
Training by: Taiwan Corporate
Governance Association

CourseFocus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Trends, Challenges, and Risks ofInformation Security GovernanceDigital Transformation ‐ Starting from
Strengthening the Digital Skills of theBoard of Directors
2018 Annual Forum of Taiwan Instituteof Directors
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Trends, Challenges, and Risks ofInformation Security GovernanceTraining on Anti‐Money Laundering andCounter‐Financing of Terrorism for
Directors and Senior Management
Corporate Governance and Corporate
Sustainability Management Workshop
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Corporate Social Responsibility andTrade Links ‐ Sustainable Supply Chain
Management
Taipei Corporate Governance Forum
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Corporate Social Responsibility andTrade Links ‐ Sustainable Supply Chain
Management
Taipei Corporate Governance Forum
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View

Corporate Governance Report65TitleDirector

Independent
Director

Independent
Director

Independent
Director

Name

Wang, Shih‐Szu

Traininghours

Date(s)2hr

09/29/2018

Taiwan Insurance Institute3hr

11/08/2018

Training by: Taiwan Corporate
Governance Association

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

08/24/2018

Wbcsd Global Network Partner

3hr

10/15/2018

3hr

11/08/2018

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

09/10/2018

Taiwan Stock Exchange
Corporation

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

11/08/2018

Training by: Taiwan Corporate
Governance Association

3hr

07/11/2018

Training by: Taiwan Corporate
Governance Association

3hr

11/08/2018

Training by: Taiwan Corporate
Governance Association

Sponsoring Organization

Financial Supervisory
Commission, R.O.C.
Training by: Taiwan Corporate
Governance Association

Chang, Hsieh
Gen‐Sen

Chung, Lo‐Min

Shen, Hui‐Ya

66 Corporate Governance Report

CourseAnalysis of Laws and Regulations related
to Anti‐Money Laundering andCounter‐Financing of Terrorism
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Corporate Social Responsibility andTrade Links ‐ Sustainable Supply Chain
Management
Taipei Corporate Governance Forum
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point ofView
New Corporate Governance Roadmap
Seminar Series of the Financial
Supervisory Commission ‐ the Role andAuthority of the Directors
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Trends, Challenges, and Risks ofInformation Security Governance
Focus of Supervision over Reinvestment
Business and Subsidiaries from theInternal Control and Financial Point of
View
Trends, Challenges, and Risks ofInformation Security GovernanceE. Corporate Governance Related Training Attended by Company Managers:
Title

Name

Vice
President,
Chen, I‐Chieh
FinanceDiv.
AssistantVice
Yen, Yang
President,
FinanceDiv.
DeputyAuditor
General,Fang, Juo‐Ling
General
Audit
OfficeDeputyAuditor
General,Ho, Hui‐Fen
General
Audit
OfficeDate(s)Sponsoring Organization

From January 1, 2018 through April 27, 2019
Training
Coursehours

10/04/2018‐10/05/2018

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

12hr

09/06/2018‐09/07/2018

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

12hr

08/31/2018

Internal Audit Professional Course ‐ Auditing
Institute of Internal
Auditors‐Chinese Taiwan Practice and Ethics Discussion

6hr

09/19/2018

Accounting Research and Internal Control and Audit Series ‐ Analysis ofDevelopment
Practical Issues Regarding Legal ComplianceFoundation
Risks in the Age of the Digital Economy

6hr

04/16/2018‐04/18/2018

Internal Auditing Professional
Institute of Internal
Course‐Pre‐Employment Training Workshop
Auditors‐Chinese Taiwan
for the First‐Time Corporate Internal Auditor

18hr

F. Succession plan for the Board of Directors and key management of the Company:
In the succession plan for the Board of Directors of China Airlines, the candidates of
the Board of Directors are nominated by the major shareholders and then electedby the shareholders' meeting, and the Board of Directors as a whole shall have theabilities of management judgment, leadership and decision‐making, operation andmanagement, and crisis management, and shall possess knowledge of the industry,
professional fields, and international market outlook. Refer to P.44 for thediversification situation. The independence of all Board members shall be ensured
according to law. The successors of the Board members are selected by the major
shareholders. The succeeding director representatives shall meet qualifications forthe aviation business, such as possessing abundant knowledge and experience inbusiness management and expertise, and the results of annual appraisal are
important references for continued nomination; in order to enhance the expertiseand continuous enrichment of new knowledge for new or reappointed Directors,
China Airlines has formulated the annual Directors’ continuing education programand arranged various training courses for Directors.
Furthermore, regarding the succession plan for important management, in addition
to having excellent professional management ability, its behavior, ethics, andinstructions 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 andCorporate Governance Report67that 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
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.

68 Corporate Governance ReportChina Airlines Ltd. Procedures for Handling Material Inside Information:
Article 1: These Procedures are specially adopted to establish sound mechanisms for the handling anddisclosure of material inside information by the Company, in order to prevent improper
information disclosures and to ensure the consistency and accuracy of information released by
the Company to the public.
Article 2: The Company shall implement its handling and disclosure of material inside information inaccordance with applicable laws and regulations, the rules and regulations of the Taiwan Stock
Exchange Corporation, and these Procedures.
Article 3: These Procedures shall apply to all directors, managerial officers, and employees of the Company.
The Company shall ensure that any other person who acquires knowledge of the Company's
material inside information due to their position, profession, or relationship of control shallcomply with the applicable provisions of these Procedures.
Article 4: For the purposes of these Procedures, the term “material inside information” refers to
information that is defined as material inside information by the Securities and Exchange Act,
other applicable laws and regulations, and the applicable rules and regulations of the Taiwan
Stock Exchange Corporation or the GreTai Securities Market.
Article 5: The Company’s Finance Division is tasked with handling material inside information. The division
shall have the following functions and authorities:
1. Responsibility for formulating the drafts of these Procedures and any amendments to them.
2. Responsibility for receiving inquiries in connection with the methods of handling material inside
information, and for consultation, review, and recommendations relating to these Procedures.
3. Responsibility for receiving reports on unauthorized disclosures of material inside informationand formulation of corresponding measures.
4. Responsibility for designing a system for preserving all documents, files, electronic records, andother materials related to these Procedures.
5. Other activities related to these Procedures.
Article 6: The Company's directors, managerial officers, and employees shall exercise the due care andfiduciary duty of a good administrator and act in good faith when performing their duties. No
director, manager, or employee with knowledge of material inside information of the Company
may divulge the information to others before it is made public. No director, managerial officer, or
employee of the Company may inquire about or collect any non‐public material inside informationof the Company not related to their individual duties from a person with knowledge of suchinformation, nor may they disclose to others any non‐public material inside information of theCompany of which they become aware for reasons other than the performance of their duties.
Article 7: Proper protection of confidentiality shall be given to files and documents containing the Company's
material inside information when transmitted in written form. When transmitted by email or otherelectronic means, such files and documents must be processed with appropriate security
technology, such as encryption or electronic signatures.
Files and documents containing the Company's material inside information shall be backed up and stored ina secure location.
Article 8: The Company shall ensure that the firewalls specified in the preceding two articles are established,
and take the following additional steps:
1. Adopt adequate control measures for the firewalls and perform periodic testing.
2. Enhance measures for custody and maintaining the secrecy of files and documents containing
non‐public material inside information of the Company.
Article 9: Any organization or person outside of the Company that is involved in any corporate action of theCompany relating to a merger or acquisition, major memorandum of understanding, strategic
alliance, other business partnership plans, or the signing of a major contract shall be required tosign a confidentiality agreement, and may not disclose to another party any material inside
information of the Company thus acquired.
Article 10: The Company shall comply with the following principles when making external disclosures ofmaterial inside information:
1. The information disclosed shall be accurate, complete, and timely.
2. There shall be a well‐founded basis for the information disclosure.
3. The information shall be disclosed fairly.

Corporate Governance Report69Article 11: Any disclosure of the Company's material inside information, except as otherwise provided by law
or regulation, shall be made by the Company's spokesperson, or by a deputy spokesperson acting
in such capacity in a confirmed sequential order. When necessary, the disclosure may be madedirectly by a responsible person of the Company.
The Company's spokesperson or deputy spokesperson shall communicate to outside parties only
information within the scope authorized by the Company, and no personnel of the Company,
other than those serving as the Company's responsible person, spokesperson, or deputy
spokesperson, may disclose any material inside information of the Company to outside parties
without authorization.
Article 12: The Company shall keep records of the following in respect of any disclosure of information tooutside parties:
1. The person who discloses the information, the date, and the time.
2. How the information is disclosed.
3. What information is disclosed.
4. What written material is delivered.
5. Any other relevant details.
Article 13: If a media agency releases information that is in any respect inconsistent with material
information disclosed by the Company, the Company shall promptly issue a clarification on theMarket Observation Post System (MOPS) and request that the media agency correct the
information.
Article 14: Any director, managerial officer, or employee of the Company that becomes aware of any
unauthorized disclosure of the Company's material inside information shall report to the
responsible unit and the internal audit department of the Company as soon as practicable.
Upon receipt of a report made pursuant to the preceding paragraph, the responsible unit shall formulate
corresponding measures. When necessary, it may invite members from the internal audit andother departments to meet for discussion of the measures, and shall keep a record of the resultsof the measures for future reference. The internal auditors shall also perform such audits astheir duties may require.
Article 15: The Company shall take measures to discover those responsible and take appropriate legal action
against any personnel under either of the following circumstances:
1. Personnel of the Company disclose material inside information without authorization to any
outside party, or otherwise violate these Procedures or any other applicable law or regulation.
2. A spokesperson or deputy spokesperson of the Company communicates to any outside party
any information beyond the scope authorized by the Company, or otherwise violates these
Procedures or any other applicable law or regulation.
If any person outside the Company divulges any material inside information of the Company,
thereby causing damage to any property or interest of the Company, the Company shall pursue
appropriate measures to hold the person divulging the information legally liable.
Article 16: These Procedures shall be incorporated into the Company's internal control system. The internal
auditors shall keep themselves regularly informed of the status of compliance with these
Procedures and shall prepare related audit reports, so as to ensure full implementation of theprocedures for handling material inside information.
Article 17: At least once per year, the Company shall conduct educational campaigns to promote awarenessamong all directors, managerial officers, and employees with respect to these Procedures andrelated laws and regulations.
The Company shall also provide educational campaigns to new directors, managerial officers, andemployees in a timely manner.
Article 18: These Procedures, and any amendments to them, shall be implemented upon approval by the
Board of Directors.

70 Corporate Governance Report3.3.11 Internal Control Systems
A. Internal Control Statement

Corporate Governance Report71

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.

72 Corporate Governance Report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 noted:No.
1

Penalty
A fine of
NT$300,000.

Deficiency
On January 5, 2018, due to aircraft
malfunction, flight and cabin crew members
worked overtime, which was in violation of
Article 32, Paragraph 2 of the Labor Standards
Act.

2

A fine of
NT$300,000.

On March 22, 2018, the Company underwent
labor inspection. There was a violation of
Article 49, Paragraph 1 of the Labor Standards
Act because female workers' nighttime workin the Ground Services Division had not been
approved by the labor union.

3

A fine of
NT$20,000.

On May 10, 2018, the Company underwent
labor inspection. There was a violation of
Article 34, Paragraph 2 of the Labor Standards
Act because the rest period for out‐stationed
rotation did not reach eleven hours.

4

A fine of
NT$1,020,000.

On May 10, 2018, the Company underwent
labor inspection. There was a violation of
Article 38, Paragraph 4 of the Labor Standards
Act because remaining annual paid leave of
the Ground Services Division employees havenot been bought back; There was a violationof Article 49, Paragraph 1 of the Labor
Standards Act because female workers'
nighttime work in the Ground Services
Division between May and June 2018 had notbeen approved by the labor union.

5

A fine of
NT$1,020,000.

On August 31, 2018, the Company underwent
labor inspection. There was a violation of
Article 32, Paragraph 2 of the Labor Standards
Act because cabin crew members performed
more than 12 hours of work; and a violationof Article 35 of the Labor Standards Act
because flight deck crew members did nothave in‐flight relief and cabin crew members
did not have a sufficient rest period (30minutes of rest shall be given for every fourhours).

Improvement
1. In this case, the overtime work was due to mechanicalproblems of the aircraft which resulted in the aircraft
being unable to depart at the scheduled time; thisconstituted a force majeure factor.
2. The case underwent subsequent labor inspection. The
cabin crew members filed an administrative appeal tosafeguard Company's rights and interests because thedelay was due to temporary mechanical failure of theoutstation aircraft, which then resulted in the change ofplane and overtime work.
3. The Company reviewed the cause of this malfunction
and strengthened the inspection of the aircraft toimprove the availability.
1. In this case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe results of the treatment are 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 of a collective agreement in March 2018,
and will reconfirm the provisions allowing female
workers' nighttime work.
1. The cabin crew member worked on mission CI112,
which was connected to CI113; although the return trip
was on the next day, it should still be recognized as thesame mission. Also, the crew members' rest period andon‐duty hours did not violate the AOR regulations of
the Civil Aeronautics Administration.
2. This case, due to the particularity of the flight and cabincrew work, the Company finds the competentauthority’s restriction based on the hard‐and‐fast rulethat is inconsistent with hours between the shifts
unreasonable. Administrative appeal has been filed
according to the law for remedy.
1. In this case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe results of the treatment are unfair since thecompetent authority was biased towards the union’s
claim and imposed the penalty.
2. The administrative appeal of this case was dismissed,
the Company will continue to file an administrative
litigation for remedy.
3. The Company and the Company union have initiatednegotiation of a collective agreement in March 2018,
and will reconfirm the provisions allowing female
workers' nighttime work.
1. In this case, there was overtime because the plane wasunable to take off according to the scheduled time,
which was due to the decision of Air Traffic Control(ATC) after a natural disaster at the out station; thisconstituted a force majeure factor.
2. An administrative appeal has been filed for this case toprotect the Company's rights and interests.
3. From time to time, the Company reviews the factors
causing flight delays and includes them as reference
when planning the dispatching of crew members.

Corporate Governance Report

73

No.
6

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

Deficiency
On November 6, 2018, the Company
underwent labor inspection. There was a
violation of Article 49, Paragraph 1 of theLabor Standards Act because female workers’
nighttime work in the Ground Services
Division in October 2018 had not been
approved by the labor union.

7

A fine of
NT$1,000,000.

On December 10, 2018, the Company
underwent labor inspection. There was a
violation of Article 49, Paragraph 1 of theLabor Standards Act because female workers'
nighttime work in the Cargo Services Divisionin December 2018 had not been approved by
the labor union.

Improvement
1. In this case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe results of the treatment are 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 of a collective agreement in March 2018,
and will reconfirm the provisions allowing female
workers' nighttime work.
1. In this case of female workers' nighttime work, theCompany union refused to acknowledge the provisionsof the collective agreement; the Company believes thatthe results of the treatment are 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 of a collective agreement in March 2018,
and will reconfirm the provisions allowing female
workers' nighttime work.

In addition, due to several labor disputes between the Company and the labor unionin 2018, the Company was successively fined from NT$30,000 to NT$120,000 by the
Board for Decision on the Unfair Labor Practices of the Ministry of Labor. Up till now,
the total imposed fine has reached more than NT$500,000, and we continue to seek
administrative remedies. The relevant statistics of cases and content of the disputes
are as follows:
Number of cases

9

Main dispute
1. Dispute regarding granting of leave forunion related business of the union’s cadre
2. Dispute regarding Company’s internal
disciplinary power
3. Dispute regarding whether the operationof labor union was hindered
4. Dispute regarding change of internal
regulations of the Company

Total amount of fines

NT$540,000

3.3.13 Major Resolutions of Shareholders’ Meeting and Board Meetings
A. Major Resolutions of Shareholders’ Meeting in 2018
Item
Major resolutions
Execution
1. Business Report and Financial Statements This resolution was passed Announcement was made after resolution of
for the year 2017as proposed upon voting.
Shareholders’ Meeting on June 27, 2018
2. 2017 Surplus Earnings Distribution
This resolution was passed Announcement was made after resolution ofas proposed upon voting.
Shareholders’ Meeting on June 27, 2018
3. Election of the 21st Board of Directors
This resolution was passed Elected Directors are as follows:
as proposed upon voting.
Seven juridical person director representatives of the“China Aviation Development Foundation”:
Ho, Nuan‐Hsuan; Hsieh, Su‐Chien; Charles C.Y., Chen;
Ting, Kwang‐Hu; Chen, Han‐Ming; Ko, Sun‐Ta; Wei,
Yung‐Yeh.
Two juridical person director representatives of the“National Development Fund of Executive Yuan”:
Lin, Su‐Ming; Wang, Shih‐Szu.
Three Independent Directors:
Chung, Lo‐Min; Chang, Hsieh Gen‐Sen; Shen, Hui‐Ya.
4. Lifting of Non‐competition Restriction on This resolution was passed The non‐competition restriction on the 21st Board of
Holding Concurrent Posts for the 21st
as proposed upon voting.
Directors was lifted based on the resolution ofBoard of Directors
Shareholders’ Meeting on June 27, 2018, which was
subsequently announced.

74 Corporate Governance Report

B. Major Resolutions of Board Meetings (January 1, 2018 to April 27, 2019)20 Board

Date

Item

Major resolutions

Opinions of
independent
directors

14th meeting

2018/01/24

1. 2017 Corporate Social Responsibility(CSR) Operation Results of theCompany
2. 2017 Employee Salary and 2018 Lunar
New Year Incentive

1. Approved.

1. None.

Handling ofIndependent
Directors’
opinions by
the Company
1. None.

2. Approved.

2. It is suggested
that the labor
union’s improperstatement andclaims be properly
explained andclarified.

2. Prompt andproperresponse
and externalclarification
have beenmade.

3. Chairman and Managers' 2017
Year‐end Bonus, 2018 Lunar New Year
Incentive and 2018 Salary Adjustment

3. Approved.

3. Based on
the opinions
of a numberofIndependent
Directors, itis planned
that current
operations
will bemaintained.

4. 2018 Employee Salary Adjustment
5. Acquisition of Shares in “Kaohsiung
Airport Catering Services Ltd.”
1. The Adoption of Introduction Plan and
Schedule in IFRS 16 Leases by theCompany
2. Internal Audit Business Report for theSecond Half of 2017
3. Dismissal of Auditor General in the
General Audit Office who is retiring due
to age4. The Convening of the 2018 Annual
General Meeting
5. 2017 Internal Control System
Effectiveness Audit and Statement
6. 2017 Financial Report andConsolidated Financial Report
7. 2017 Business Report
8. 2017 Surplus Earnings Distribution
9. 2018 CPA Appointment andRemuneration
10. Provision of Financing Endorsement
and Guarantee to Taiwan Aircraft
Maintenance and Engineering Co.,
Ltd. with a limit of 2 billion NT$
1. Review of Qualifications of the 21st
Director Nominees

4. Approved.
5. Approved.

3.(1) Careful study
and evaluation oftheperformance‐relat
ed salaryadjustment
method for senior
management isrecommended.
(2) Senior
managers will also
face the pressureof salary reduction
due to Company’s
losses, so theinclusion of aperformancebonus is still
recommended.
4. None.
5. None.

1. Approved.

1. None.

1. None.

2. Approved.

2. None.

2. None.

3. Approved.

3. None.

3. None.

4. Approved.

4. None.

4. None.

5. Approved.

5. None.

5. None.

6. Approved.

6. None.

6. None.

7. Approved.
8. Approved.
9. Approved.

7. None.
8. None.
9. None.

7. None.
8. None.
9. None.

10. Approved.

10. None.

10. None.

1. Except for Mr.
Liu, Hui‐Tsung,who did notproviderelevant
evidencing
documents
required by

1. None.

1. None.

th

15th meeting

16th meeting

2018/03/22

2018/05/10

4. None.
5. None.

Corporate Governance Report

75

th

20 Board

Date

Item

2. Lifting of Non‐compete Restriction on
the 21st Directors‐elect3. Provision of General Financing Limit
and Financial Commodity Trading Risk
Limit by Three Financial Institutions,
Including Bank SinoPac
4. Position Change of Auditor General in
the General Audit Office

Opinions of
independent
directors

Handling ofIndependent
Directors’
opinions by
the Company

Article 192‐1,
Paragraph 4 of
the Company
Act and was
not included in
the candidatesof Directors
according to
the law, theremaining 12
nominees havebeen approved
to be listed in
the roster ofcandidates forthe 21st Boardof Directors.
2. Approved.

2. None.

2. None.

3. Approved.

3. None.

3. None.

4. Approved.

4. None.

4. None.

Opinions of
independent
directors

Major resolutions

21st Board

Date

Item

Major resolutions

1st meeting

2018/06/27

1. Election of the Chairman of the 21st
Board of Directors

1. Election of
Director Ho,
Nuan‐Hsuan as
Chairman of
the 21st Boardof Directors.
2. Thereappointmentof Mr. Hsieh,
Su‐Chien as
President has
been approved.
1. Approval of theappointment of
Independent
Director Chung,
Lo‐Min,Independent
Director Chang,
Hsieh Gen‐Sen,
Independent
Director Shen,
Hui‐Ya, Director
Lin, Su‐Ming,
and Director
Ting, Kwang‐Hu
as members of
the RiskManagement
Committee ofthe 21st Boardof Directors.

2. Appointment of President

1stExtraordinary
Meeting

2018/07/11

76 Corporate Governance Report

1. Appointment of Risk Management
Committee Members of the 21st Boardof Directors

1. None.

Handling ofIndependent
Directors’
opinions by
the Company
1. None.

2. None.

2. None.

1. None.

1. None.

21st Board

2nd meeting

3rd
Extraordinary
Meeting
3rd meeting

4th
Extraordinary
MeetingDate

2018/08/09

2018/10/03

2018/11/08

2018/12/21

Item

Major resolutions

2. Appointment of Remuneration
Committee Members of the 21st Boardof Directors

2. Approval of theappointment of
Independent
Director Chang,
Hsieh Gen‐Sen,
Independent
Director Shen,
Hui‐Ya, and Mr.
He, Jyun‐Huei
as members oftheRemuneration
Committee ofthe 21st Boardof Directors.
3. Approved.

2. None.

Handling ofIndependent
Directors’
opinions by
the Company
2. None.

3. None.

3. None.

1. Approved.

1. None.

1. None.

2. Approved.

2. Directors
have been
reminded ina timelymanner.

3. Set the Record Date for Related Mattersof the 2017 Cash Dividend Distribution
1. 2017 Employee Compensation (Bonus)of the Chairman and Managers
2. Traveling Expense Standards for
Military, Civil or Teaching Personnel
Serving as Part‐time Directors of theCompany

Opinions of
independent
directors

3. Flight and Cabin Allowance Adjustment
for Senior Vice President (VO)
4. Change in Personnel
5. Issuance of Domestic Unsecured
Ordinary Corporate Bonds
6. Provision of General Financing Limit and
Financial Commodity Trading Risk Limit
by Five Financial Institutions, IncludingFirst Commercial Bank
7. Share Buyback of the Company
Position Change of Senior Vice President(VV)

3. Approved.

2. According to therecommendationof Remuneration
Committee
member He,
Jyun‐Huei on July
26, themanagerial unit
is requested toremind the
Directors in atimely manner.
3. None.

4. Approved.
5. Approved.

4. None.
5. None.

4. None.
5. None.

6. Approved.

6. None.

6. None.

7. Approved.
Approved.

7. None.
None.

7. None.
None.

1. 2019 Audit Plan
2. 2019 Business Plan and Budget
3. Revision of “Operational Procedures for
Loaning Funds to Others”
4. Setting of Capital Reduction Record
Date for the Cancellation of Shares in
the Present Buyback
5. Change of CPA by Deloitte&Touche
6. Provision of General Financing Limit and
Financial Commodity Trading Risk Limit
by Two Financial Institutions, Including
CTBC Bank
7. Traveling Expense Standards for
Military, Civil or Teaching Personnel
Serving as Part‐time Directors of theCompany

1. Approved.
2. Approved.
3. Approved.

1. None.
2. None.
3. None.

1. None.
2. None.
3. None.

4. Approved.

4. None.

4. None.

5. Approved.
6. Approved.

5. None.
6. None.

5. None.
6. None.

7. Approved.

7. None.

7. None.

Position Change of Senior Vice President(VV)

Approved.

None.

None.

3. None.

Corporate Governance Report77

21st Board

Date

Item

Major resolutions

Opinions of
independent
directors

4th meeting

2019/01/21

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
Taiwan1. Approved.

1. None.

Handling ofIndependent
Directors’
opinions by
the Company
1. None.

2. Approved.

2. None.

2. None.

3. Approved.

3. Managerial
Department isRequested to
PrepareMaterials for
Queries andAnswers in the2019 Annual
General Meeting.

4. Provision of General Financing Limit and
Financial Commodity Trading Risk Limit
by Five Financial Institutions, Including
Mega International Commercial Bank
5. Regular Review of Performance
Evaluation Systems of Directors andManagers
6. Regular Review of Policies, Systems,
Standards, and Structures for Salary andCompensation of Directors andManagers

4. Approved.

4. None.

3. Materials
for queries
and answers
in the 2019
AnnualGeneralMeeting
have been
preparedaccording tothesuggestion of
Independent
Directors.
4. None.

5. Approved.

5. None.

5. None.

6. Thesupervisorydifferential payof Chairman
Ho,
Nuan‐Hsuan
and President
Hsieh, Su‐Chien
will not be
adjusted during
their terms ofoffice. The
Directors'
traveling
expenses or
remuneration
will be reported
to the Board of
Directors afterreferring to thesalary andremunerationof Directors
and Supervisors
designated by
the Ministry ofTransportation
andCommunications to its businessorganizations,with aretrospective
effective dateof January 1,
2019; thismatter was
passed after
the attending
Directors

6. None.

6. None.

78 Corporate Governance Report

21st Board

5th meeting

5th
Extraordinary
MeetingDate

2019/03/20

2019/04/02

Item

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
1. 2018 Internal Control System
Effectiveness Audit and Statement
2. The Convening of the 2019 Annual
General Meeting
3. Amendment of “Directors Election
Regulations”
4. 2018 Financial Report and Consolidated
Financial Report
5. 2018 Business Report
6. 2018 Surplus Earnings Distribution
7. 2019 CPA Appointment andRemuneration
8. Amendment of “Company’s Articles of
Association”
9. Revision of “Procedures for theAcquisition 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 a collective
agreement on February 21, 2019, at themeeting with the Department of Labor,
Taoyuan City Government.
Election of new Chairman

Opinions of
independent
directors

Handling ofIndependent
Directors’
opinions by
the Company

approved therevision.
7. Approved.

7. None.

7. None.

8. Approved.
9. Approved.

8. None.
9. None.

8. None.
9. None.

10. Approved.

10. None.

10. None.

11. Approved.

11. None.

11. None.

1. Approved.

1. None.

1. None.

2. Approved.

2. None.

2. None.

3. Approved.

3. None.

3. None.

4. Approved.

4. None.

4. None.

5. Approved.
6. Approved.
7. Approved.

5. None.
6. None.
7. None.

5. None.
6. None.
7. None.

8. Approved.

8. None.

8. None.

9. Approved.

9. None.

9. None.

10. Approved.

10. None.

10. None.

11. Approved.

11. None.

11. None.

12. Approved.

12. None.

12. None.

13. Approved.

13. None.

13. None.

All attending
Directors
unanimously
agreed that
Director Hsieh,
Su‐Chien willserve as the new
Chairman, while
holding the
concurrent
position of
President.

None.

None.

Major resolutions

Corporate Governance Report79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.

3.4 Information Regarding the Company’s Audit Fee andIndependence
3.4.1 Audit Fee
Accounting Firm
Deloitte & Touche

Name of CPA
Yang, Chen‐Hsiu

Period Covered by CPA’s Audit

Remarks

01/01/2018‐09/30/2018

Mainly due to the internal rotation

10/01/2018‐12/31/2018of the accounting firm

Chen, Li‐Chi

Yang, Chen‐Hsiu Huang, Jui‐Chan

Unit: NT$ thousands
Fee Items
Fee Range
1

Under 2,000

22,000 ‐ 4,000

34,000 ‐ 6,000

46,000 ‐ 8,000

58,000 ‐ 10,000

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
Accounting Name of Audit
Firm

Deloitte &Touch

System ofCompany

Human

DesignRegistration

Resource

Others Subtotal

Covered by

Remarks

CPA’s Audit

5,663

‐

‐

‐

2,861

2,861

01/01/2018‐09/30/2018

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).

Yang, Chen‐Hsiu
Huang, Jui‐ChanToucheFee

PeriodYang, Chen‐Hsiu
Chen, Li‐Chi

Deloitte &CPA

Non‐audit Fee

1,887

‐

‐

‐

503

503

10/01/2018‐12/31/2018

Others include service fee formaster file andcountry‐by‐country
reporting.

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.

80 Corporate Governance Report3.5 Replacement of CPA:
3.5.1 On the previous accountant
Date of change

November 8, 2018

Reason and explanation forchangeDue to internal reorganization at the CPA firm, the resolution was passed at the
3rd meeting of the 21st Board of Directors on November 8, 2018 that from thefinancial report for Q4 of 2018, the CPA would be switched to Yang, Cheng‐hsiu
and Huang, Jui‐Chan.
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

Appointee

Proactive termination of
appointment
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

Yang, Cheng‐hsiu; Huang, Jui‐Chan

Date of appointment

November 8, 2018

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 Report81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
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

Name

Unit: Shares
The current year through2018
April 27, 2019
PledgedPledged
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

China Aviation Development Foundation (Note 1)
China Aviation Development Foundation
Representative: Hsieh, Su‐Chien
China Aviation Development Foundation
Representative: Charles C.Y., Chen; 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 (Assumed post on 06/27/2018)

0

0

0

0

Shen, Hui‐Ya (Assumed post on 06/27/2018)

0

0

0

0

Hsieh, Su‐Chien

0

0

0

0

Lo, Ya‐Mei

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 (Assumed post on 07/21/2018)

0

0

0

0

Chien, Feng‐Nien
Chen, I‐Ko
Lai, Ming‐HuiPeng, Pao Chu
Liu, Der‐Chuan
Liu, Tsao‐Yang
Yeah, Shao‐Ting
Chung, Ming‐JyhChen, I‐Chieh
Hong, Tsu‐Kuang
Chiu, Chang‐Hsin
Chou, Jyh‐Shyan
Chen, Wei‐Tau (Assumed post on 11/07/2018)
Chang, Cheng‐Hao (Assumed post on 01/21/2019)
Lu, Shih‐Ming
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

82 Corporate Governance Report

The current year throughApril 27, 2019
PledgedPledged
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
2018

Title

Deputy Auditor
GeneralAssistant 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
Assistant Vice
President
Assistant Vice
President
Director

Name

Ho, Hui‐Fen

0

0

0

0

Yu, Yueh Han (Assumed post on 12/06/2018)

0

0

0

0

Chen, Chwen‐Der (Assumed post on 08/01/2018)

0

0

0

0

Tung, Hsing‐Hua (Assumed post on 03/16/2018)

0

0

0

0

Huang, Hsiang‐Piao

0

0

0

0

Jeng, Jong‐Shinn

0

0

0

0

Chen, Pei‐Ti (Assumed post on 05/16/2018)

0

0

0

0

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

0

0

0

0

Shann, Da‐Sin (Assumed post on 01/01/2018)

0

0

0

0

Fang, Cheng‐Ru (Assumed post on 10/20/2018)

0

0

0

0

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

0

0

0

0

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

0

0

0

0

Chen, Jo‐Ching

0

0

0

0

Yen, Yang (Assumed post on 05/01/2018)

0

0

0

0

Huang, Hui Na

0

0

0

0

Fang, Yuan‐Hua (Assumed post on 08/04/2018)

0

0

0

0

Kao, Shu‐Chuan

0

0

0

0

Yu, Yau

0

0

0

0

Hsiao, Kuo Chih

0

0

0

0

Wang, Wei

0

0

0

0

Liu, Shou‐Shu (Assumed post on 12/01/2018)

0

0

0

0

Lu, Shwu‐Huoy

0

0

0

0

Liu, Duan‐Shiuh

0

0

0

0

Hsiao, Jui‐Fu

0

0

0

0

Ku, Yueh‐Han (Dismissed on 01/01/2018)

0

0

0

0

Chu, Te‐Hsiu (Dismissed on 01/08/2018)

0

0

0

0

Lin, Ming‐Hsiu (Dismissed on 01/11/2018)

0

0

0

0

Chunghwa Telecom Co., Ltd.
Representative: Huang, Hsiu‐Gu(Dismissed on 01/19/2018)

0

0

0

0

Corporate Governance Report

83The current year throughApril 27, 2019
PledgedPledged
Holding
Holding
Holding
Holding
Increase
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
2018

Title

Assistant Vice
President
Assistant Vice
President
Auditor General
Director

Director
Independent
Director
Independent
Director
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Senior Vice
President
Vice President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Assistant Vice
President
Vice President
ChairmanName

Liao, Wei‐Chih (Dismissed on 03/01/2018)

0

0

0

0

Lin, Hsiao‐Feng (Dismissed on 03/26/2018)

0

0

0

0

Chung, Chuar‐Duan (Dismissed on 04/30/2018)
China Aviation Development Foundation
Representative: Cheng, Chuan‐Yi(Dismissed on 05/07/2018)
China Aviation Development Foundation
Representative: Jong, Jia‐shi; Lee, Kuo‐Fu(Dismissed on 06/26/2018)

0

0

0

0

0

0

0

0

0

0

0

0

Luo, Hsiao‐His (Dismissed on 06/26/2018)

0

0

0

0

Ting, Tin‐Yu (Dismissed on 06/26/2018)

0

0

0

0

Hsueh, Po‐Wen (Dismissed on 07/01/2018)

0

0

0

0

Lu, Shwu‐Huoy (Dismissed on 07/17/2018)

0

0

0

0

Pan, Wen‐Tsung (Dismissed on 07/30/2018)

0

0

0

0

Lai, Hsiang‐Kuang (Dismissed on 09/25/2018)

0

0

0

0

Chang, Chih‐Chieh (Dismissed on 10/08/2018)

0

0

0

0

Peng, Long‐Min (Dismissed on 11/05/2018)

0

0

0

0

Tsai, Chih Hung (Dismissed on 12/06/2018)

0

0

0

0

Wei, Shi Jong (Assumed post on 03/31/2018)(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)

0

0

0

0

0

0

0

0

Note 1: Refers to major shareholders holding more than 10% of company shares.

3.7.1 Shares Trading with Related Parties: Not Applicable.
3.7.2 Shares Pledge with Related Parties: Not Applicable.

84 Corporate Governance Report3.8 Relationships among the Top Ten Shareholders
Name

Current Shareholding

SharesChina Aviation Development Foundation(Representative: Wang, Kwo‐Tsai)National Development Fund, Executive
Yuan%

1,867,341,935 34.45%

Spouse’s/minor’s
Shareholding

Shareholding
by Nominee
Arrangement

SharesShares%%April 27, 2019
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

519,750,519

9.59%

0

0%

0

0%

None

None

None

263,622,116

4.86%

0

0%

0

0%

None

None

None

New Labor Pension Fund

102,841,000

1.90%

NA

NA

0

0%

None

None

None

China Airlines Ltd. Employee Stock
Ownership Trust Plan

58,077,060

1.07%

NA

NA

0

0%

None

None

None

JPMorgan Chase Bank N.A. Taipei Branchin custody for Norges Bank

47,132,821

0.87%

NA

NA

0

0%

None

None

None

43,583,353

0.80%

NA

NA

0

0%

None

None

None

43,007,050

0.79%

NA

NA

0

0%

None

None

None

41,627,932

0.77%

NA

NA

0

0%

None

None

None

41,464,000

0.76%

0

0%

0

0%

None

None

None

(Representative: Dr. Chen, Mei‐Ling)
Chunghwa Telecom Co., Ltd.
(Representative: Sheih, Chi‐Mau)

CitiBank (Taiwan) in custody for investor
account of Dimensional Emerging
Markets Value Fund
JPMorgan Chase Bank N.A. Taipei Branchin custody for Vanguard Emerging
Markets Stock Index Fund, a series ofVanguard International Equity Index
Funds
JPMorgan in custody for Dimensional
Emerging Markets Value Fund
Sea Investment Co., Ltd.
(Representative: Wang,Yun‐E)

Corporate Governance Report853.9 Ownership of Shares in Affiliated Enterprises
Dec 31, 2018
Unit: shares; %Affiliated Enterprises

Ownership by the Company

Direct or Indirect Ownership by
Directors, Managers
Shares%‐‐5,000
100.00400,000
100.00‐‐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
77,270100.00‐‐77,270Corp. (Note 4)
4. Yestrip Co., Ltd.
1,600,000
100.00‐‐1,600,000
5. Cal Park Co., Ltd.
150,000,000
100.00‐‐150,000,000
6. Cal Hotel Co., Ltd.
46,500,000
100.00‐‐46,500,000
7. Taiwan Aircraft Maintenance And
135,000,000
100.00‐‐135,000,000
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.
180,000,000
90.00
20,000,000
10.00
200,000,000
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.
408
51.00
‐
‐
408
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.
245,000
49.00‐‐
245,000
19. Global Sky Express Ltd.
250,000
25.00‐‐
250,000
20. Asian Compressor Technology
7,732,200
24.50‐‐
7,732,200
Services Co., Ltd.
21. China Aircraft Services Limited.
28,400,000
20.00
‐
‐
28,400,000
22. Jardine Air Terminal Services
15.00
12,000,000‐‐
12,000,000
Ltd.
23. Everest Investment Holdings
13.59(Note3)‐‐(Note3)
Ltd.
24. Chung‐Hwa Express Co., Ltd.
11.00
1,100,000‐‐
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.
Note 4: Hwa Hsia Company Ltd. was renamed “Dynasty Aerotech International Corp.” in 2018.

86 Corporate Governance Report%100.00100.00100.00100.0035.00
28.00(Note2)28.00(Note2)2.59
5.45
100.00100.00100.00100.00100.0093.99
93.93
100.00
55.00
59.00
53.67
51.00
51.00
51.00
49.00
48.43
100.00
49.00
25.00
24.50
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

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

APR 27, 2019
Unit: shares; NT$
Authorized Capital

Paid‐in CapitalMonth/
Year

Par
Value
(NT$)

SharesAmountSharesAmount02/201210

6 billion

60 billion

5.2 billion

52 billion

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

RemarkApproval Date andDocument No. by Ministryof Economic Affairs
Jing Shou Shang No.
Cash increase
NT$5,683,776,490 10101028630, February 20,
2012
Corporate debt for
Jing Shou Shang No.
equity swap
10401079310, May 7, 2015
NT$491,665,650
Corporate debt for
Jing Shou Shang No.
equity swap
10401096840, May 28,
NT$1,208,413,350
2015
Corporate debt for
Jing Shou Shang No.
equity swap
10401186200, September
NT$1,000,652,560
17, 2015
Corporate debt for
Jing Shou Shang No.
equity swap
10401250360, December
NT$8,169,930
8, 2015
Corporate debt for
Jing Shou Shang No.
equity swap,
10601158980, December
NT$945,010
4, 2017
Treasury Stock
Jing Shou Shang No.
Retired10701157330, December
NT$500,000,000
18, 2018
Sources of Capital

Note: There was no “Capital Increase by Assets Other than Cash.”

B. Type of Stock:

APR 27, 2019; Unit: Thousand shares

Share Type
Common Stock
InscribedIssued Shares

Authorized Capital
Un‐issued Shares

Total Shares (Note)

5,420,985

579,0156,000,000

Remarks
Listed Stocks

Note: On June 18, 2014, the Company approved revision to the Articles of Association at the Shareholders’ Meeting that adjusted
the total authorized capital to 7 billion shares.

4.1.2 Status of Shareholders
Item
Number of
Shareholders
Shareholding%

Government
Agencies

APR 27, 2019; Unit: shares

Financial
Institutions

Other Juridical
Persons

Foreign Institutions & Domestic Natural
Natural Persons
Persons

4

25

230

749

119,609

120,617519,750,824
9.59%

103,222,119
1.90%

2,541,645,307
46.89%

1,003,016,819
18.50%

1,253,349,581
23.12

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

88 Capital Overview

Total

Number of Shareholders
33,80352,627
14,679
5,279
3,823
3,401
1,686
1,197
2,165
975
425
148
69
73
267
120,617

APR 27, 2019; Unit: shares
Shareholding
11,080,737
126,173,253
117,592,031
65,808,963
70,884,098
86,665,273
60,081,046
56,006,487
157,243,859
140,882,076
119,824,001
72,857,178
47,357,996
66,538,167
4,221,989,485
5,420,984,650

Percentage (%)
0.20%
2.33%
2.17%
1.21%
1.31%
1.60%
1.11%
1.03%
2.90%
2.60%
2.21%
1.34%
0.87%
1.23%
77.89%
100.00%4.1.4 List of Major Shareholders:
APR 27, 2019; Unit: shares
Shareholding

SharesShareholder's Name
China Aviation Development Foundation
National Development Fund, Executive Yuan

Percentage

1,867,341,935
519,750,519

34.45%
9.59%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share
Unit: Thousand shares; NT$
Year
Items
MarketPrice per
Share
(Note 1)

2019

(Distributed in 2019) (As of APR 27)(Note 9)

Highest Market Price

13.40

12.90

11.20

Lowest Market Price

9.02

8.97

9.62

Average Market Price

10.92

10.44

10.21

10.43

10.54

10.48

10.56

‐

‐

Weighted Average Shares

5,468,030

5,456,579

5,418,096

Diluted Earnings Per Share(Note 3)

0.40

0.33

0.04

0.2181820086(Note10)0.20960737(Note11)‐‐ (Note10)‐ (Note 11)‐‐ (Note10)‐ (Note 11)‐‐ (Note10)‐ (Note11)

‐

26.00

31.21

‐

47.67(Note10)

49.14(Note11)‐

2.10%(Note10)

2.04%(Note11)‐

Cash Dividends
Dividends from
Dividends
per Share(Note 8)

2018

(Distributed in 2018)

Net Worth Before Distribution
per Share(Note 2) After Distribution
Earnings
per Share

2017

Related Earnings
Stock
Dividends Dividends from
Capital Surplus
Accumulated Undistributed
Dividends (Note 4)

Price / Earnings Ratio (Note 5)
Return on
Price / Dividend Ratio (Note 6)
Investment
Cash Dividend Yield Rate (Note 7)*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 2019 financial information has not yet been reviewed by Deloitte & Touche.
Note 10: 2017 surplus allocation plan resolution passed at the 15th meeting of the 20th Board of Directors on March 22, 2018, and it
will be sent to the 2018 shareholders' meeting for recognition.
Note 11: 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 12: The Company's 2018 final daily closing price was NT$11.00.

Capital Overview

894.1.6 Dividend Policy and Implementation Status
A. Dividend Policy:
The CAL Articles of Association 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 and approved by the Shareholders’ Meeting that adheres to thefollowing principles:(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's surplus allocation plan was passed in a resolution on 2018 cash dividend distribution
at the 5th meeting of the 20th Board of Directors on March 20, 2019, and it will be sent to the 2019
shareholders' meeting for recognition.

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 Association 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:
As stipulated in the Company’s Articles of Association, directors are not awarded bonuses. Should
the actual amount of employee compensation, differ significantly from the estimated value of
employee compensation due to Board of Director resolution prior to the publication date of theannual individual financial statement, the difference is charged to the earnings of the year making
the initial estimate. If there are changes in the amount after the publication of the annual individual
financial statement, the adjustment shall be recorded in the following year as a result of change inaccounting estimate.

90 Capital Overview

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:
The Company's Board of Directors passed a resolution on 2018 Employee Compensation on
March 20, 2019, resolving to issue NT$51,656,000 in Employee Compensation in cash; as per theCompany's charter, no reward was issued to directors. If the above estimated figures are at odds
with the amount issued, it will be handled through changes in accounting estimates, and adjusted
and entered into the following year.
(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.

D. The actual employee compensation and director bonuses distributed for theprevious year (2017) (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:
APR 27, 2019
No. of buyback period

1st

Purpose of buyback

Performing share buyback and cancellation to safeguard
shareholders’ rights and interests.

Period of buyback

The approved buyback period was from August 10, 2018, toOctober 9, 2018.

Price range of buyback

Buyback price per share was between NT$9 and NT$14

Type and quantity of shares bought back

50,000,000 ordinary shares in total

The amount of shares bought backThe total transaction amount was NT$469,526,285, and theaverage transaction price was NT$9.39 per share.

Number of shares canceled and transferred

The cancellation of 50,000,000 ordinary shares bought backwas completed and the approval letter Jing‐Shou‐Shang‐Zi No.
10701157330 made on December 18, 2018, by the Ministry of
Economic Affairs was received on December 20, 2018.

Total number of shares of the Company held

The shares bought back have been canceled, so there are noshares of the Company held.

Percentage of total number of shares of the0%Company held in the total outstanding shares

Capital Overview

914.2 Bonds
4.2.1 Corporate Bonds:
APR 27, 2019
Corporate Bond Type

Domestic Unsecured
Straight Bond (2013)

Domestic Unsecured
Domestic Unsecured
Domestic Unsecured
Straight Bond (2016‐1) Straight Bond (2016‐2) Straight Bond (2017‐1)

Issue date

01/17/2013

05/26/2016

09/27/2016

05/19/2017

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

Issue price

Par

Par

Par

Par

Total price

NT$10,900,000,000

NT$5,000,000,000

NT$5,000,000,000

NT$2,350,000,000

Coupon rate

Tranche A: 1.60% p.a.;Tranche B: 1.85% p.a.

1.19% p.a.

1.08% p.a.

A: 1.20% per annum
B: 1.75% per annum

Tenor

Tranche A: 5 years
Maturity: 01/17/2018
Tranche B: 7 years
Maturity: 01/17/2020

5 year maturity:
05/26/2021

5 year maturity:
09/27/2021

Tranche A: 3 years (May19, 2017 to May 19,2020);
Tranche B: 7 years (May19, 2017 to May 19,2024)

Guarantee agency

Not applicableNot applicableNot applicableNot applicable

Consignee

CTBC Bank Trust
Department

Hua Nan Commercial
Bank

Hua Nan Commercial
Bank

Huanan Commercial
Bank

Underwriting institution

Not applicable

YuanTa Securities

MasterLink Securities

Masterlink Securities
Corporation

Kuo, Hui‐Chi
Kuo, Hui‐Chi(Ture Honesty(Hsi Endai Lawyer Office) International Law
Office)Kuo, Hui‐Chi(Ture Honesty
International Law
Office)Kuo, Hui‐Chi(Ture Honesty
International Law
Office)Huang, Jui‐chan;Chen, Li‐Chi(Deloitte & Touche)

Huang, Jui‐chan(Deloitte & Touche)

Yang, Chen‐Hsiu(Deloitte & Touche)

Yang, Chen‐Hsiu(Deloitte & Touche)

Repayment method

Tranche A: Repaymentof 50% of the principal
in the fourth year andthe remaining 50% in
the fifth year
Tranche B: Repaymentof 50% of the principal
in the sixth year and theremaining 50% in theseventh year

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

One‐time repayment of
capital upon maturity.

Issuing and transaction location Republic of China

Certified lawyer

CPA

Outstanding principal

NT$5,500,000,000

NT$5,000,000,000

NT$5,000,000,000

NT$2,350,000,000

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,
rightsNot applicable
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

92 Capital Overview

APR 27, 2019
Corporate Bond Type

Domestic Unsecured Straight
Bond (2017‐2)thDomestic Unsecured 6
Convertible Bond (2018)

Domestic Unsecured Ordinary
Corporate Bonds (2018‐1)

Issue date

10/12/2017

01/30/2018

10/30/2018

Denomination

NT$1,000,000

NT$100,000 per

NT$1,000,000 per unit

Republic of China

Republic of China

Issuing and transaction location Republic of China
Par
Issue priceTotal price
Coupon rate

Tenor
Guarantee agency
Consignee
Underwriting institution
Certified lawyer

Issued at 100.2% of par value Par

NT$3,500,000,000

NT$6,012,000,000
A: 1.14% per annum
B: 1.45% per annum 0.00% per 0.00% p.a.
annum

NT$450,000,000
A: 1.32% per annum
B: 1.45% per annum

Tranche A: 3 years (October 12,
A: 5 years (November 30, 2018,2017 to October 12, 2020);
5 years (January 30, 2018 to to November 30, 2023)
Tranche B: 5 years (October 12, January 30, 2023)
B: 7 years (November 30, 2018,2017 to October 12, 2022)
to November 30, 2025)
Not applicableNot applicableNot applicable
Huanan Commercial Bank

Chinatrust Commercial Bank
Huanan Commercial Bank
Trust Department

Fubon Integrated Securities Ltd.

Taihsin Integrated Securities
Fubon Integrated Securities Ltd.
Ltd.

Kuo, Hui‐Chi
Ture Honesty International Law
Chiu, Ya‐Wen
Office(Ture Honesty International Law(HandsomeAttorney‐at‐Law)
Office)Kuo, Hui‐Chi, Attorney At Law
Yang, Chen‐Hsiu(Deloitte & Touche)

Not applicable

Repayment method

Tranche A: one‐time payment
upon maturity;
Tranche B: return of 50% of
capital 4 and 5 years from thestart date, respectively.

According to the offering ofthDomestic Unsecured 6
convertible bond (2018)section 6

Outstanding principal

NT$3,500,000,000

NT$6,000,000,000

NT$4,500,000,000

Terms of redemption oradvance repayment

None

According to the offering ofthDomestic Unsecured 6
convertible bond (2018)section 18 and 19

None

Restrictive clause

None

None

None

None

None

CPA

Name of credit rating agency,
rating date, rating of corporate None
bonds
As of the printing dateof this annual report,
converted amount of(exchanged or
subscribed) ordinary
shares, GDRs or other
Other securities
rightsNot applicableattached Issuance andconversion (exchangeor subscription)
method as per the 5thissue of domestic
unsecured convertible
bondsIssuance and conversion,exchange or subscription
Not applicable
method, issuing condition
dilution, and impact on existing
shareholders’ equity

Yang, Cheng‐Hsiu(Deloitte & Touche)
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 seventhyear

Not yet converted

Not applicable
According to the offeringofthDomestic Unsecured 6
convertible bond (2018)section 8 and 9(Note)

Not applicable

Transfer agent
None
None
None
Note: As of April 27, 2019, according to the conversion price NT$12.90 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% to45.03%, but there will be no significant change in the shareholding structure, thus it has little effect on shareholder equity.

4.2.2 Corporate Bonds Undergoing Private Placement: None.

Capital Overview

934.2.3 Convertible Bonds:
Types of Corporate Bonds
Year
Item
Convertible Bond
Market Price

Unit: NT$
Domestic Unsecured 6th convertible bond (2018)
2018

The current year through April 27, 2019

Highest102.15102.00

Lowest101.13100.60

Average

99.05

100.00Conversion Price

12.90
12.90
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 2017 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 from NT$13.20 to NT$12.90.
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 27, 2019, the use of funds earned through previously issued securities areprogressing as planned and are in accordance with expected results.

94 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

95

V. Operational Highlights
5.1 Business Activities
5.1.1 Business Scope
A. Main areas of business operations(1) Air passenger transport and regularly scheduled and non‐scheduled international contract
charter flight services.
(2) Air cargo services.
(3) Ground handling services for international civil airports and transiting aircraft.
(4) In‐flight merchandise sales.
(5) Provision of in‐flight meal and beverage services and other related products.
(6) Laundry services for textiles and clothing used aboard aircraft and general laundry services forthe hospitality industry.
(7) Warehousing services for import, export, or transit cargo.
(8) Aircraft body and parts maintenance.
(9) Civil aviation personnel training.
(10) Other: In addition to permitted operations, the Company may engage in any other operations
not prohibited or restricted by law.

B. Revenue distribution
Proportion of Overall Business
Item
Passenger Revenue

Net Revenue

Unit: NT$ thousands
2018
Proportion of Revenue

108,345,648

64%

Cargo Revenue

49,847,065

29%

Other

12,518,894

7%

Total

170,711,607

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.

96 Operational Highlights

D. Product Development(1) Optimizing ground services for the passengers in cooperation with the new construction of
Taoyuan Airport
In order to provide passengers with faster and more convenient services, the Company cooperated with
Taoyuan Airport and launched 26 Self Bag Drop (SBD facilities) counters on October 1, 2018, in terminal 2 torelieve the pressure of people crowding at the manual check‐in counters and increase passengers’ customs
clearance and check‐in efficiency; moreover, important changes such as the “New Construction of theOutbound Baggage Conveying System in Terminal 1," the “Terminal 2 Expansion Project” and the “Terminal
3 Building Project” are all continuing. Through new construction projects, such as going automated, mobile,and paperless at the Taoyuan International Airport Corporation, it is expected that the boarding process will
be even more simplified. We will be stationed in the terminal 3 together with our SkyTeam partners in the
future to optimize the overall service quality.

(2) Steadying aviation network layout and strengthening bidirectional transfer hub
In addition to the continuous introduction of the long‐haul fleet, the Company is in the process of selecting
new‐generation narrow body aircrafts to meet market growth needs, which will help the Company improve
its transportation capacity in aviation networks in North America, Europe, Southeast Asia and Northeast
Asia. The Company will not only be able to provide more diversified flight choices to people in Taiwan, butalso increase the convenience of connecting transportation capacity, strengthening Taiwan's position as thetransfer hub for air transportation in Eastern Asia.

(3) Expanding the scope of use of the accumulated mileage and establishing the e‐commerce
platform Dynasty Miles Go
At the end of 2018, the Company's new type e‐commerce platform Dynasty Miles Go was officially launched.
Its greatest feature differentiating it from general e‐commerce platforms is that millage can be used tooffset the price of products, so that the passengers can fully utilize their accumulated mileage. Also, theplatform covers diversified products. The Company can take advantage of being stationed in foreigncountries to increase the number of special products; also, in the future, we will also continue to launchfrom time to time China Airlines’ exclusive special products, so as to meet the needs of members morecomprehensively.

5.1.2 Industry Overview
A. State of the industry and future development
The operating environment for the airline industry is deeply impacted by global economic growthand oil prices. Of these factors:(1)Economic growth
According to forecast report of the International Monetary Fund (IMF), the global overall economic growthrate in 2019 will be 3.5%, which is slightly lower than the 2018 economic growth rate 3.7%. This is due tothe US‐China trade war, the slowdown of China's economic growth, and Brexit. The economic growth rate ofJapan, among the major countries that have dealings with Taiwan, has slightly increased due to the future
increase of the consumption tax. Economic growth in China and other Southeast Asian countries has slowed
down due to factors such as the trade situation and the US dollar exchange rates; the overall economic
situation has been seeking stability while growth slows.

(2)Oil prices
The cost of oil is a large part of the aviation industry’s operating costs. Crude oil prices have gradually
recovered since the second half of 2017, and reached a peak in the most recent four years in 2018. Although
the growth rate slowed down by the end of the year, IATA expected that, benefiting from US shale oil
mining, the overall crude oil market will be oversupplied in 2019. The annual average price is NT$81.3,
lowered by 7.2% from the previous year. However, OPEC and other oil‐producing countries have made aproduction reduction agreement, and with the clearing up of the US‐China trade war, the market demand
will gradually recover and the oil price will still be an uncertainty in the operation of the aviation industry.

The global airline industry outlook report published by the IATA in December 2018 shows:(1) Air passenger market
The air transportation market grew rapidly from 2013 to 2017. However, due to the gradual impact of thefactors such as Brexit and US‐China trade war in 2018, the growth rate has slowed down. The Revenue
Passenger Kilometer (RPK) has grown by about 6.5%, and the Available Seat Kilometer (ASK) has a growthrate of 6.0%. The IATA forecasted that in 2019, the previously mentioned situation will continue, RPK and
ASK growth rates will fall to 6.0% and 5.8%, respectively, and the slowdown trend will manifest in the
Asia‐Pacific, with a growth rate of supply and demand of 7.1% and 7.5%, respectively, which are both lower
than those in the same period of last year. The reduction ratio of demand growth in the overall market ishigher than that of supply, and market competition will become more and more intense. It is expected thatthe overall passenger load factor will show a declining trend.

Operational Highlights

97

(2) Air cargo market
In 2018, the global aviation Freight Tonne Kilometer (FTK) grew 3.5% from 2017, while the Available Freight
Tonne Kilometers (AFTK) grew 5.4%. Looking back at the international economic situation in 2018, in thefirst half of the year, global trade continued to heat up and international oil prices remained at a higher level,
which made the economic and trade performance of major countries continue to be strong, as in theprevious year. However, as the United States gradually adjusted its trade strategy and tightened monetary
policy, and the impact of China‐US trade disputes spread from corporate confidence to the real economy,
the global market experienced significant volatility in the fourth quarter, and manufacturers' demand
turned conservative, indicating that global economic growth may face a slowdown trend starting from 2019.

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.

(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)Air cargo market liberalization, airlines continue to add capacity
As integration within the global airline industry becomes more mature, air cargo liberalization is expanding
within the Asia‐Pacific region. The USA, Japan, Singapore, Malaysia, and Thailand have already opened theirskies to Taiwanese carriers. In recent years, Korea, Vietnam, and the Philippines have considerably relaxed
regulations, enabling further expansions in destinations and capacity. However, in addition to domestic
airlines continuing to expand their networks, low‐cost and foreign carriers are also adding capacity making
the industry increasingly competitive. China Airlines is fully aware of these trends and will continue todevelop new business opportunities and expand market share.

(2)Taiwan Taoyuan Airport expansion, a new East Asian hub
In recent years, the government has aimed to develop Taiwan Taoyuan Airport into an East Asian transit hub.
In addition to actively expanding policies and freedoms in the air, the R.O.C. government promulgated the“Taoyuan International Airport Park Master Conceptual Plan” and “Implementation Plan” in 2011 and 2012
respectively, and successively launched Terminal 1 renovations, airport roadway improvements, plans for
Terminal 3 and a satellite terminal, and a third runway. China Airlines is working in coordination withgovernment policies to gradually expand fleet capacity and create a new transfer hub in Asia.

(3)Optimizing cargo aviation network and customizing charter service
In 2018, charter business was fruitful. Customized charter business was expanded in alignment withcustomer demand. A total of 159 charter flights were completed during the year, which was an increase of
43 flights compared with 2017, including 3 regular charter flights per week between Taipei and Columbus
Ohio, United States, taking full advantage of the transportation strength of the Company's Boeing 747 cargo
fleet; in addition, in response to the growth of the Asian region's supply of goods, and considering thecontinuous optimization of the Company's aviation network, in the Southeast Asian deployment, cargoflights’ transportation capacity in Singapore, Penang, Ho Chi Minh City, Hanoi, and others, have been
increased. Also, the Company effectively optimized the performance of the overall cargo flight operation
through the raising the proportion of goods supplies in the Asian region and the promotion of central
products of the overseas routes.

(4)Grasping logistics trends and expanding the map of operation
The Company continues to grasp pulse of the market and expand potential markets for high‐growth sourceof goods, such as semiconductor precision machinery, aircraft engine materials, temperature‐controlled
cold chain, biotechnology and pharmaceutical and other special cargo, which have all been continuously
developed by the Company; in addition, to respond to the development of cross‐border e‐commerce,

98 Operational Highlights

besides strengthening cooperation with express delivery companies and other airlines, the air and marinetransport of e‐commerce postal delivery has also achieved multiple factors of growth in quantity in 2018.
The Company will continue to grasp the logistics trend and potential markets, develop multiple supplies ofgoods, and expand our business territory.

D. Product competition
China Airlines primarily operates international passenger and cargo air transport services. Because of ourcontinued focus on stable revenue and cost controls, CAL is not only the Taiwan market leader, but also an
important player on the international stage. According to R.O.C. Civil Aeronautics Administration statistics,
China Airlines is the market leader in both passenger and cargo air transport. Also, released in 2018, theIATA 2017 international passenger and cargo capacity rankings showed that China Airlines was 33rd in theworld and 13rd in the Asia‐Pacific region for passenger air transport with 39.822 billion Revenue Passenger
Kilometers (RPK), while cargo capacity reached 5.741 billion Freight Revenue Ton Kilometers (FRTK), earning
China Airlines 10th place globally and 4th place in the Asia‐Pacific region.

Taiwan National Airlines International and Cross‐Strait Market Share for Passengers and Cargo in 2018
AirlinePassenger

Cargo

China Airlines
24.23%
38.60%EVA Air22.13%
24.44%
Mandarin Airlines
2.34%
0.71%
UNI Air
1.52%
0.52%
Far Eastern Air Transport
0.40%‐
Tigerair Taiwan
4.52%
0.05%
Other‐Foreign Carriers
44.87%
35.69%
Source: Civil Aeronautics Administration Monthly Statistics from January to December 2018‐Taiwan National Airlines
International and Cross‐Strait Market Share for Passengers and Cargo

IATA Global International Route Passenger and Cargo Rankings 2017
1
2
3
4
5
6
7
8
9

Passenger (Passenger‐Kilometers) Rankings
Unit: 1 million
Emirates
288,886
Ryanair(5)157,114
Lufthansa(4)147,168
United Airlines
146,582
Qatar Airways
143,930
British Airways(4)142,804
Delta Air Lines
134,175
Air France(4)133,877
American Airlines
119,865

1
2
3
4
5
6
7
8
9

Cargo (Ton‐Kilometer) Rankings
Unit: 1 million
Emirates
Qatar Airways
Cathay Pacific Airways
Federal Express
Korean Air
Cargolux
Lufthansa(4)Singapore Airlines
United Parcel Service

12,715
10,99910,772
8,040
7,986
7,322
7,313
6,592
5,894

10

Turkish Airlines(4)114,063

10

China Airlines

5,741

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Cathay Pacific Airways
KLM(4)
Singapore Airlines
Etihad Airways
easyJet(1)(4)(5)
Air Canada
Korean Air
Thai Airways International
LATAM Airlines Group(4)Air China
Aeroflot Russian Airlines
Norwegian(1)(4)(5)
China Southern Airlines(1)China Eastern Airlines
Qantas Airways
Saudi Arabian Airlines
All Nippon Airways(4)IberiaEVA Air
Asiana Airlines
Japan Airlines
Wizz Air(1)(5)

111,760
103,487
95,53390,241
83,62576,80274,423
66,12965,95965,93960,64959,11756,91056,53456,424
48,79948,462
46,81545,77041,561
41,36340,464

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

AirBridgeCargo Airlines
Air China
China Southern Airlines
Turkish Airlines
British Airways
Polar Air Cargo
Etihad Airways
All Nippon Airways(4)Asiana Airlines
Atlas Air
United Airlines
Air France(4)EVA Air
KLM(4)
American Airlines
Nippon Cargo Airlines
LATAM Airlines Group(4)China Cargo Airlines
AeroLogic
Saudi Arabian Airlines
Silk Way West Airlines
Delta Air Lines

5,543
5,522
4,871
4,701
4,358
4,348
4,303
4,275
3,992
3,917
3,834
3,611
3,609
3,603
3,375
3,229
2,874
2,631
2,617
2,487
2,429
2,381

33

China Airlines

39,822

33

Thai Airways International

2,352

Source: IATA WATS 2018

Operational Highlights

995.1.3 Research and Development
A. Costs of R&D investment and successfully developed technologies or products
From January 1, 2018 through the publication date of this report, the Company invested
approximately NT$98 million in research and development. The following table summarizes thetechnologies and products developed:
Project
Establishment of
new generationflight operation
control system

R&D Project Description
Introducing the new generation flight operation control system to allow flight control personnel to maketimely flight control decisions with greater efficiency and lower cost in response to the ever‐changing
operating environment through streamlined flight control dispatching operations, precise abnormality
control, proactive decision‐making support, and other system functions. The establishment and launchingof the system were completed in October 2018.
Establishment of NDC is a distribution standard actively promoted by the IATA in recent years. China Airlines obtained the
New Distribution IATA NDC Level 3 system standard specification certification from the IATA on June 27, 2018. We
Capability (NDC) continued to plan the self‐built China Airlines NDC distribution system and direct sales cooperation withsystemthe channels to achieve a new distribution business model for the aviation tourism industry. We
completed e‐commerce and distribution channels in 2018 to provide customers with more products andservice options in a timely and accurate manner.
Establishment of Integrating information relevant to business, marketing, operations, safety, and finance of all units of the
major operational Company, providing a single and clear dashboard analysis interface, effectively providing the function ofindicator system decision‐making support system, and providing a mobile user interface to enable senior executives toeffectively master the important indicators of the Company's operations. The establishment and launchingof the system were completed in October 2018.
Establishment of Establishing apron mobile operation, providing labeling operations for unit load, cargo delivery, loading
apron operation and scanning operations for passenger and cargo flights, and establishing the real‐time management
mobile platform function of the aircraft apron, to effectively control the progress of the unit load adjustment, ensure theloading accuracy, and strengthen the two‐way communication between load balancing operation(in‐house) and the apron loading supervision (field) of the Loading Control Department. The establishment
and launching of the platform were completed in September 2018.
Establishment of In order to comply with International Civil Aviation Organization (ICAO)’s promotion of the global aviation
carbon emission industry carbon exchange and reduction mechanism, establish the Company's carbon emissions andcarbon footprint systematic calculation and management capacity, so to accurately and efficiently conduct
management
carbon emissions monitoring, verification, and declaration operations of the international routes. The
system forinternational
establishment and launching of the system were completed in September 2018.
routesEstablishment of In order to improve the quality of aircraft maintenance and improve the efficiency of maintenance work,
mobile version of the work orders of current apron pre‐departure and transit inspection have gone mobile. The Company
streamlined and upgraded the maintenance work of the apron through digitalization from thethe apron workorder systemestablishment of work order parent files to actual execution records of the work orders; it has aligned
these improvements with the current apron dispatch operation and has provided apron staff with mobile
devices to input the work order execution results. The establishment and launching of which werecompleted in October 2018.
Establishment of In order to improve decision‐making regarding the use of funds, the new financial liability management
system was established. Its functions include the asset and debt transaction online sign‐off template andnew financial
management information, which improve the efficiency of the operation processes and financial
liability
management
accounting analyses, and facilitate decision making analysis. The system went online in January 2019.
systemEstablishment of Current passenger shopping is dominated by e‐commerce platform; in response, the “Sky Boutique APP”
new generation e revision program was conducted and officially went online in October 2018 to provide various functions
according to the passengers’ usage scenarios, add promotional activities to enhance passengers’
Shopping App
willingness to pre‐order, and increase the revenue of duty‐free products.
systemB. Future R&D Projects(1) In order to meet future development needs, China Airlines will continue to invest in R&D projects.
Over 2019, we plan to invest a total of NT$95 million into R&D. The following table summarizes
future projects:
Estimated
Completion Date
June 2019
Establishment of In response to the substantial growth in the number of Company's flights and crew The
members, as well as the needs of passenger and cargo flight dispatch, we planned to implementation
new generationbuild a new generation crew member dispatch system, to quickly meet the progress was 82%
crew member
shift arrangement requirements of civil aviation regulations, optimize manpower dispatch, and fairly and as of the annual
report printing
systemefficiently allocate crew members’ shifts, ensuring crew members’ dispatch quality.
date
Through the automated analysis of the system, the flight operation decision‐making
December 2019supplementary information, such as flight on‐time, late departure or arrival status,
The
Establishment of current and estimated flight transportation capacity, airport airworthiness, flight
implementation
schedule surveillance and real‐time flight trajectory were generated, so that flight
Flight Control &progress was 13%
Monitoring
control personnel can fully grasp the Company's flight transportation capacity andas of the annual
System (FCMS)
flight status, and produce the most appropriate flight operation decisions. In addition
report printing
to taking into account the flight operation cost and service quality, emergencies candate
be responded to at all times to ensure that flights arrive on time and safely.
Project

100 Operational Highlights

Future R&D Project Description

September 2019
The
Establishment of
Establishing an inter‐airline sub‐accounting system to follow the trend of IATA implementationnew
sub‐accounting. The sub‐accounting system interfaces with the passenger business progress was 45%
sub‐accounting
as of the annual
operation revenue system to improve system maintenance and save manpower.
systemreport printing
dateJune 2020
The
Establishment of Introducing Amadeus' new revenue management system to upgrade the current
implementation
revenue management calculation from a segmentation basis to an O&D basis, andnew revenue
progress was 33%
add functionality for dynamic fare grabbing database and real‐time booking
management
as of the annual
information calculation, which can increase turnover.
systemreport printing
date
December 2019
Taking advantage of intelligent robots to assist in in‐flight service training. Training
The
Establishment of includes safety procedures, service terms, and other in‐flight service related matters.
implementation
AI in‐flight service If employees need to be familiar with cabin in‐flight announcement, students canprogress was 10%
training assistant enhance their sense of presence through situational dialogs in the classroom. Also,
as of the annual
systemincreasing the number of exercises performed by the students improves training
report printing
results.
date
May 2019
In order to improve the efficiency of duplication, fixed rules, and cross‐platform The
Establishment ofoperations, and use manpower for work of high output value, a robotic process implementation
robotic process
automation platform was built for personnel change account management of progress was 85%
automation
heterogeneous systems, among other operations, to improve system maintenance as of the annual
systemreport printing
time and save manpower.
date
Responding to the complexity and dispersion of the overall cabin loading and space August 2019
Establishment ofmanagement, and providing the latest loading information for the user units (Cabin Implementation
In‐Flight
Crew Division, ground station agents) to follow. The system was built to implement progress was 60%
Equipment
the systematic management of the cabin in‐flight service supplies data, promptly as of the annual
Management
provide external agents with complete and accurate loading information, and use report printing
System (IEMS)
date
data analysis to further improve the loading efficiency and operation quality.
December 2019
Introducing the cargo business management system, strengthening the business The
Establishment ofmanagement operations such as freight rate management, revenue and flight implementation
cargo businessrevenue estimation, and using the revenue management system with the expectation progress was 20%
managementof improving the efficiency of freight operations and increasing the revenue of overall as of the annual
systemcargo business.
report printing
dateJune 2019
In the online ticket purchasing completion phase, collecting and tracking usage The
Establishment ofrecords, instantly grasping online user activities and conducting customer analysis, implementation
ticket purchasing
and cooperating with online sales activities to achieve marketing models such as progress was 69%
instant marketing
precision marketing and remarketing. In the future, we plan to expand and integrate as of the annual
platform
report printing
with artificial intelligence, big data technology, and other systems.
date
October 2019
Establishment of The digital track model captured and labeled a plethora of information, such as The
passengers' consumption preferences and behaviors, so as to better understand the implementation
e‐commercecurrent and potential needs of customers; this further allowed for the Company to progress was 30%
consumer
behavior analysis conduct timely and accurate marketing, and was provided for the use of managers in as of the annual
report printing
systemdecision‐making and forecasting.
date(2) Major Factors Affecting the Success of Future R&D
A. Full support of operational managers
B. Proper grasp of operational needs
C. Utilization of the latest IT know‐how and technology
D. Information system architecture upgrades
E. Implementation of project management
F. Strict budget control

Operational Highlights

101

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
 Japanese and Korean tours continue to flourish, enhance investment in capacity
Taiwanese demand for tourism in Japan is strong, and a flood of Koreans are coming to Taiwan on vacation. The
Company has increased its capacity supply and is also responding to seasonal demand by planning added
flights/charters to improve profit space.

 In coordination with the government's new Southern Policy, expand market potential
The Company has increased the number of flights for respective potential destinations (such as Bangkok and Penang);with the government’s provision of entry visa preferential measures for Southeast Asian countries, it is expected todrive the demand for traveling between the two places; at the same time, for the destinations with market potential,
we have initially been cultivating customers by means of inter‐airline cooperation (such as code‐sharing and signing
SPA contract).

 Improving passenger composition to enhance the overall profitability of the route
The Company is now working to increase the percentage of FIT passengers in each route, and to improve the overallprofitability of the route by changing the composition of passengers.

(2) Cargo Improving revenue management and promoting customized service
We will continue to improve revenue management. Regarding the different transportation needs of special cargo,such as time limit, volume, and special loading treatment, we will continue to enhance the price differentiation andincrease the added value of transportation services by utilizing the large cargo loading advantages and professional
services of our Boeing 747‐400 all‐cargo aircrafts. We will also continue to promote the bidding mechanisms forshipping space in peak seasons to enhance unit revenue. In addition, in recent years, the promotion of the charterbusiness has been strengthened. Customized charter services have been tailored to meet the needs of individual
customers, which has contributed significantly to the increase in revenue. In 2019, we will continue to deepen ourdevelopment of 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 chartered flight business, and maximize thebenefits of the cargo fleet.

B. Long‐term Development(1) Passenger
 Optimize the long‐haul flight network to bring Taoyuan's hub position into full play
In conjunction with the introduction of the A350‐900 long haul new aircrafts, China Airlines has continued to expand
its European and American aviation network deployment since 2018 and offers passengers more convenient flight
options by expanding flights to Vienna, Rome, London and Ontario, California, USA. In addition, China Airlines has
been expanding its Oceania aviation network since 2017. Cooperating with the new southbound policy, in 2018, flights
to and from Hanoi and Bangkok were increased, enabling passengers from New Zealand, Australia, and Southeast Asia
to travel to and from destinations in Europe, the United States, and Asia through Taiwan and provide a higher‐quality
service hub. We will also pay close attention to market changes, adjust our transportation capacity, consolidate anddeepen development of the market, continue to develop potential destinations, strengthen inter‐airline cooperation,and intensively cultivate respective bread winning markets, to provide passengers with convenient and detailed flight
services.

 Strengthening the competitiveness of the Group by division of labor and market segmentation
with the subsidiary Tigerair Taiwan to respond to competition from low‐cost carriers
According to the statistics of the Civil Aeronautics Administration, the market share of Low Cost Carriers (LCC) in the
Taiwan market in 2018 was 19%, an increase of 3ppt from the previous year, indicating that LCC continued to grow in
the Taiwan market. Given the fierce competition in the market, the Company and its subsidiary Tigerair Taiwan willcontinue to carry out Group cooperation and provide suitable products for different customer groups based on market
positioning and passenger composition to strengthen the overall competitiveness of China Airlines Group.

 Continue bringing in new model passenger aircraft, improving passenger service quality
With the subsequent delivery of the last four A350 aircrafts in 2018, the long‐haul routes of Europe, the United States,
and Australia have completed the planning of all flights using new generation aircraft models, improving the long‐haul
service quality. Now, in order to meet the trend of the Asia‐Pacific market and cooperate with the development
strategy of the regional aviation network, the selection of narrow body aircrafts has been launched and the A320neo
series or 737MAX series will be continuously researched. In the future, one of the current 737‐800 aircrafts will be
replaced to provide better product quality and the most comfortable flight experience for passengers.

102 Operational Highlights

(2) Cargo Expanding project and e‐commerce postal business revenue to develop high‐growth sources ofsupplyUnder the new southbound policy and the sustained economic development of Southeast Asian countries, the market
for consumer electronics, textiles, and cross‐border e‐commerce sources of supply are expected to grow. The
Company continues to cultivate business in Japan, Singapore, Malaysia, Indonesia, Vietnam, the Philippines andThailand, in order to compete for the north‐south supply of goods in the Asian region. The Company will also optimize
the cargo flights’ destination combination in Southeast Asia, develop and research the change of multi‐legged flights
to non‐stop flights depending on the needs to increase the transportation capacity, and fully support the developmentof the Southeast Asian region to improve the overall revenue efficiency. In addition, semiconductor precision
machinery, aircraft engine materials, temperature‐controlled cold chain, biotechnology and pharmaceutical and otherspecial cargo will all be continuously developed by the Company.

 Deepening the inter‐airline cooperation and strengthening the development of freight
information
Since the launching of the Shenzhen cargo flights in 2015, the Company has been working closely with UPS on the
fixed space of each destination and the American route charter flights; cooperation with DHL, Fedex, and SF EXPRESS
has continued to grow. The scope of cooperation with Nippon Cargo Airlines (NCA) and ANA (NH) has also beensteadily deepened. Thus far, the Company has cooperated with a total of 165 global airlines and will create a mutually
beneficial situation through inter‐airline cooperation and reciprocity of aviation networks. In addition, the promotionof e‐cargo business and the upgrading of the cargo business operation/service information system are also the focusof the Company's strategic development. Through the integration of various systems and the provision of real‐timeinformation on mobile devices, in addition to improving internal operational efficiency, customer service quality andsatisfaction have also been improved.

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:
Item

2017
2018
No. ofNo. ofNo. ofNo. of
RPK
Revenue
Area
Passengers
Passengers
Passengers
Passengers(Million)(NT$ Million)
Trans‐Pacific
1,370,384
12,461
17,829984,161
10,404
14,478Europe462,491
4,322
7,688
603,3425,678
9,661
South‐East Asia
3,692,451
9,126
17,516
3,769,593
9,334
18,396
Domestic
1,222,213
295
1,939
1,239,130292
1,967
Hong Kong/Macau
2,969,871
2,322
8,075
2,687,782
2,136
7,730
North‐East Asia
6,161,837
10,86330,5186,805,685
12,12935,454
Oceania
510,978
2,703
4,272
662,3023,808
5,954
Mainland China
2,675,925
2,576
14,3792,642,732
2,475
14,706
Total
19,066,150
44,668102,216
19,394,727
46,256108,346
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.

(2) Cargo routes:
Item

2017

2018
Revenue
FRTK
Revenue
Area(NT$ Million)(Million)(NT$ Million)
Trans‐Pacific
3,724
24,912
3,764
27,742Europe
793
5,451
779
6,106
South‐East Asia
817
7,549
814
8,879
North‐East Asia
204
2,156
255
3,250
Oceania
73
435
156
794
Mainland China
142
2,833
147
3,076
Total
5,753
43,336
5,915
49,847Note 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.
FRTK(Million)

Operational Highlights

103

B. Market Share (%) of Major Product Categories in the Last Two Years
Year
Passengers
Cargo
Airline
2017
2018
2017
2018
China Airlines
25.09%
24.23%
38.03%
38.60%EVA Air
22.27%
22.13%
24.72%
24.44%
Mandarin Airlines
2.51%
2.34%
0.76%
0.71%
UNI Air
1.52%
1.52%
0.46%
0.52%
Far Eastern Air
0.33%
0.40%
‐
‐
Transport
Tigerair Taiwan
3.93%
4.52%
0.05%
0.05%
Other – Foreign
44.35%
44.86%
35.97%
35.68%
Carriers
Source: Civil Aeronautics Administration Monthly Statistics from January to December 2017 and 2018‐Taiwan National Airlines
International and Cross‐Strait Market Share for Passengers and Cargo

C. Market Analysis of Major Product Categories(1) Passenger
According to the statistics of the Tourism Bureau of the Ministry of Transportation and Communications, in the passenger
transport market of Taiwan in 2018, approximately 11.07 million foreigners entered Taiwan (a growth rate of 3.1%) and
16.64 million Taiwanese people went abroad (a growth rate of 6.3%), with an overall growth rate of 5%, showing that
Taiwan’s tourism market still has development potential. It is estimated that the impact of the restriction policy for
travelers from China will gradually slow down in 2019, and the demand for cross‐strait routes will show a steady trend; interms of regional routes, the Asia‐Pacific region is still the momentum for market demand growth; with the developmentof emerging economies and LCC expansion, competition will be more intense; in the long‐haul market, the US‐China
trade war and Brexit increased the uncertainty of the market; but in the future, domestic and foreign companies willcontinue to increase transportation capacity, which is expected to push up market demand.

(2) Cargo
The global trade boom has slowed down since the end of 2018. According to IATA’s estimation, the growth of global airtransport demand in 2019 will be 3.7%, and the overall market will remain as it was in 2018. With the protectionism ofcountries and US‐China tariff disputes, it is predicted to be a year where the market supply exceeds demand, thus the airtransport market will still be full of challenges. However, as the Company actively expands the passenger and cargo
destinations, under the mutual support of passenger and cargo aircraft and the efficient revenue management, and withthe optimizing of aviation network and development of potential markets, the margins of profitability have opportunity
for continued growth.

D. Competitive Niche(1) Next Generation Long‐Haul Fleet Taking ShapeThe 10 Boeing 777‐300ER fleet and 14 Airbus A350‐900 fleets introduced by China Airlines' new generation productproject were fully delivered at the end of 2018. The Company will then make the deployment of long‐haul aviation
network in the European, American, New Zealand and Australia markets more dense, improve effectiveness of theoperation, and implement the younger fleet strategy; and through the new generation product project, the Company will
improve the quality of hardware and software equipment, and optimize long‐haul route products.

(2) Extensive Route Network, Leader in the Region and Australia/New Zealand Markets
The Company has been operating in the transport industry for 59 years. Its passenger and cargo business serves in a totalof 29 countries and at 174 destinations. Passenger transport services are available at 78 destinations in 23 countries,
covering four continents (Europe, America, Asia and Australia). Pure cargo flight services are available at 34 destinations(as of December 31, 2018), forming a complete passenger and cargo flight network. The Company adopts a stable layout
strategy. At present, China Airlines Group's regional aviation network covers a wider range, and our market share is thehighest among all Taiwanese airlines.

(3) A Leader in Collaboration
In addition to self‐owned routes, China Airlines is the first company in Taiwan to join the global aviation alliance. It is also
the first Taiwanese company to conduct code‐sharing cooperation. Currently, it has cooperated with 22 airlines incode‐sharing, ranking first among all Taiwanese airlines. The Company is actively deploying in the global market byproviding more convenient and comprehensive services to passengers to allow passengers to travel between Taiwan andmajor cities around the world through the tightly‐woven aviation network of China Airlines.

(4) Integrating Group resources to exert synergy
The Company and Tigerair Taiwan, its LCC subsidiary, differentiated their markets based on different customer groups tostrengthen the breadth and competitiveness of product lines, provide consumers with diversified product choices, andmaintain the dominant position of China Airlines Group in the market. In addition, in order to establish a complete
aviation service network, China Airlines Group has a total of 32 re‐investment businesses. The industry scopes of suchbusinesses cover seven major categories, including air transportation, ground services, air transportation assistance,
aerospace technology, warehousing and logistics, tourism and leisure, and holding and leasing, deepening thecooperation linkage among one another to strengthen the competitiveness of the whole Group.

104 Operational Highlights

E. Corporate Governance and Policies(1) Corporate Human Rights Policy
China Airlines respects and obeys internationally recognized human rights norms and principles, and firmly believes that
respecting and protecting human rights is the basis for achieving sustainable enterprise development. China Airlines'
human rights policy applies to the airline and all enterprises in which it has a controlling interest, and the Company strives
to respect, protect, assess and compensate employees and customers who encounter human rights issues. Moreover, we
also hold China Airlines' suppliers and contractors to the same standards and requirements, and require them to conformto the spirit and basic principles of the policy.

(2) Sustainable Supply Chain Management
In order to achieve its goal of sustainable supply chain management, in 2015 China Airlines set a Supplier Code of Conductthat includes major areas such as compliance with laws and regulations, human rights and labor conditions, workplacesafety and health, environmental protection, fair transactions and ethics, quality and safety, and information security. To
increase the sustainability of its many suppliers, in 2016 the Company further required its suppliers to sign a Supplier
Code of Conduct, pledging with partners to create a sustainable industrial environment and move together toward abright future. Moreover, in 2018, for the third time, China Airlines became the only shipping operator in Taiwan to be
selected for the Dow Jones Sustainability Index (DJSI) as emerging market shares included in the composite index, andwon for the fifth times the Taiwan Corporate Sustainability award.

(3) Environmental Sustainability Management
China Airlines adheres to the belief of “developing a sustainable environment” and regards “Green Energy Environmental
Protection” as an important element of corporate sustainability. It was the first in the industry to establish the concept ofenvironmental and energy management since 2007. In 2011, it set up a dedicated Environmental Department and an
Environmental Committee. Each quarter, the President reviews the corporate environmental and energy management
performance and sets incentive measures. In 2013, a statement of corporate environmental and energy policy was
released, a corporate environmental and energy management system was promoted, and the third‐party international
standard certification has been passed. China Airlines is the first in the transportation service industry in Taiwan to haveestablished environmental risk governance structure, set up dedicated organization, formulated policies, and establishedenvironmental and climate change risk management mechanisms.

(4) Corporate Social Responsibility
China Airlines realizes that its success comes from the support of society, and it has long held fast to the concept of giving
back. The Company continues its major strategy of creating social value; we hold diverse events to help disadvantaged
groups, to give more back to our home. This nurtures potential and develops talent for the nation, providing greater value
for customers and shareholders alike.

(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 and practical methods while also
considering the environment and operational characteristics of the industry. The airline industry is currently facing threemajor 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 threeareas and, based on frequency of occurrence 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 oncompany operations.

F. Favorable and Unfavorable Factors in the Long Term
(1) Favorable Factors
 At present, in the traffic rights agreements signed by Taiwan with major countries, except for restrictions on trafficrights of cross‐strait routes, open skies agreements have been signed with the United States, Australia, Singapore,
Malaysia, and Thailand. In addition to offering existing airlines to add more flights, new airlines are offered to join,
providing consumers with more diverse options. In addition, the execution of ASEAN Multilateral Agreement on Air
Service is being actively negotiated with ASEAN countries to move towards a single aviation market model, significantly
reducing the operational restrictions of civil air transport enterprises in the ASEAN countries and promoting the growthof the Asia Pacific aviation market.
 The Asia‐Pacific region has recently benefited from the growth of emerging economies and the middle class, and thedemand for air transport has soared. IATA estimates that the demand for passenger and cargo transport in the
Asia‐Pacific region is higher than the global average. Although there are concerns about the tension in the traderelations between US and China, with the easing of fiscal and currency policies of the countries, global air transport willcontinue to grow in the future, and the Asia‐Pacific region will remain the momentum driving the global market.
 Facing regional economic integration and the adjustment of the country's foreign economic and trade strategy, theTaiwan government has been promoting the “New Southbound Policy Promotion Plan” since 2016, whereby itstrengthens strategic partnerships with 18 countries, including 10 countries in ASEAN, 6 countries in South Asia, as wellas New Zealand and Australia, in order to enhance Taiwan's economic and tourist appeal to southern countries, andexpand the diversified foreign economic layout.
 Internet technology matured in the 2000s, and major Internet giants grew from portals and search engine platforms to
e‐commerce models like “business‐to‐business” (B2B), “business‐to‐consumer” (B2C), and “consumer‐to‐consumer”(C2C), along with the popularization of mobile Internet access; in that context, consumers are encouraged to use virtualchannels to shop. The cross‐border e‐commerce is growing rapidly, replacing the position of traditional physicalchannels.

Operational Highlights

105

(2) Unfavorable Factors
 After the global financial crisis in 2008, protectionism emerged in various countries, causing tension in trade relations
between US and China and the levying of punitive tariffs; Europe also faced Brexit disputes, all of which affected theglobal supply chain layout. In the long run, protectionism is likely to cause risks like shrinkage in international trade andreduction in the demand for cross‐border business, and is a potential risk factor for the development of cargo andpassenger air transport.
 The price of oil is one of the uncontrollable costs of airlines taking up a large proportion of operating costs; it is also an
uncontrollable and extremely sensitive cost. In 2019, US shale oil will continue to be extracted in response to the OPEC
production reduction agreement, and IATA estimates that oil prices in 2019 will be lower than that in the previous year.
However, compared with the past four years, it is still at a high level and still poses uncertainty for the aviation industry
in the future.
 According to IATA statistics, in the past five years, global passenger transportation capacity has grown at an averageannual rate of 6.3%, and at an average annual rate of 8.4% in the Asia‐Pacific region. Apart from the continued
expansion of aviation networks by existing companies, the increase is mainly due to the rapid rise of emerging
companies; among which, Asia‐Pacific regional routes are subject to the competition of LCCs, and the Asia‐Pacific to
North America and European routes are facing the sudden rise of airlines in the Middle East, China and Southeast Asia.
With innovative business models and the creation of operating cost advantages, in addition to stimulating new demand,
existing customer bases are also being eroded.
 According to IATA statistics, 204 airports in the world were classified as level‐3 overcrowded airports in the summer of
2019; 61 of which were in the Asia‐Pacific and North Asia, including Taoyuan Airport and major airports in the
Asia‐Pacific, highlighting the lack of infrastructure resources for air transport in the Asia‐Pacific. The airport slot time isclosely related to the expansion of airlines' aviation networks and routes. Due to the long construction period of
airports, it is difficult to obtain a solution in a short time, which limits the development of the air transport industry,and seriously affects the long‐term development of airlines.

(3) Response Measures Keeping abreast of global political and economic movements through information gathering and management; toadapt to the unpredictable operating market at all times by enhancing the passenger load factor and profit rate of theroutes through the regulation of transportation capacity by flexible adjustment of flights and deployment of aircrafts.
 In response to the changes in trip structure and the popularization of mobile devices, the Company will adapt to thechanging needs of passengers and launch various occasional marketing activities, while continuously optimizing various
e‐services and accurately marketing to target customers; such actions will boost the Company's competitiveness.
 The Company will take advantage of open skies business opportunities, develop new destinations/routes in a timely
manner, secure its leading position in the regional aviation network, and deepen and optimize the long‐haul aviation
network; use Taiwan's geographic location advantage in the Asia‐Pacific region to build the East Asia transfer hub,while expanding the cooperation with United Airlines to expand the global aviation network and generate revenue.

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.

106 Operational Highlights

B. Major Suppliers in the Last Two Calendar Years:
CPC Corporation, Formosa Petrochemical Corporation, and Chevron Corporation, etc.
Unit: NT$ thousands
20173

Amount%RelationwithIssuerCompanyName

Amount%10.34 None Corporation

18,413,016

12.00 None

CPC
Corporation

3,885,414

10.74 None

4,083,732

Formosa
3.05 None Petrochemical
Corporation

5,372,889

3.50 None

ChevronCorporation

1,169,036

3.23 None

3,373,214

2.51 None Corporation

5,117,227

3.33 None Petrochemical

1,095,814

3.02 None

Amount%CPC
Corporation
Formosa
Petrochemical
Corporation

13,875,830

ChevronCorporation

Other
Net Total

2019 (as of March 31)
Relation with
Issuer2

Relation with
IssuerItem

1

CompanyName

2018

112,816,598
134,149,374

Company
Name

CPC

Formosa

Chevron84.10
100.00

Corporation

Other
Net Total

127,600,944 81.17
153,504,076 100.00

Other
Net Total

30,041,645 83.01
36,191,909 100.00

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
2017
Capacity and Traffic
Available Seat Kilometers (ASK)
55,723,852
Revenue Passenger Kilometers (RPK)
44,668,163
Load Factor (%)
80.16%
Freight Available Ton Kilometers (FATK)
7,960,873
Freight Revenue Ton Kilometers (FRTK)
5,752,743
Load Factor (%)
72.26%
Available Ton Kilometers (ATK)12,962,698
Revenue Ton Kilometers (RTK)
9,762,044
Load Factor (%)
75.31%
Note 1: The above data includes scheduled flights, charter flights, and extra flights.
Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Rate of Increase(Decrease)2018
58,043,562
46,256,379
79.69%
8,290,378
5,914,889
71.35%
13,498,780
10,065,315
74.56%

4.16%
3.56%‐0.47 ppt
4.14%
2.82%
‐0.91 ppt
4.14%
3.11%
‐0.75 ppt

Reasons for Changes:
In 2018, 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 2017; in response to the increase in demand for cargo transport, the FTK (thousand) of
FRTK (thousand) also increased compared with 2017.

5.2.6 Shipments and Sales in the Last Two Years
Unit: thousand kilometers; NT$ thousands
Item

2017
RPK/FRTK

2018
Amount

RPK/FRTK

AmountPassenger Revenue

44,668,163

102,216,106

46,256,379

Cargo Revenue

5,752,743

43,336,068

5,914,889

49,847,065‐

10,569,611‐

12,518,894‐
156,121,785
Note 1: The above data includes scheduled flights, charter flights, and extra flights.

‐

170,711,607

Other Operating Revenue
Total

108,345,648

Note 2: The above data includes Mandarin Airlines and Tigerair Taiwan.

Reasons for Changes:
The sales volume of both Company's passenger and cargo business in 2018 increased compared to 2017,
mainly due to the introduction of new passenger transportation capacity into the market in 2018, which
led to the increase in Revenue Passenger Kilometer (RPK) and sales; in addition, in 2018, due to thesteady recovery from the economic recession, international trade demand boomed and freight rates
increased, causing cargo business revenue to continue to grow for the whole year of 2018.

Operational Highlights

1075.3 Human Resources
Year
Male
Number of
FemaleEmployees
Total
Average Age
Average Years of Service
PhDs
Master’s Degrees
Bachelor’s Degrees
Education
Senior High School
Below Senior HighSchool2017

2018

APR 27, 2019

6,476
6,169
12,645
40.60
13.30
0.11%
10.64%
82.66%
6.22%

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

6,302
5,937
12,239
41.40
14.00
0.09%
11.10%
82.64%
5.89%

0.37%

0.31%

0.29%

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. Beginning in 2017, the Company
introduced life cycle thinking, completed control over every links of organization's operations; also,
considering the issues of interest to stakeholders, the Company has further improved the level andperspective of environmental and energy risk management, and become comprehensively in linewith the standard thinking of international enterprises’ sustainable development governance. The
Company also completed the third party audit operation of ISO 14001 and ISO 50001 on December
20, 2018. China Airlines is the second airline in the world and the first in the domestic air transport
service industry to pass both ISO14001 and ISO50001 certification. It is also the airline with the mostcomplete scope of certification in the domestic service industry.

B. Environmental KPI Controls
The Company’s five major Environmental Management Committees and the Carbon Management
Taskforce have adopted and implemented environmental KPI (key performance indicators). The
annual review by the Environmental Committee, convened and chaired by China Airline’s President,
encourages all divisions to implement environmental protections.
In 2018, a total of 59 KPI were completed and carbon emissions were reduced by 144,882 tons ofCO2e through conservation of aviation fuel, energy, and vehicle fuel. In 2019, we set up a further 70
KPI and expect to reduce emissions by 132,818 tons of CO2e over the year.

C. Environmental Management Inspection Mechanism
The Company promotes environmental management supervision mechanisms. Each unit
independently implements the first‐level audit of environmental management; second‐level audit ofenvironmental management is implemented by the headquarters. The double audit mechanism
ensures that environmental management is implemented in the basic level operations of all units.
The second‐level audit (including cause/corrective measures and review operation) was completed
in the second and fourth quarters of 2018. The audit project was carried out according to theestablished checklist. It also included the review of the previous audit, the implementation progressof environmental and energy KPIs, and review of the implementation status of the corrective
measures for the inspection results by the Department of Environmental Protection of Taoyuan City.

108 Operational Highlights

D. Employee Environmental Education and Training
To implement the statement of environmental and energy policy of “implementing environmental
and energy conservation education to foster employees’ environmental awareness,” and to achieve
the goal of “environmental protection by all employees,” China Airlines plans an “environmental
education campaign series” every year to implement online or in‐class environmental management
education and training in Taiwan to cultivate an environmentally friendly attitude and actions in its
employees. In 2018, regarding the management and update operation of the new version of theenvironmental management system, education and training was conducted for all members(including personnel stationed in affiliated companies); a total of 6,181 people completed thetraining. In addition, through the “China Airlines and Me” course, new employees are informed of
the Company's environmental protection and energy conservation policies and practices, and theconsensus of all employees is achieved. Implementation rate is 100%.
In addition to environmental education, China Airlines also publishes new environmental protection
information through employees’ e‐mail and the internal promotion platform. In 2018, 6 special
topics and 1 eco‐care operation highlight reports were released.
In 2018, a contest calling for ideas on the theme of “designing environmental protection icon” andvoting activities were conducted for all members. A total of 57 submissions were received, and
1,288 colleagues participated in the voting.

E. Carbon Inventory and Reduction Project, in Accordance with International
Management Trends(1) A solid response to ICAO CORSIAICAO plans to promote the “Carbon Offsetting and Reduction Scheme for International Aviation(CORSIA),” which will be officially launched in 2019. The Company has participated in the IATA
environmental committee and the AAPA environmental protection task force, actively grasping
the progress and regulations of CORSIA, establishing the internal operation momentum of theGroup companies, and simultaneously providing related information to the relevant competentauthorities in Taiwan for reference, while also cooperating with government policies to establish
a response strategy. On the other hand, through the industry and government platform of the
Flight Safety Foundation, China Airlines assists in handling relevant work meetings of CORSIA, sothat domestic government, industry, universities, institutes, and other relevant units canunderstand the contents of the international carbon control mechanism.
(2) Implementation of an annual proactive organization greenhouse gas audit
Following the ISO/CNS 14064‐1 rules, the Company began greenhouse gas audits in 2009. These
covered flight, ground logistics and office and administrative business; third‐party certification
was performed.
In April, 2019, the Company completed the third‐party (DNV GL) certification process for 2018,
and obtained a certificate of “Reasonable Assurance”. In 2018, greenhouse gas emissions werecertified at 7,253,362.76 metric tons CO2e.
(3) A healthy response to the EU Emission Trading Scheme
According to the EU regulations, because the carbon emissions of the Company's 2018 Intra‐EU
Flights totaled less than 3,000 metric tons, carbon emissions may be calculated by the
EUROCONTROL simple auxiliary tool; calculation results are as follows: 2018: CO2 emissions of
2,511 tons from 81 flights. The carbon credit limit alloted to the Company by the EU are 7,157
metric tons per year from 2017 to 2020; the balance for 2018 was 4,646 metric tons.

F. Actively Participate In International Environmental Protection Initiatives
Our company works with the Environmental Protection Administration, National Central University,and the European Union environmental protection unit IAGOS‐ERI to carry out the PacificGreenhouse Gases Measurement (PGGM) plan. IAGOS instruments were installed on B‐18806,
B‐18317, and B‐18316 aircrafts of the Company in June 2012, July 2016, and July 2017, respectively,

Operational Highlights

109

enabling automatic collection of gas data in the atmosphere during flights from then on fordomestic and international research units to detect and understand the change of gas at highaltitudes, for the purpose of conducting ecological conservation research. During the period from
July 1, 2012, to December 31, 2018, atmospheric data for a total of 9,143 flights was collected,
contributing to the image of Earth's ecology and Taiwan's environmental protection.

G. Building an Energy‐Efficient, Environmental Fleet
In planning our new fleet, the primary concern was to select planes that met international flightnoise and emissions standards while also prioritizing fuel efficient models.
Beginning in September, 2014, the Company has incorporated fuel‐efficient Boeing 777‐300ER and
Airbus A350‐900 aircraft, and by the end of 2018, had a total of 10 777‐300ERs and 14 A350‐900s in
the fleet.
In addition to effectively improving fuel efficiency, the introduction of the new fleet can also reduce
the amount of air pollution emitted during take‐off and landing of aircraft, taking into accountservice efficiency and environmental protection at the same time.

H. Promote Continuous Improvement in Maintenance Operations(1) Maintenance Facility Environmental Management TeamThe maintenance facility established an Environmental Management Committee, in which an
assistant vice president‐level manager serves as Environmental Management representative. The
Committee is made up of members employed in the maintenance facility andenvironmenta‐related units. Through the committee platform, the effectiveness of maintenancefacility environmental management is regularly monitored and reviewed to meet legal
requirements, international trends, company policies, and our corporate social responsibilities.
(2) Establishing Maintenance Facility Environmental KPI
Each year, the maintenance facility sets environmental KPI in accordance with Company goals
and in consideration of potential maintenance facility environmental impact. The KPI include fuel,energy, and water conservation, green procurement, waste recycling, and environmental
education and training. Each goal is regularly monitored and reviewed by the Environmental
Management Committee to continuously improve environmental management and keep up withdomestic and international environmental protection trends.
(3) Continue to Implement Maintenance Facility ISO 14001 Environmental Management System/ISO
50001 Energy Management System
In accordance with ISO14001 and ISO 50001 provisions, the maintenance facility completed the
management systems’ PDCA model in the areas of environmental policy establishment,
environmental management document formulation, environmental assessment, environmental
objective setting, education and training, environmental performance assessment, internal
auditing, and environmental management review. Each year these efforts are certified by athird‐party auditor.
(4) Air Pollution Control
Each year air pollution emissions testing is performed on the heating boilers in our maintenancefacility’s engine plant and plating factory based on relevant standards and regulations and aquarterly air pollution control fee declaration is made (because the facility uses super diesel, noinspection is required, but a declaration must be made).
(5) Wastewater Treatment
Our maintenance facility wastewater treatment plant treats wastewater produced by airplanecleaning, paint stripping, and plating. The plant has obtained a wastewater discharge permit andour water pollution prevention measures program has been updated to meet legal regulations.
Improvements are implemented and equipment added as necessary to ensure compliance withthe latest environmental regulations.

110 Operational Highlights

(6) Waste Disposal
Waste produced by the maintenance facility is sorted and stored as required by law into recycling,
reusable waste, and industrial waste then collected by EPA‐approved recyclers and waste
disposal companies. Maintenance facility units perform scheduled review to ensure the legalityof the final disposal. The waste disposal program is updated regularly as required by law andeach year’s actual waste amount is updated and declared. Soil and groundwater remediation feesare paid based on the latest laws and the declared amount of waste produced.
(7) Procurement
The maintenance facility has received all necessary authorizations for the toxic chemicals
purchased and in use, which are properly stored, labeled, managed, and declared. In order tomaintain compliance, improvements to these processes are implemented, new equipment added,
and applications for revisions are made based on the latest environmental laws and regulations.
(8) Airport Noise Control
In order to control employee noise exposure while working on the apron, the Company regularlycommissions professional testing organizations to perform operating environment noise
inspections at the Taipei Taoyuan and Kaohsiung airports. The Company purchases anddistributes hearing protection equipment to protect employees working on the apron fromhearing loss. As required in the Civil Aviation Law of The Republic of China, CAL pays aviationnoise control fees (see table below) and supports related education campaigns implemented by
the authorities.

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

2018

2019

14,4832020

20,0002021

14,00014,000

90

100

100

100

4,536

4,000

4,000

4,000

190,357

194,925

194,925

194,925

4,483

4,000

4,000

4,000

27,59820,00020,00020,0005.4.4 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

111

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. Employees who may claim from the oldsystem pension account accounts for approximately 51.5% of the employees of the Company(37.4% of Company employees are subject to both 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 Labor Standards Act and whose retirement has taken effect, theresponsible unit shall take 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 applicationaccording 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 is supervised 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 the use of thepension 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. Employees who may claim from the
new system pension account accounts for approximately 66.5% of the employees of theCompany (29% of Company employees are subject to both 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.

112 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 24 written complaints were handled in 2018.

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 2018, a total of 1,994 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
The Company and Taoyuan Pilots Union signed a Collective Agreement on February 14 and February
21, 2019, effective on the same day; the Union issued a letter to the competent authority forreference according to the law. The two parties will fulfill the contents of this Agreement, agreeingthat no strikes or industrial actions will be called within the effective period of the Agreement (3years and 6 months). The Collective Agreement signed with the China Airlines’ company union has
been announced on the Company's “CAL Enterprise Management Portal.”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
2018, there was a total of 96 counseling visits totaling 164.5 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

113

(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
successfully completed by an employee (in cases where the government provides assistance forthe full amount, no additional subsidy will be paid). Each person may draw a total of NT$5,000 insuch subsidies annually.
(2) Obtained the ROC Ministry of Labor Workforce Development Agency's 2018 training subsidy ofNT$398,776.
(3) Popularize and hold strategic work, management, professional and general skills courses.
 Marketing training: including marketing strategies, customer operations, freight business andrelated OJT training, with a total of 209 in‐person classes and 73 e‐classes, and total of 17,680
people trained.
 Professional technical classes: including enterprise safety/inspection work, flight services, joint
management and EMO, with a total of 3,268 in‐person classes and 338 e‐classes, and a total of
68,205 people trained.
 Service: including service quality assurance, introduction to public relations, service business,ground services operations and in‐flight products, with a total of 616 in‐person classes and 255
e‐classes, and a total of 20,169 people trained.
 Other: including investment management unit business, law and insurance, financial,information technology, and human resources management, with a total of 188 in‐personclasses and 57 e‐classes, and a total of 26,992 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 complies with the requirements outlined in the Occupational Safety and Health Act andother relevant regulations. Therefore, we formulated and follow our Occupational Health and Safety
Manual and actively promote the Occupational Health and Safety Management system to implement
related operations. To address potential dangers in the work environment, in addition to hazard
identification, risk assessment, engineering controls, government management, and providing
employees with personal protective equipment, we also arrange employee physicals, health promotion
activities, and health education counseling to reduce occupational incidents. The Company has also
strictly implemented automatic safety checks, workplace environment monitoring, and safety
inspections. Furthermore, we launched workplace incident education to enhance employee safety
awareness. As part of health and safety education and emergency response training, the Company
provides essential health and safety training to both new hires and existing employees. Through theparticipation of all employees in harm prevention, we are committed to continuous improvement andcreating a safe and healthy work environment.

114 Operational Highlights

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 2018 to April 27, 2019, the Company was fined a total of NT$4.66 million by the government
labor authorities for labor disputes or imperfections after labor inspections. In addition, the derivativecompensation for customers’ losses and various expenses from the strike incident called by the
Taoyuan Pilots Union in February 2019 was preliminarily estimated to be NT$154 million; fromFebruary 8 to February 14, a total of 214 flights were canceled, and the accumulated revenue loss wasestimated to be around NT$500 million. In the end, according to the fifth appeal of the Agreement
between the two parties, it was promised that the full salary of the 13th month would be changed to aflight safety bonus. The amount of the bonus was agreed at the negotiation meeting on February 21. It
was estimated that the annual expenditure will increase by around NT$190 million.
In view of the losses in the Company's operation and goodwill caused by this labor dispute, theCompany will continue to conduct positive communication and negotiation with the union, and hope toachieve the goal of caring for employees’ welfare and improving the quality work environment by
maintaining a genial interaction mechanism between the parties, and, through comprehensive
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
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease

Counterparty
SASOFIV Aviation Ireland DAC
AWA Leasing Co., Ltd.
Zhong Hang Co., Ltd.
SASOFIV Aviation Ireland DAC
Zhong Hang Co., Ltd.
AerCap Ireland Limited
Bluesky Magical 1001 Leasing Co.
MSN 1272&1278 Aircraft Leasing(Cayman) Limited
MSN 1272&1278 Aircraft Leasing(Cayman) Limited
AS Air Lease 83 Ireland Limited
AS Air Lease 83 Ireland Limited
Sky Aircraft A1450 Limited
Jade Aviation (Ireland) AOE 5LimitedWilmington Trust SP Services
Wilmington Trust SP Services
Wilmington Trust SP Services
Avolon Aerospace AOE 73 Limited
Avolon Aerospace AOE 78 Limited
SMBC Aviation Capital (UK) Limited
Flip No. 196 Co., Ltd./Flip No. 197
Co., Ltd.
Oriental Leasing 4 Company Limited
Celestial Aviation Trading 34
LimitedWilmington Trust SP Services(Dublin) Limited
Sky High XXXVII Leasing Company
LimitedSky High XXXVII Leasing Company
LimitedSky High XXXVII Leasing Company
Limited
ALC Blarney Aircraft Limited
ALC Blarney Aircraft Limited
Sky High XXXVII Leasing Company
Limited

Period02/2006‐02/2022
06/2006‐06/2018
06/2006‐06/2018
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‐18308
Aircraft Type:A330‐300/No.:B‐18309
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‐‐‐

06/2014‐06/2026

Aircraft Type:A330‐300/No.:B‐18361‐

04/2013‐04/2021
05/2013‐05/2021
06/2013‐06/2021
03/2014‐03/2022
05/2014‐05/2022
06/2014‐06/2022

Aircraft Type:737‐800/No.:B‐18651
Aircraft Type:737‐800/No.:B‐18652
Aircraft Type:737‐800/No.:B‐18653
Aircraft Type:737‐800/No.:B‐18655
Aircraft Type:737‐800/No.:B‐18656
Aircraft Type:737‐800/No.:B‐18657

‐
‐
‐
‐
‐
‐

10/2014‐09/2026

Aircraft Type:777‐300ER/No.:B‐18051‐

10/2014‐10/2026

Aircraft Type:777‐300ER/No.:B‐18052‐

11/2014‐11/2026

Aircraft Type:777‐300ER/No.:B‐18053‐

01/2015‐01/2027

Aircraft Type:777‐300ER/No.:B‐18055‐

05/2015‐05/2027

Aircraft Type:777‐300ER/No.:B‐18001‐

06/2015‐06/2027

Aircraft Type:777‐300ER/No.:B‐18002‐

08/2015‐08/2027

Aircraft Type:777‐300ER/No.:B‐18003‐

09/2015‐09/2023
10/2015‐10/2023

Aircraft Type:737‐800/No.:B‐18658
Aircraft Type:737‐800/No.:B‐18659‐‐

10/2015‐10/2027

Aircraft Type:777‐300ER/No.:B‐18005‐

Operational Highlights

115

Agreement
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
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Loan
Bills
Bills
Bills
Bills
Bills
Bills
Bills

Counterparty
Sky High XXXVIII Leasing Company
LimitedUMB Bank N.A.
Sky High XXXIX Leasing Company
LimitedChilli Leasing LLC
Pacific Triangle Leasing Limited
BOC Aviation Limited
BOC Aviation Limited
BOC Aviation Limited
BOC Aviation Limited
First Commercial Bank
Cathay United Bank
Taiwan Cooperative Bank
Taiwan Business Bank
Taipei Fubon Commercial BankFirst Commercial BankFirst Commercial Bank
Taiwan Cooperative Bank
Bank of Taiwan
Hua Nan Commercial Bank
Bank of Taiwan
Chang Hwa Commercial Bank
Land Bank of Taiwan
Hua Nan Commercial Bank
Mega International Commercial
Bank
Bank of America Corporation
Ta Chong Commercial Bank
E.SUN Commercial Bank
Hua Nan Commercial Bank
Mega International Commercial
BankLand Bank of Taiwan
KGI Bank
Bank of Taiwan
Bank of Communications
Bank of Communications
Taipei Fubon Commercial Bank
Bank SinoPac
Agricultural Bank of Taiwan
Taiwan Business Bank
Mega International Commercial
Bank
The Export‐Import Bank of the
Republic of China
Hua Nan Commercial Bank
O‐BankChina Construction Bank
Corporation
Bank of Taiwan
Union Bank of Taiwan
Mega Bills
International Bills Finance Corp. andsyndicate
China Bills Finance Corporation
Mega Bills
International Bills Finance Corp.
China Bills Finance Corporation andsyndicate

116 Operational Highlights

PeriodMajor Contents

Restrictions

01/2016‐01/2028

Aircraft Type:777‐300ER/No.:B‐18006‐

03/2016‐03/2024

Aircraft Type:737‐800/No.:B‐18660‐

05/2016‐05/2028

Aircraft Type:777‐300ER/No.:B‐18007‐

09/2016‐09/2024
09/2016‐09/2024
10/2016‐10/2024
11/2016‐11/2024
01/2017‐01/2025
02/2017‐12/2025
05/2007‐05/2019
08/2007‐08/2019
02/2008‐02/2020
04/2011‐04/2018
10/2012‐10/2019
09/2013‐09/2018
10/2013‐10/2018
12/2013‐12/2018
03/2014‐03/2019
06/2014‐06/2019
12/2014‐12/2019
01/2015‐01/2018
01/2015‐01/2018
03/2015‐03/2020

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‐18316
Aircraft Type:747‐400F/No.:B‐18725
Aircraft Type:A330‐300/No.:B‐18317
Test Cell
Aircraft Type:737‐800/No.:B‐18610&B18617
Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan
Aircraft Type:747‐400F/No.:B‐18701
Unsecured Loan
Unsecured Loan
Unsecured Loan

‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐

07/2015‐07/2020

Aircraft Type:747‐400F/No.:B‐18711‐

01/2016‐01/2019
01/2016‐01/2018
06/2016‐06/2019
06/2016‐06/2021

Unsecured Loan
Unsecured Loan
Unsecured Loan
Unsecured Loan

‐
‐
‐
‐

08/2016‐11/2018

Unsecured Loan‐

09/2016‐09/2018
09/2016‐12/2018
10/2016‐10/2028
11/2016‐11/2019
01/2017‐01/2029
03/2017‐11/2018
03/2017‐12/2018
04/2017‐04/2029
04/2017‐04/2029

Unsecured Loan
Unsecured Loan
Aircraft Type:A350‐900/No.:B‐18901
Unsecured Loan
Aircraft Type:A350‐900/No.:B‐18902
Unsecured Loan
Unsecured Loan
Aircraft Type:A350‐900/No.:B‐18905
Aircraft Type:A350‐900/No.:B‐18905

‐
‐
‐
‐
‐
‐
‐
‐
‐

05/2017‐08/2019

Unsecured Loan‐

06/2017‐06/2019

Unsecured Loan‐

06/2017‐06/2029
07/2017‐11/2018

Aircraft Type:A350‐900/No.:B‐18906
Unsecured Loan‐‐

11/2017‐11/2029

Aircraft Type:A350‐900/No.:B‐18903‐

04/2018‐04/2030
01/2015‐02/2018
03/2015‐05/2018

Aircraft Type:A350‐900/No.:B‐18907
FRCP
FRCP

‐
‐
‐

12/2015‐03/2019

FRCP Joint Underwriting,‐04/2016‐04/2020
07/2016‐07/2020
09/2016‐09/2020

FRCP
FRCP
FRCP

‐
‐
‐

12/2016‐12/2020

FRCP Joint Underwriting,‐Agreement
Bills

Counterparty
China Bills Finance Corporation andsyndicate

Period
10/2017‐04/2022

Surface Rights
Registration
Northern Region Branch ofContract of
National Property Administration
Taipei CALof the Ministry 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
Building Lease
the OEC Group
Contract

2016/03/01‐115/12/31

Nankan CAL
Park Land
Lease
Contract

Kaohsiung
CAL Building
Lease
Contract

Costco President Taiwan Inc.

FX Hotels Taiwan

CAL Park
Building Lease Cal Park Co., Ltd.
Contract
Engineering
consulting
company
T.Y.Lin Taiwan Consulting
commissioned
Engineers. inc.
technical
service
category

Construction period:
2012/01‐2012/07
Leasing start date: The day thelessee opens business to the
public in the leased building, or
the day after the expiration of one
year from the date ofcommencement of construction.
Period of leasing: 20 years since
the leasing start date.

2012/12/31‐2032/12/30

2019/01/01‐2021/12/31
The contract will be automaticallyrenewed for 1 year upon
expiration of this period andcontract renewal shall be madeevery two years.

2019/03/01‐2020/11/30

Major Contents

Restrictions‐

FRCP Joint Underwriting,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 are 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 land at Jinzhong Section, Luzhu District,Taoyuan City with parcel number of 705, andone land used for road facing Nankan Road
with parcel number 705‐1 and total 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).
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).

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

‐

‐

‐

In
accordancewithnotarized
text

‐

‐

‐

Operational Highlights

117

Financial Information
6.1 Five‐Year Financial Summary
6.2 Five‐Year Financial Analysis
6.3 Consolidated Financial Statements for the YearsEnding December 31, 2018 and 2017, andIndependent Auditors’ Report
6.4 Parent Company Only Financial Statements for theYears Ending December 31, 2018 and 2017 andIndependent Auditors’ Report
6.5 Audit Committee’s Review Report

118 Financial Information

VI. Financial Information
6.1 Five‐Year Financial Summary
6.1.1 Consolidated Condensed Balance Sheet – Based on IFRS
Unit: NT$ thousands
Year
Item

2014(Note 4)
40,910,490

Current assets
Property, Plant andEquipment
Intangible assets
Other assets
Total assets
Current
liabilities

Financial Summary for the Last Five Years (Note 1)2015 (Note 5)2016 (Note 6)2017 (Note 7)
45,642,615
47,338,201
47,411,834

2018 (Note 8)
52,827,560

2019 (As of March 31) (Note 3)
45,785,380

142,655,066

129,628,866

140,136,737

153,617,531

163,107,718

670,997

1,009,678

1,137,115

1,019,345

1,210,796

1,180,239

44,837,474

45,645,150

35,888,706

23,850,922

12,990,508

88,548,771

160,105,308

229,074,027

221,926,309

224,500,759

225,899,632

230,136,582

295,619,698

Beforedistribution

61,357,995

68,220,452

68,605,724

60,289,113

60,949,892

64,730,022

After
distribution

61,357,995

70,728,977

68,605,724

61,482,783‐

Not yet allocatedNon‐current liabilities

116,730,020

93,149,314

98,027,837

106,453,000

109,139,606

171,070,496

Beforedistribution

178,088,015

161,369,766

166,633,561

166,742,113

170,089,498

235,800,518

After
distribution

178,088,015

163,878,291

166,633,561

167,935,783‐

Not yet allocatedEquity attributable toshareholders of the parent

48,664,275

58,269,896

55,783,817

57,023,237

57,081,572

56,777,688

Capital stock

52,491,666

54,708,901

54,708,901

54,709,846

54,209,846

54,209,846

480,462

798,415

799,932

799,999

1,241,214

1,241,214

Beforedistribution(3,870,736)

2,872,235

206,092

1,664,405

1,615,661

1,371,957

After
distribution(2,358,783)

363,710206,092

470,735‐

Not yet allocatedTotal liabilities

Capital surplus (Note 4)
Retainedearnings

Other equity interest(1,905,698)(66,283)

112,264(107,641)

58,223(1,957)

Treasury shares(43,372)(43,372)(43,372)(43,372)(43,372)(43,372)

Non‐controlling interest

2,321,737

2,286,647

2,083,381

2,134,282

2,965,512

3,041,492

Beforedistribution

50,986,012

60,556,543

57,867,198

59,157,519

60,047,084

59,819,180

Total equity

After
Not yet allocated50,986,012
58,048,018
57,867,198
57,963,849‐
distribution
Note 1: 2014 ‐ 2018 annual financial information was verified by Deloitte & Touche.
Note 2: 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, theaforementioned standards and interpretations have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: As of the date of printing of this annual report, 2019 Q1 financial information has not yet been reviewed by Deloitte & Touche.
Note 4: The 2014 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 26, 2015 and additional paid‐in capital of
NT$1,511,953,000 was used to compensate for the deficit.
Note 5: 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 6: 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
making up the shortfall.
Note 7: 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 8: The 2018 Surplus Distribution Proposal resolution was passed at the 5th meeting of the 21st Board of Directors on March 20, 2019, but has not yet been
approved at the shareholders' regular meeting.

Financial Information

1196.1.2 Consolidated Condensed Statement of Comprehensive Income – Based on
IFRS
Unit: NT$ thousands; EPS (net) = NT$
Year
Item

Financial Summary for the Last Five Years (Note 1)

2019 (As of March 31)(Note 3)

Revenue2014
150,581,742

2015
145,056,217

2016
141,079,107

2017
156,121,785

2018
170,711,607

Gross profit

13,631,370

20,268,374

18,005,906

21,972,411

17,207,531

Operating Profit

2,518,747

8,129,197

4,564,687

8,826,160

4,022,383

761,473

Non‐operating Income and Expenses(2,156,321)(994,312)(2,684,836)(5,302,197)(941,134)(719,112)

Pretax Profit (Loss)

362,426

7,134,885

1,879,851

3,523,963

3,081,249

42,361

Income from operations of continued
segments ‐ after tax(597,488)

5,926,210

710,940

2,490,792

2,272,684(146,876)

Income from discontinued operations

‐

‐

‐

‐

‐

‐

(597,488)

5,926,210

710,940

2,490,792

2,272,684(146,876)

Other comprehensive income(Income/Loss after taxes)(1,947,078)

1,269,760(681,669)(1,113,176)(578,363)(64,544)

Total Comprehensive Gain (Loss) for
the Year(2,544,566)

7,195,970

29,271

1,377,616

1,694,321(211,420)

Net income attributable toshareholders of the parent(749,073)

5,763,714

571,540

2,208,066

1,790,361(243,704)

Net income attributable tonon‐controlling interest

151,585

162,496

139,400

282,726

482,323

96,828Comprehensive income attributable to
Shareholders of the parent(2,693,811)

7,072,042

26,103

1,240,677

1,258,035(312,357)

Comprehensive income attributable tonon‐controlling interest

149,245

123,928

3,168

136,939436,286

100,937Net Income (Loss)

40,405,348
4,213,439

Earnings (Loss) per share(0.14)
1.06
0.10
0.40
0.33
(0.04)
Note 1: 2014 ‐ 2018 annual financial information was verified by Deloitte & Touche.
Note 2: 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, theaforementioned standards and interpretations have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: As of the date of printing of this annual report, the 2019 Q1 financial information has not yet been reviewed by Deloitte & Touche.

120 Financial Information

6.1.3 Condensed Balance Sheet – Based on IFRS (Parent Company Only)
Unit: NT$ thousands
Year
Item
Current assets
Property, Plant andEquipment
Intangible assets
Other assets
Total assets
Current
liabilities

Financial Summary for the Last Five Years (Note 1)
2014(Note 4)
34,477,533

2015 (Note 5)
37,904,039

2016 (Note 6)
39,908,492

2017 (Note 7)
37,933,696

2018 (Note 8)
42,932,859

131,178,428

118,446,472

129,121,632

142,265,548

149,029,054

2019 (As of March 31)(Note 3)‐‐649,614990,307

1,115,101

989,327

979,708‐

51,594,035

51,802,032

41,394,218

30,729,421

21,972,600‐

217,899,610

209,142,850

211,539,443

211,917,992

214,914,221‐

Beforedistribution

59,079,846

64,725,525

64,339,805

54,925,364

55,179,834

‐

After
distribution

59,079,846

67,234,050

64,339,805

56,119,034‐‐

Non‐current liabilities

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‐‐

Equity attributable toshareholders of the parent

48,664,275

58,269,896

55,783,817

57,023,237

57,081,572‐

Capital stock

Total
liabilities

52,491,666

54,708,901

54,708,901

54,709,846

54,209,846‐

Capital surplus (Note 4)

480,462

798,415

799,932

799,999

1,241,214‐

Beforedistribution(3,870,736)

2,872,235

206,092

1,664,405

1,615,661‐

After
distribution(2,358,783)

363,710206,092

470,735‐‐

Retainedearnings

Other equity interest(1,905,698)(66,283)

112,264(107,641)

58,223‐(43,372)(43,372)(43,372)(43,372)(43,372)‐

Non‐controlling interest

‐

‐

‐

‐

‐

‐

Beforedistribution

48,664,275

58,269,896

55,783,817

57,023,237

57,081,572‐

Treasury shares

Total
equityAfter48,664,275
55,761,371
55,783,817
55,829,567‐‐
distribution
Note 1: 2014 ‐ 2018 annual financial information was verified by Deloitte & Touche.
Note 2: In 2015, the Company began using the financial reporting standards in the revised Regulations Governing the Preparation of Financial Reports by
Securities Issuers and these standards have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: The Company has not prepared an individual financial statement for Q1 2019.
Note 4: The 2014 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 26, 2015 and additional paid‐in capital of
NT$1,511,953,000 was used to compensate for the deficit.
Note 5: 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 6: The 2016 Deficit Compensation Proposal was passed by the Shareholders’ General Meeting held on June 22, 2017, using a statutory surplus reserve of
NT$81,132,000 to cover the deficit.
Note 7: 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 8: The 2018 Surplus Distribution Proposal resolution was passed at the 5th meeting of the 21st Board of Directors on March 20, 2019, but has not yet been
approved at the shareholders' regular meeting.

Financial Information

121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)

2019 (As of March 31)(Note 3)

Revenue2014
139,726,168

2015
133,441,725

2016
127,524,864

2017
139,815,211

2018
150,264,792

Gross profit

10,917,174

17,623,801

15,275,980

17,966,397

12,649,836‐

Operating Profit

1,870,191

7,885,097

4,475,707

7,358,114

1,847,567‐

Non‐operating Income
and Expenses(1,820,766)(1,047,275)(2,938,456)(4,269,911)

468,064‐

Pretax Profit(Loss)‐

49,425

6,837,822

1,537,251

3,088,203

2,315,631‐

Income from operationsof continued segments ‐after tax

(749,073)

5,763,714

571,540

2,208,066

1,790,361‐

Income fromdiscontinued operations

‐

‐

‐

‐

‐

‐

Net Income(Loss)(749,073)

5,763,714

571,540

2,208,066

1,790,361‐

Other comprehensive
income(income/Loss after tax)

(1,944,738)

1,308,328(545,437)(967,389)(532,326)‐

Total Comprehensive
Gain (Loss) For The
Year(2,693,811)

7,072,042

26,103

1,240,677

1,258,035‐

Net income
attributable to(0.14)
1.06
0.10
0.40
0.33
shareholders of theparentNote 1: 2014 ‐ 2018 annual financial information was verified by Deloitte & Touche.
Note 2: In 2015, the Company began using the financial reporting standards in the revised Regulations Governing the Preparation of Financial Reports by
Securities Issuers and these standards have been applied retroactively to affected sections of the previous year’s (2014) financial statement.
Note 3: The Company has not prepared an individual financial statement for Q1 2019.

122 Financial Information‐

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 2014 to 2018
Year

Accounting Firm

Audit Opinion

Name of CPA

2014
Deloitte & Touche
Huang, Jui‐chan; Chen, Li‐Chi
Unqualified Opinion
2015
Deloitte & Touche
Huang, Jui‐chan; Chen, Li‐Chi
Qualified Opinion (Note)
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 Opinion
Note: 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.

6.2 Five‐Year Financial Analysis
6.2.1 Consolidated Financial Analysis – Based on IFRSYear

Financial Summary for The Last Five Years (Note 1)
2014

2015

2016

2017

2019 (As of March 31)(Note 3)

2018

Item (Note 4)(%)

Solvency (%)

Operatingperformance

Profitability

Cash flow

Leverage

Debt Ratio

77.74

72.71

74.22

73.81

73.91

79.76

Ratio of long‐term capital toproperty, plant and equipment

117.57118.57111.24107.81103.73144.21

Current ratio

66.68

66.90

69.00

78.64

86.67

70.73

Quick ratio

53.49

53.06

53.16

59.46

67.50

54.97

Interest earned ratio (times)

115.55496.25265.40369.02338.05100.88

Accounts receivable turnover (times)

17.45

16.98

17.67

18.40

18.30

16.84

Average collection period

20.91

21.49

20.66

19.84

19.95

21.67

Inventory turnover (times)

‐

‐

‐

‐

‐

‐

Accounts payable turnover (times)

‐

‐

‐

‐

‐

‐

Average days in sales

‐

‐

‐

‐

‐

‐

Property, plant and equipment
turnover (times)

1.03

1.07

1.05

1.06

1.08

1.00

Total assets turnover (times)

0.67

0.64

0.63

0.69

0.75

0.61

Return on total assets (%)

0.48

3.28

0.80

1.60

1.48

0.84

Return on stockholders' equity (%)(1.15)

10.63

1.20

4.26

3.81

(0.98)

Pre‐tax income to paid‐in capital (%)

0.69

13.04

3.44

6.44

5.68

0.31

Profit ratio (%)(0.40)

4.09

0.50

1.60

1.33

(0.36)

Earnings per share (NT$)(0.14)

1.06

0.10

0.40

0.33

(0.04)Cash flow ratio (%)

27.56

46.60

25.71

47.35

41.33

69.95

Cash flow adequacy ratio (%)

207.19233.25303.17351.58361.41562.77

Cash reinvestment ratio (%)

5.48

10.56

4.83

8.82

7.59

14.81

Operating leverage

8.19

3.21

4.99

3.16

6.00

11.93

Financial leverage
5.04
1.28
1.40
1.18
1.52
(6.66)
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 operating profit in 2018 compared with the same period of last year, resulting in the increased
degree of operating leverage.
2. Degree of financial leverage: Mainly due to the decrease in operating profit in 2018 compared with the same period of last year, resulting in the increased
degree of financial leverage.
3. In 2019, the Company began using the financial reporting standards (IFRS 16) and new accounting code like right‐of‐use asset and leased liability, so thestandard has been applied results the increased degree of financial structure and cash flow.

Financial Information

1236.2.2 Financial Analysis – Based on IFRS (Parent Company Only)
Year
Item (Note 4)

Financial Summary for the Last Five Years (Note 1)
2014

2015

2016

2017

2018

2019 (As of March 31)(Note 3)

Debt Ratio
77.67
72.14
73.63
73.09
73.44
‐
Ratio of long‐term capital to fixed
121.07121.93114.00110.35107.18‐assetsCurrent ratio
58.36
58.56
62.03
69.06
77.81
‐
Solvency (%)
Quick ratio
45.32
44.54
45.82
49.03
57.87
‐
Interest earned ratio (times)
100.38495.43246.03350.56292.02‐
Accounts receivable turnover
16.23
15.56
15.92
16.62
16.57
‐
(times)Average collection period
22.49
23.46
22.92
21.96
22.46
‐
Inventory turnover (times)
‐
‐
‐
‐
‐
‐
Operatingperformance
Accounts payable turnover (times)
‐
‐
‐
‐
‐
‐
Average days in sales
‐
‐
‐
‐
‐
‐
Fixed assets turnover (times)
1.03
1.07
1.03
1.03
1.03
‐
Total assets turnover (times)
0.65
0.62
0.61
0.66
0.70
‐
Return on total assets (%)
0.41
3.36
0.75
1.54
1.33
‐
Return on stockholders' equity (%)(1.51)
10.78
1.00
3.91
3.14
‐
Profitability
Pre‐tax income to paid‐in capital (%)
0.09
12.50
2.81
5.64
4.27
‐
Profit ratio (%)(0.54)
4.32
0.45
1.58
1.19
‐
Earnings per share (NT$)(0.14)
1.06
0.10
0.40
0.33
‐
Cash flow ratio (%)
25.44
47.38
26.71
47.41
39.42
‐
Cash flow
Cash flow adequacy ratio (%)
209.68232.93309.01357.86373.29‐Cash reinvestment ratio (%)
5.10
10.74
4.94
8.48
6.90
‐
Operating leverage
10.21
3.15
4.85
3.46
11.25
‐
Leverage
Financial leverage(19.66)
1.28
1.38
1.21
3.45
‐
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)
1. Profitability As the net profit after tax in 2018 decreased compared with the same period of last year, each item of profitability also decreased.
2. Degree of operating leverage: Mainly due to the decrease in operating profit in 2018 compared with the same period of last year, resulting in the increased
degree of operating leverage.
3. Degree of financial leverage: Mainly due to the decrease in operating profit in 2018 compared with the same period of last year, resulting in the increased
degree of financial leverage.
Note 1: 2013 ‐ 2017 annual financial information was verified by Deloitte & Touche.
Note 2: 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 year’s (2014) financial statement.
Note 3: As of printing of this annual report, Q1 2018 consolidated financial information has not yet been reviewed by Deloitte & Touche. The Company has not prepared
an individual financial statement for Q1 2018.
Note 4: 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)
Financial structure(%)

124 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, 2018 and 2017, and Independent Auditors’ Report:
Please refer to Appendix 1.
6.4 Parent Company Only Financial Statements for the Years Ended
December 31, 2018 and 2017, and Independent Auditors’ Report:
Please refer to Appendix 2.

Financial Information

1256.5 Audit Committee’s Report
Audit Committee Report
The Board of Directors shall create and send (1) the 2018 consolidated financial statement andindividual financial statement that have been jointly audited by Deloitte CPAs Yang, Chen‐Hsiu andHuang, Jui‐chan who released an official unqualified opinion by March 20, 2019, and (2) the 2018business 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 20, 2019

126 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 Management127

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:
Year
Item

2018

Unit: NT$ thousands
Difference

2017
Amount%Current Assets

52,827,560

47,411,834

5,415,726

Property, Plant and Equipment

163,107,718

153,617,531

9,490,187

6.18

1,210,796

1,019,345

191,45118.78(45.53)

Intangible Assets

11.42

Other Assets

12,990,508

23,850,922(10,860,414)

Total Assets

230,136,582

225,899,632

4,236,950

1.88

Current Liabilities

60,949,892

60,289,113

660,779

1.10

Non‐Current Liabilities

109,139,606

106,453,000

2,686,606

2.52

Total Liabilities

170,089,498

166,742,113

3,347,385

2.01

Capital stock

54,209,846

54,709,846(500,000)(0.91)

Capital surplus

1,241,214

799,999441,215

55.15

Retained Earnings

1,615,661

1,664,405(48,744)(2.93)

Other Equity

58,223(107,641)

165,864154.09Treasury shares(43,372)(43,372)‐‐

Non‐Controlling Interests

2,965,512

2,134,282

831,230

38.95

Total Equity
60,047,084
59,157,519
889,565
1.50
Analysis of changes in financial ratios:
1. Other assets: Mainly due to the delivery of 4 A350 aircrafts in 2018, aircraft purchasing advance payment was reclassified as Property, Plant
and Equipment.
2. Retained earnings: In 2018, the sixth domestic convertible bond was issued, increasing the additional paid‐in capital by NT$410 million.
3. Other equity: Mainly due to the changes in the fair value of financial assets and hedging instruments measured by fair value of othercomprehensive profit and loss cases.
4. Non‐controlling interest: Shareholdings in Kaohsiung Airport Catering Services Ltd. were increased in 2018; it became a consolidated
entity, resulting in an increase in non‐controlling interests.
Future response actions: The above changes do not significantly affect the Company.

128 Review of Financial Conditions, Financial Performance, and Risk Management7.2 Analysis of Financial Performance (Consolidated)
Financial Performance Analysis Table
Year
Item

Unit: NT$ thousands

2018

Difference

2017
Amount%Revenue

170,711,607

156,121,785

14,589,822

9.35

Cost

153,504,076

134,149,374

19,354,702

14.43

Gross Profit

17,207,531

21,972,411(4,764,880)(21.69)Operating Expenses

13,185,148

13,146,251

38,8970.30

Operating Income

4,022,383

8,826,160(4,803,777)(54.43)(941,134)(5,302,197)

4,361,063

82.25

3,081,249

3,523,963(442,714)(12.56)

Income Tax Expense

808,565

1,033,171(224,606)(21.74)Net Income (Loss)

2,272,684

2,490,792(218,108)(8.76)

Other Comprehensive Income(578,363)(1,113,176)

534,813

48.04

Non‐operating Income andExpenses
Pretax Profit

Total Comprehensive Gain (Loss)

1,694,321
1,377,616
316,705
22.99
for the Year
Analysis of changes in financial ratios:
1. Operating income, pretax profit, and net income for the period: Each profit item of 2018 was lower than those of 2017, mainly due to thesubstantial increase in fuel costs.
2. Non‐operating income and expenses: In 2018 and 2017, affected by the elimination of fleet, impairment losses of NT$125 million andNT$4,262 million were recognized, respectively.
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
Unit: NT$ thousands
Year
Item

2018

Difference

2017
Amount%Cash and Cash Equivalents, Beginning of Year

22,585,332

24,267,197(1,681,865)(6.93)Net Cash Flow from Operating Activities

25,188,007

28,547,018(3,359,011)(11.77)

Net Cash Flow from Investing Activities(18,440,662)(25,792,340)

7,351,678

28.50

Net Cash Flow from Financing Activities(4,386,909)(4,669,431)

282,522

6.05(8,231)

232,888(241,119)(103.53)

Exchange Rate Adjustment

Cash and Cash Equivalents, End of Year24,937,537
22,585,332
2,352,205
10.41
Analysis of change in cash flow in the current year: The difference in cash flow of the investing activities was mainly due to the decrease inaircraft purchasing advance payment in 2018 compared with that of the same period in 2017.

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 NT$18.69 billion and estimated net cash flow from operating
activity for the year is NT$25.78 billion. Cash flow from investment and financing activities are estimated to total
NT$8.96 billion and NT$31 billion respectively. The cash shortfall was made up through corporate bond issuance,and medium‐term unsecured loans of NT$12 billion and the cash and cash equivalents at the end of the year totaled
NT$16.51 billion.

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.

Review of Financial Conditions, Financial Performance, and Risk Management129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 2018 totaled NT$1.919 billion.
In the coming year, for the Company’s re‐investment businesses, we will continue to carry out the
hangar construction of the Taiwan Aircraft Maintenance and Engineering Co., Ltd. We will also evaluatevarious potential investment possibilities in aspects such as passenger transport, cargo transport, 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, through effective controls 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 Operational Procedures for Lending Funds to Others and Operational
Procedures for Endorsements/Guarantees and risks of such operations are controlled through strict
assessment. Therefore, loans and endorsements/guarantees do not lead to profits or losses for theCompany.
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 100.
7.6.4 Effects of and Response to Changes in Policies and Regulations Relating toCorporate Finance and Sales: None.
130 Review of Financial Conditions, Financial Performance, and Risk Management7.6.5 Effects of and Response to Changes in Technology and the Industry
Relating to Corporate Finance and Sales:
1.Information Security
In order to construct a comprehensive information security protection capability and cultivate good
information security awareness among colleagues, the Company has established relevant
maintenance plans and operating procedures in accordance with the Cyber Security Management Act.
It has also implemented the establishment of various protection measures and supervised theoperation situation of information security management according to the law to ensure that theconfidentiality, integrity, availability and compliance of the Company's information andcommunication system and assets are in compliance with the requirements of relevant laws andregulations, while also being protected from internal or external, intentional or accidental threats.
2.Information Security Governance System
In order to strengthen the Company's information and communication security and improve theinformation and communication security management system, the Company has established the“China Aviation Information and Communication Security Task Force,” which is responsible for thedevelopment of the Company's information and communication security policy, the implementationof information and communication security education and training, confidential and sensitive
information protection, information and communication security for intelligence assessments,
handling of emergency notification/response, and regular review of the appropriateness of theinformation and communication security policy and goals in information and communication security
management review meetings.

3.Information Security Management Mechanism
The major directions of Company's information security strategy have been focused on three aspects,
including information security governance, daily maintenance and operation, and infrastructure
protection, in which there are contained risk management, legal compliance, and corporate 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 of organization.
In view of currently prevalent external attacks and ransomware, the Company communicates withinternational information security vendors every year, regularly pays attention to the issues of
information security, and plans the response measures. Meanwhile, professional information security
courses and training sessions have been conducted for designated information security personnel tostrengthen their ability to detect and handle such incidents upon occurrence and to respondaccordingly.
Furthermore, to strengthen the Company's information security management, in addition to
conducting regular information security examinations and external penetration tests, the Company

Review of Financial Conditions, Financial Performance, and Risk Management131also successively obtained credit card transaction environment PCI‐DSS compliance, PIMS personal
information management system, ISO27001 compliant data center and other international
certifications, to ensure the reduction of information security risk; In terms of program development,
secure development operation specifications were also established with reference to international
standards, implementing the SDLLC Secure Software Development lifecycle. In the future, we willcontinue to strengthen information security protection and establish a joint defense mechanism.
4. Personal Information Management
In 2014, the Company established the “Personal Information Management Committee,” andformulated and disclosed on the Company's official website the “Information Security Policy” toprotect the privacy of all customers' personal information. In addition, in 2018, a Data Protection
Officer position and a personal information management task force were set up; an external
professional consultant team was introduced to establish a systematic management system that links
personal information protection with organizational operations by the “PDCA Methodology” in
response to the the EU General Data Protection Regulation (GDPR). The implementation report ofpersonal information management project was reported to the Board of Directors on January 21, 2019,
and the Committee reports the implementation status to the Board of Directors on a regular basis
every year in accordance with the Article 38 of GDPR. In the future, the Company will continue tomaintain customer privacy in accordance with high standards.

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, clarify, and communicate with the public, and post explanationon our website or social media platform if necessary, to reduce the negative effects.
The Company has faced the challenge of labor disputes turning into petition and protest activities. In
order to avoid losses that cannot be estimated in operations and goodwill, the Company will maintain agenial interaction mechanism through diversified communication channels to achieve the goal of caring
for employees’ welfare and improving the quality work environment, and through comprehensive
improvement of the satisfaction of employees in all categories, eliminating the issues that may arise
from unnecessary labor disputes.

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.

132 Review of Financial Conditions, Financial Performance, and Risk Management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.
No.

Case Name

1

Litigation forrefundingoverpaymenton aircraft
rentalDisputed
Amount(NT$)
1. In 2002, the Civil
More than 1.2
Aeronautics Administration billion(CAA) unilaterally
terminated an aircraft
rental contract with theCompany for six aircraft,resulting in earlytermination of the contract,which changed the natureof the lease and the rent
calculation basis andresulted in rent
overpayment by theCompany.
2. In 2010, the CAA resolvedthat the Civil Aeronautics
Administration should pay
the Company more than
NT$1.5 billion and in 2015
the Supreme Court revoked
the arbitration judgment,
which resulted in the
Company filing a civil
lawsuit against the CAA torecoup the aforementioned
rent overpayment.
Summary

Litigants

Current Status

Plaintiff: China
Airlines
Defendant: Civil
Aeronautics
Administration

On the first ruling by the Taipei
District Court, the Company's
claim was rejected, but because
there was a calculation error by
the court of first instance, theservices of a law office wereretained on April 2, 2018 toproceed on appeal.

7.6.13 Other Major Risks:
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 supervision of the Boardof Directors to improve risk management and require subordinate units to control for each major risk
category.
The CAL risk management organization and units responsible for implementation:
Type of Risk

Responsible
Department

Operating Risk

Corporate
Development
OfficeSafety Risk

Corporate
Safety OfficeFinancial Risk

Finance Div.

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
impact on company operations. The Corporate Development Office analyses potential
political, economic, aviation industry, and internal Company situations that could affect
the Company and proposes concrete response plans to reduce their impact on China
Airlines’ strategic direction and annual business plan.
Safety is the cornerstone of airline operations and only a good record of flight safety canearn passenger trust. The Corporate Safety Office utilizes the Safety Management System(SMS) to identify internal and external operating risks including flights, aircraft, in‐flight
service, and ground handling. Operating risk is controlled to an acceptable level throughcontinuous hazard identification and risk management. In addition, countermeasures areproposed to improve the overall safety performance of the company.
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
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.

7.7 Other Important Matters: None.

Review of Financial Conditions, Financial Performance, and Risk Management

133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

134 Special Disclosure

VIII. Special Disclosure
8.1 Summary of Affiliated Companies
8.1.1 Basic information of Affiliated Companies
A. Affiliated Companies Chart
Dec 31, 2018

China Airlines

100%

80%

55%

54%

51%

51%

49%

47% 25%Global Sky Express

Taiwan Airport Service

Taoyuan International Airport Services

China Pacific Laundry Services

Dynasty Holidays

Taiwan Air Cargo Terminal

China Pacific Laundry Services

Tiger Taiwan

Sabre Travel Network (Taiwan)

Mandarin Airlines

CAL Hotel

CAL Park

Yestrip

Freighter Princess

100%

94%

100% 100% 100% 100% 100% 100% 94%

Freighter Prince

Hwa Hsia Company

CAL‐Asia Investment

CAL‐Dynasty International

Taiwan Aircraft Maintenance and Engineering
100%

100% 100%

2.5%

10%

100%

2.5%

51%

Taiwan Airport Service (Samoa)

Delica International Co., Ltd.

Dynasty Hotel of Hawaii

Dynasty Properties

1.08%

Note 1: The affiliates listed above mean companies in which the company has invested and has a 50% or higher voting share, or the means
to control, either directly or through a subsidiary company. China Pacific Laundry Services and China Pacific Catering Services arejoint ventures.
Note 2: Hwa Hsia Company Ltd. was renamed "Dynasty Aerotech International Corp." in 2018.

Special Disclosure

135

B. Basic information of Affiliated Company
Dec 31, 2018/Unit: NT$ thousands
Company
1. CAL‐Dynasty International, Inc.
1A Dynasty Properties Co., Ltd.
1B Dynasty Hotel of Hawaii, Inc.
2. CAL‐Asia Investment Inc.
3.Dynasty Aerotech International
Corp. (Note 2)
4. Yestrip Co., Ltd.

Date
FoundedAddress

200 Continental Blvd. Suite #101 El Segundo,
07/01/1991
CA90245, U.S.A.
200 Continental Blvd. Suite #101 El Segundo,
08/15/1973
CA90245, U.S.A.
12/10/1973 1830 Ala Moana Blvd. Honolulu, Hawaii 96815, U.S.A.
Mandar House, 3rd Floor, P.O. Box 2196, Johnson’s
06/29/1995
Ghut, Tortola, VG1110, Virgin Islands, British
No.6, Hangqin South Road, Dayuan District, Taoyuan
05/11/1989
City
10F, No.9,Section 3, Nanjing E Rd., Zhongshan District,
01/18/2001
Taipei City

5. CAL Park Co., Ltd.

09/06/2006 No.1, Hangzhan S Rd., Dayuan District, Taoyuan City

6. CAL Hotel Co., Ltd.

01/03/2007 No.1‐1, Hangzhan S Rd., Dayuan District, Taoyuan City

7. Taiwan Aircraft Maintenance andEngineering Co., Ltd.

01/16/2015

No.15, Hangqin South Road, Dayuan District, Taoyuan
City

No.3, Alley 123, Lane 405, Dunhua North Road,
Songshan District, Taipei City
No.57, Fuxing North Road, Songshan District, Taipei
9. Sabre Travel Network (Taiwan) Ltd. 10/09/1990
City
8. Mandarin Airlines, Ltd.

10. Tigerair Taiwan Co., Ltd.

04/29/1991

04/21/2014 No.1, Hangzhan S Rd., Dayuan District, Taoyuan City

No.7, Lane 54, Sande Street, Luzhu District, Taoyuan
11. China Pacific Laundry Services Ltd. 09/08/1997
City
No.10‐1, Hangqin North Road, Dayuan District,
12/22/1999
12. Taiwan Air Cargo Terminal Ltd.
Taoyuan City
13. Kaohsiung Airport Catering
Services Ltd.
13A Delica International Co., Ltd.
14. Dynasty Holidays, Inc.
15. China Pacific Catering Services
Ltd.

09/27/1999

No. 2‐10, Zhongshan 4th Rd., Xiaogang District,Kaohsiung City

No. 2‐10, Zhongshan 4th Rd., Xiaogang District,Kaohsiung City
5F, You Ei Ginza Second Building, 9‐7, 1Chome, Ginza,
10/28/1980
Chuo‐Ku, Tokyo, Japan

05/24/2016

08/19/1994

No.22, Lane 156, Section 2, Haishan Rd., Luzhu
District, Taoyuan City

Capital(Note)

Principal Activities

804,462 Holding & investing
Real estate investing, property
leasing
123,077 Hotel service
15,385

220,688 Holding & investing
77,270Aviation ground handlingservice, cleaning service

16,000 Travel service
1,500,000

Real estate leasing, parking lot
management

465,000 Hotel business
1,350,000 Aircraft maintenance and repair
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
400,500 Catering service
20,000 Catering service
11,114 Travel service
861,000 Catering service

16. NORDAM Asia Ltd.

12/07/2017 No. 15, Hangqin S. Rd., Dayuan Dist., Taoyuan City

17. Taoyuan International Airport

No.15, Hangqin North Road, Dayuan District, Taoyuan
11/08/1978
City

700,000 Aviation ground handling service

18. Taiwan Airport Service Co., Ltd.

07/19/1966 No.340, Dunhua N Rd., Songshan District, Taipei City435,600 Aviation ground handling service

18A Taiwan Airport Service (Samoa)

TrustNet Chambers, Lotemau Centre, P. O. Box 1225,
03/22/2004
Apia, Samoa

180,830 Holding & investing

Services Co., Ltd.

Co., Ltd.

5,000 Aircraft maintenance and repair

No.186, Section 4, Nanjing East Road, Songshan
10,000 Air freight forwarder
District, Taipei City
Note 1: Capital was calculated using the exchange rate at the end of 2018: 1TWD=0.0325 USD, 3.5991JPY, 0.2232CNY.
Note 2: Hwa Hsia Company Ltd. was renamed “Dynasty Aerotech International Corp.” in 2018.
19. Global Sky Express Ltd.

136 Special Disclosure

09/29/1994

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
Airlines

Description
Mandarin Airlines provides domestic and international passenger and cargo air transport services to further capitalize on ourcompetitive advantage in the cross‐strait market. Tigerair Taiwan is tasked with operating in the Asian low‐cost carrier market
to develop new business opportunities.

GroundHandling
Services

Ground services at Taiwan Taoyuan and Taitung Airports are provided by Taoyuan International Airport Services Co., Ltd.,
while Kaohsiung Airport and all other domestic airports are serviced by Taiwan Airport Service Co., Ltd. Overseas, theCompany has invested in Jardine Aviation Services in Hong Kong, which serves as China Airlines’ ground handling agent inHong Kong. Cleaning and repair ground services are provided by Hwa Hsia Company Ltd.

Air Transport
SupportThe 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 and general laundry
services for the hospitality industry.

Logistics andWarehousing

Domestically, TACT Logistics is responsible for providing warehousing services at Taiwan Taoyuan Airport and KaohsiungInternational 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 aerospace technology business in Taiwan, the Company invested in Taiwan Aircraft Maintenance and Engineering Ltd.,
responsible for all aspects of maintenance and repair services for Boeing 777 and 737s and Airbus A320 and A350 models;NORDAM Asia provides thrust reverser and composite material maintenance services in the Asian region; overseas, theCompany invests in Xiamen Taiko Landing Gear Co. in Mainland China, providing and maintaining landing gear, and HAECO
Composite Structures (Jinjiang) Co. Ltd. , providing composite material maintenance. In Hong Kong, the Company invests in
the China Aircraft Service Company, providing aircraft maintenance capacity.

Tourism andLeisureDomestic investments include Yestrip and CAL Hotel Co., Ltd. Overseas investments include an indirect investment in Dynasty
Hotel of Hawaii in the USA and investment in Japan’s Dynasty Holidays.

Investment
holdings andLeasing
Business Group

Established CAL‐Dynasty International, which makes indirect investments in Chinese and American companies engaged in realestate investments and leasing management. CAL‐Asia Investment Inc. and Taiwan Airport Service (Samoa) Co., Ltd. areengaged in general investment holdings.
Freighter Prince and Freighter Princess are special purpose entities set up to meet financial structuring needs.

Special Disclosure137

D. Directors, Supervisors, and Presidents of Affiliated Companies
Dec 31, 2018
Units: Shares; %Company
1. CAL‐Dynasty International,
Inc.

Title
Chairman
Director
Director (President)

1A Dynasty Properties Co.,Ltd.

5. CAL Park Co., Ltd.

6. CAL Hotel Co., Ltd.

7. Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

8. Mandarin Airlines, Ltd.

11.China Pacific Laundry
Services Ltd.

12. Taiwan Air Cargo Terminal
Ltd.

138 Special Disclosure

Hsieh, Su‐Chien (Note 1)
Lee, Hsien‐Kuang (Note 1)

100

5,000
(USD100, share)100

400,000(USD10, share)100

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

180,000,000

90

20,000,000

10

13,750,000

55

Hsieh, Su‐Chien; Peng, Pao‐Chu (Note 2)
Lee, Hsien‐Kuang (Note 2)Peng, Pao‐Chu (Note 2)
Pan, Wen‐Tsung (Note 1)
Ho, Nuan‐Hsuan (Note 1)
Hsieh, Su‐Chien (Note 1)
Lo, Ya‐Mei (Note 1)
Chao, Lin (Note 1)
Liu, Der‐Chuan; Sun, Jia‐Min; Chung, Ming‐Jyh (Note 1)
Chen, I‐Chieh (Note 1)
Lu, Yung‐Nan (Note 1)
Hsieh, Hsin‐Ni (Note 1)
Tong, Huai‐Ming; Wang, Chen‐Min (Note 1)
Huang, Hui‐Na (Note 1)
Lo, Chun‐Ying (Nominated by China Airlines)
Ho, Nuan‐Hsuan (Note 1)
Hsieh, Su‐Chien; Chang, Young (Note 1)
Fang, Juo‐Ling (Note 1)
Hsieh, Su‐Chien (Note 1)
Ho, Nuan‐Hsuan (Note 1)
Hsieh, Su‐Chien; Kao, Shing‐Hwang; Lo, Ya‐Mei (Note 1)
Fang, Juo‐Ling; Chen, I‐Chieh (Note 1)

ChairmanWang, Houng (Note 1)

Director
Supervisor
President
Chairman

Supervisor
Director(President)

Chang, Young; Sun, Jia‐Min; Lee, Jung‐Hui (Note 1)
Fang, Juo‐Ling; Yen, Yang (Note 1)
Tsai, Chih Hung (Nominated by China Airlines)
Hsieh, Su‐Chien (Note 1)
Chang, Young; Kao, Shing‐Hwang; Wang, Houng;Lo, Ya‐Mei (Note 1)
Chen, I‐Chieh
Tsao, Jyh‐Fen (Note 1)

ChairmanWu, Wen‐Kuo (Note 1)

Director

Supervisor
President
Chairman
Director
Supervisor
Supervisor

Lu, Shih‐Ming; Tong, Huai‐Ming; Wang, Chen‐Min (Note 1)
Alan Chen (Representing Sabre Travel Network Asia
Pacific)
Ho, Hui‐Fen
Chen, Chau‐Ling (Nominated by China Airlines)
Chang, Horng‐Jong (Note 1)
Chang, Young; Peng, Pao‐Chu; Wang, Chen‐Min (Note 1)
Tsao, Jyh‐Fen (Representing Mandarin Airlines)
Chen, I‐Chieh

President

Chang, Horng‐Jong

ChairmanChiu, Chang‐Hsin (Note 1)

Director

Hong, Tsu‐Kuang; Chen, Wei‐Tau (Note 1)

Director

Chen, Derrick (Represent Hendriz Holding)

3,750,000

15

Director

So, Raymond(Representing Heathlee Int’l)

3,750,000

15Supervisor

Wong, Andy (Representing Merton Lake)

3,750,000

15Supervisor

Chen, I‐Chieh

President

Lo, Tao‐Wei (Nominated by China Airlines)

ChairmanChen, Chong‐Yi (Note 1)

135,000,000

54

Director

10. Tigerair Taiwan Co., Ltd.

2,614,500(USD10, share)%

Director
Supervisor
Director(President)
Chairman
Director
Supervisor
President
Chairman
Director
Supervisor
Director(President)
Chairman
Director
Supervisor

Director

9. Sabre Travel Network(Taiwan) Ltd.

Shareholding
SharesHo, Nuan‐Hsuan (Note 1)

Chairman (President) Lee, Hsien‐Kuang (Note 2)

Director
1B Dynasty Hotel of Hawaii,
ChairmanInc.
Director
Director (President)
2. CAL‐Asia Investment Inc.
Chairman
Director
Director (President)
3. Dynasty Aerotech
ChairmanInternational Corp. (Note 3)

4. Yestrip Co., Ltd.

NameCompany

Title
Deputy Chairman
Director
Director
Director
Supervisor
Supervisor

13. Kaohsiung Airport Catering
Services Ltd.

President
Chairman
Director
Director
Supervisor
Supervisor
President

13A Delica International
Co., Ltd.

Chairman
Director
Director
Supervisor
Supervisor
President

14. Dynasty Holidays, Inc.

15. China Pacific Catering
Services Ltd.

16. NORDAM Asia Ltd.

17. Taoyuan International
Airport Services Co., Ltd.

Charles C. Y. Chen (Representing Eyon Industrial Co.)
Chang, Cheng‐Hao; Liu, Der‐Chuan (Note 1)
UPS
Michael Shea (Representing Hsin Feng Corp.)
Fang, Juo‐Ling
Chen, Jyi‐Fu (Representing Express Container Terminal
Corp.)
Chang, Cheng‐Hao (Nominated by China Airlines)
Chang, Young (Note 1)
Chiu, Chang‐Hsin; Wang, Wei (Note 1)
Lin, Jyh‐Jong; Tsai, Ta‐Wei (Representing Uni Airways
Corporation)Han, Lan‐Ping (Representing Evergreen International
Corporation)
Yen, Yang (Note 1)
Lee, He ‐Yuan
Lee, He ‐Yuan(Representing Kaohsiung Airport Catering
Services)Chiu, Chang‐Hsin; Lin, Jyh‐Jong (Representing Kaohsiung
Airport Catering Services)
Tokuyama, Keiichi; Tokuyama, Keisuke (Representing F.
TEC Co., Ltd.)
Lai, Li‐Chao
Araki, Osamu (Representing F.TEC Corp.)
Eguchi, Kennichi (Nominated by Kaohsiung Airport
Catering Services)

Chairman (President) Chang, Ming‐Way (Note 1)
Director
Wang, Chen‐Min; Chen, Pei‐Ti (Note 1)
Koizumi Kazuhisa; Yamada Keisuke (Representing Koizumi
Director
Group)
Supervisor
Yen, Yang (Note 1)
Supervisor
Ishihara Tetsu (Representing Koizumi Group)
Chairman
Yeh, Chu‐Lan (Note 1)
Deputy Chairman
Ho, Nuan‐Hsuan (Note 1)
Director
Chiu, Chang‐Hsin (Note 1)
Wong, Andy; Yau, Algernon (Representing Aldeburgh
Director
Limited)Supervisor
Fang, Juo‐Ling
Supervisor
Lee, Agatha (Representing Deli Holdings Limited)
President
An, Long‐Chi (Nominated by China Airlines)
ChairmanHo, Nuan‐Hsuan (Note 1)
Deputy Chairman
T. Hastings Siegfried (Nominated by The NORDAM Group)
Director
Wang, Houng (Note 1)
J.Terrell Siegfried David Whitten (Representing The
Director
NORDAM Group)
Supervisor
Ralph McDavidSupervisor
Wang, Wei

Shareholding
Shares6,000,000%
2.4

20,000,000
7,000,000

8
2.8

15,000,000

621,494,637

53.67

16,178,945

40.4

10,0000.02

1,020,000

51

980,000

49

408

51

392

49

43,911,000

51

21,045,500

24.5

21,045,500

24.5

245,000
255,000

49
51

Chairman

Lin, Hsin‐Te (Representing Motc)

31,500,000

45

Director(President)

34,300,000

49

Director
Supervisor

Huang, Chin‐Feng (Note 1)
Hsieh, Su‐Chien; Chang, Young; Lo, Ya‐Mei; Wang, Houng(Note 1)
Chen, Yen‐Po; Chang, Chang‐Chi; Li, Hung‐Sheng;
Li, Jun‐Xiong (Represent Motc)
Pi, Chung‐Wei (Represent UPS)
Li, Mi; Li, Shen‐Yi

4,200,000

6

Chairman

Chang, Young (Note 1)

20,626,644

47.35

Director(President)
DirectorPeng, Long‐Min (Note 1)
Peng, Pao‐Chu (Note 1)
Chung, Ting‐Chun (Representing juridical personshareholder Rih Hsin Asset Management Company)
Chang, Chieh‐Tang (Representing Goldsun Building
Materials)
Fang, Juo‐Ling

9,405,300

21.59

7,405,200

17

Director
Director

18. Taiwan Airport Service
Co., Ltd.

Name

Director
Director
Supervisor

Special Disclosure

139Company

Title
Supervisor

18A Taiwan Airport Service(Samoa) Co., Ltd.
19. Global Sky Express Ltd.

Shareholding
SharesName%Chen, Yao‐Ming
5,876,976(USD1, share)
50,000250,000
40,00050,00020,00020,000

Authorized Signatory Chang, Young (Representing Taiwan Airport Service Co.)
Chairman
Director
Director
Director
Director
Director

Li, Chung‐Hui
Liu, Der‐Chuan; Hsueh, Po‐Wen; Peng, Pao‐Chu (Note 1)
Pao, Hsueh‐Chao
Huang, Nan‐Sheng
Wei, Ching‐Li
Hsiao, Yu‐Hsin
Chung, Mei‐Chih (Representing Leader Mutual Freight
Director
System)Supervisor
Huang, Hui‐Na
Supervisor
Yeh, Chien‐Tien
Supervisor
Chiang, Ming‐Fang (Representing Morrison Express)
President
Ying, Yung‐Chi (Nominated by China Airlines)
Note 1: Representative of juridical person shareholder China Airlines.
Note 2: Representative of juridical person shareholder CAL‐Dynasty International, Inc.
Note 3: Hwa Hsia Company Ltd. was renamed “Dynasty Aerotech International Corp.” in 2018.

100
5
25
4
5
2
2

20,0002

10,00050,0001
5E. Affiliated Company Business Overview
Dec 31, 2018
Unit: NT$ thousands; EPS=NT$
Company
1. CAL‐Dynasty International, Inc.
1A Dynasty Properties Co., Ltd.
1B Dynasty Hotel of Hawaii, Inc.
2. CAL‐Asia Investment Inc.
3. Hwa Hsia Company Ltd.
4. Yestrip Co., Ltd.
5. CAL Park Co., Ltd.
6. CAL Hotel Co., Ltd.
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.
14. Dynasty Holidays, Inc.
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.

Capital

Total
Assets804,462
15,385123,077
220,688
77,27016,0001,500,000
465,000

1,435,735
744,373
530,295
494,098
203,354
65,1703,860,605
542,8111,350,000
2,001,825

Total
Liabilities

Total
Equity168,815
244,777
105,7750105,297
38,2242,353,160
81,573

1,266,920
499,596424,520494,098
98,057
26,946
1,507,445
461,238

1,743,414

615,276

4,630,407

3,329,610

138,618

606,885

2,000,000

Operating
Revenue

Operating
Income (Loss)

Profit(Loss)

EPS (Dollars)

366,416
102,439
256,2140
380,764
42,106345,569
578,324

62,41529,596
27,629(1,126)19,007
1,562
53,552
24,61943,975
18,84818,19026,115
14,616
1,437
3,143
25,274

16.82
3,769.62
45.48
3.64
189.16
0.90
0.02
0.54

1,128,138

1,650(103,072)(103,410)(0.77)

1,300,797

8,330,779(77,068)

24,824

0.12

123,387

483,498

379,779

226,205

188,247

13.58

5,906,785

3,900,206

2,006,579

8,775,354

846,617

981,7134.91

250,000

369,640

66,184

303,456

240,287

38,38730,3551.21

2,500,000

3,435,560

596,219

2,839,341

2,111,210

404,517359,195

1.44

400,500

1,440,107

520,122919,985

2,151,445

364,044296,678

7.41

20,00015,639218

15,421

0

(1)

3

0.00

11,114

126,267

74,731

51,536526,226(1,583)(2,297)(2,871.84)

861,000

2,983,723

1,412,381

1,571,342

3,081,371

629,191

524,339

6.09

5,000

4,820

7

4,813

0

0

(83)

(0.17)

700,000

2,913,474

1,371,395

1,542,079

3,213,111

301,213282,2544.03

435,600

1,266,618

703,208

563,410

1,051,958

126,416

133,894

3.07

180,830

388,9100388,9100027,3534.65

10,00034,164

6,180

27,984

103,738

6,394

5,137

5.14

Note 1: Capital, total assets, total liabilities, total equity were calculating using the exchange rate at the end of 2018.
Note 2: Operating revenue, operating profit, and income for the period were calculated using the 2018 quarterly average exchange
rates.
Note 3: Exchange rates at the end of 2018 were 1TWD=0.0325USD, 3.5991JPY, 0.2232CNY.
Note 4: Quarterly average exchange rates in 2018 were as following:
Q1: 1TWD=0.0340USD, 3.7246JPY, 0.2170CNY.
Q2: 1TWD=0.0338USD, 3.6527JPY, 0.2144CNY.
Q3: 1TWD=0.0327USD, 3.6235JPY, 0.2209CNY.
Q4: 1TWD=0.0325USD, 3.6823JPY, 0.2252CNY.
Note 5: Hwa Hsia Company Ltd. was renamed "Dynasty Aerotech International Corp." in 2018.

140 Special Disclosure

(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.

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:
APR 27, 2019
Units: NT$; shares; %Number of
Number of Number ofAmount of
Shares andShares and Shares andCompany
Date of
Source of % Stake in
Investment Value of Stock
Acquisition Value ofValue ofEndorsement
Funds
Subsidiary
Gain/Loss Held as of theor Disposal
StocksStocks/Guarantee ofPrinting Date of
Acquired Disposed of
Subsidiary
this ReportCompany

CapitalHwa Hsia
Company Ltd.
(Note 1)

77,270,000

Equity
Fund

100%

‐

‐

‐

‐

814,152 shares
7,905,000‐

Mandarin
Airlines, Ltd.

2,001,825,000

EquityFund

93.99%‐‐‐‐

2,074,628 shares
20,0145,000‐

Note 1: Hwa Hsia Company Ltd. was renamed “Dynasty Aerotech International Corp.” in 2018.
Note 2: 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.
A. Chunghwa Telecom Co., Ltd., juridical person director of the Company, resigned on January
19, 2018. The juridical person director representative, Mr. Huang, Hsiu‐Gu, was naturally
dismissed.
B. “Chunghwa Telecom,” the Company's juridical person Board member, was discharged on
January 19, 2018, with representative Mr. Huang Hsiu‐Gu discharged accordingly.
C. 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 andconcurrently as the President.

Special Disclosure

1418.5.2 Signing of major memoranda, strategic alliances or other plans forbusiness cooperation or major contracts
Since its establishment in 2014, Tigerair Taiwan has developed into an LCC with a stablebusiness model and sound financial structure. Considering the benefits of convenient fundraising in the future, financial autonomy and equity value enhancement, the Board of Directors
resolved to execute the listing plan of Tigerair Taiwan.

8.5.3 Lawsuits, non‐contentious matters, administrative actions, administrative
disputes, injunctive procedures or compulsory enforcement matters
A. The Department of Labor of the Taoyuan City Government performed labor inspection. On
September 7, 2018, the Company was fined NT$1 million due to female ground staff'snighttime work, which was in violation of Article 49, Paragraph 1 of the Labor Standards Act.
B. The Department of Labor of the Taoyuan City Government performed the labor inspection at
the Company on August 28 and 31, 2018. On October 23, 2018, the Company was fined
NT$1 million due to the extension of working hours, which was in violation of Article 32,
Paragraph 2 of the Labor Standards Act.
C. The Department of Labor of the Taoyuan City Government performed the labor inspection at
the Company on November 6, 2018. On December 11, 2018, the Company was fined for
NT$1 million because female workers' nighttime work had not been approved by the labor
union, which was in violation of Article 49, Paragraph 1 of the Labor Standards Act.
D. The Taoyuan Union of Pilots announced that it would go on strike at 6 o'clock on February 8,
2018 until February 14. Under the witness of the Executive Yuan, the Ministry of Labor, theMinistry of Transportation and Communications and the Taoyuan City Government, theCompany reached an agreement with the Taoyuan Union of Pilots through thelabor‐management conference and signed the collective agreement. The union immediately
announced the termination of the strike. The compensation for customers’ losses andvarious derivative expenses was preliminarily estimated to be around NT$154 million.
According to the fifth appeal of the Agreement between the two parties, was promised thatthe full salary of the 13th month will be changed to a flight safety bonus. The amount of thebonus was agreed to at the negotiation meeting on February 21. It was estimated that theannual expenditure will increase by around NT$190 million.
E. The Department of Labor of the Taoyuan City Government performed labor inspection. On
February 25, 2019, the Company was fined NT$1 million because female workers' nighttime
work had not been approved by the labor union, which was in violation of Article 49,
Paragraph 1 of the Labor Standards Act.

142 Special Disclosure143

Opinionwith the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports andMarch 20, 2019-1-

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, 2018. 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

We 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.

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, 2018 and 2017, 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, 2018 and 2017, 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, 2018 are

INDEPENDENT AUDITORS’ REPORTDECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES(Appendix 1)

144
As of December 31, 2018, total assets of these subsidiaries amounted to NT$5,864,701 thousand
dollars, representing 2.55% of the combined total assets. For the year ended December 31, 2018,
revenue from these subsidiaries amounted to NT$8,634,324 thousand dollars, representing 5.06%
of the combined total revenue.

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. As of
December 31, 2018, passenger revenue was NT$108,345,648 thousand. Refer to Notes 4 and 28 in
the accompanying consolidated financial statements for related detailed information.

In accordance with IAS 16 “Property, Plant and Equipment”, aircraft acquisition costs wereallocated into several significant components, which include airframe, airframe overhaul, engine,engine overhaul, landing gear, etc., and are depreciated over different useful lives. As of December
31, 2018, the carrying amount of flight equipment was NT$136,187,473 thousand. Refer to Notes 4,
5 and 16 to the accompanying consolidated financial statements for related detailed information.

We conducted an assessment on the rationality of the aircraft’s useful life based on aircraft
performance in the industry, historical experience of aircraft operations, and documents that
described the basis used by management to determine the useful life of its new aircraft.

2.

-3-

We reviewed the certificates issued by the aircraft and engine manufacturers, the estimatedoverhaul cost of the manufacturers, and the historical experience from the maintenancedivision to assess management’s rationale to determine the allocated amount of components.

1.

The main audit procedures that we performed included the following:

Since the Group acquired several A350-900 brand new aircraft this year, the allocation base wasadjusted. Moreover, the carrying amount related to the aircraft and the depreciation expense
recognized will be subject to the allocation of acquisition costs and the estimated useful life, whichwere made in accordance with management’s judgment. Therefore, we identified new aircraft
acquisition cost as a key audit matter.

-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.

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.

3.

New Aircraft Acquisition Cost

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.

We understood and tested the effectiveness of the information system related to the process ofpassenger revenue.

2.

Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements

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:

We have also audited the parent company only financial statements of China Airlines, Ltd. as ofand for the years ended December 31, 2018 and 2017 on which we have issued an unmodified
opinion.

Other Matter Parent Company Only Financial Statements

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.

Passenger Revenue Recognition

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.

Other Matter Audited by Other Independent Auditors

The key audit matters in the audit of the consolidated financial statements of the Group are statedbelow:

145

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, 2018 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 20, 2019

Deloitte & Touche
Taipei, Taiwan
Republic of China

The engagement partners on the audit resulting in this independent auditors’ report are Chen-Hsiu
Yang and Jui-Chan Huang.

146

Total equity attributable to owners of the Company

The accompanying notes are an integral part of the consolidated financial statements.

TOTAL

Total equity

NON-CONTROLLING INTERESTS (Note 27)

-7-

24
1
1
25
1
26
100

54,209,846
1,241,214
351,923
118,810
1,144,928
1,615,661
58,223(43,372)
57,081,572
2,965,512
60,047,084$ 230,136,582

74

170,089,498

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 21 and 27)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficits)
Total retained earnings
Other equity
Treasury shares

47

109,139,606

Total liabilities

27

60,949,892

Total non-current liabilities

1
6
9
2
7
2

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

100

77

12
26
4
1
4
-

$

$ 230,136,582

177,309,022

1
71
1
1
2
1

23

52,827,560

132,191
2,200,149
163,107,718
2,075,345
1,210,796
5,152,070
3,430,753

11
2
4
4
2

%

$ 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
Amount28,473,710
60,686,148
8,473,464
1,903,665
188,447
2,945
8,803,382
607,845

NON-CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - non-current (Notes 4, 5, 7 and 33)
Derivative financial liabilities for hedging - non-current (Notes 4, 5, 8 and 33)
Bonds payable - non-current (Notes 4, 21, 27 and 33)
Loans and debts - non-current (Notes 20, 33 and 35)
Provisions - non-current (Notes 4, 5 and 25)
Contract liabilities - current (Notes 4, 5 and 24)
Deferred tax liabilities (Notes 4 and 29)
Capital lease obligations - non-current (Notes 4, 22, 33 and 35)
Deferred revenue - non-current (Notes 4, 5 and 24)
Accrued pension costs (Notes 4, 5 and 26)
Other non-current liabilities (Note 33)

Total current liabilities

CURRENT LIABILITIESShort-term debts (Note 20)
Financial liabilities at fair value through profit or loss - current (Notes 4, 5, 7 and 33)
Derivative financial liabilities for hedging - current (Notes 4, 8 and 33)
Financial liabilities for hedging - current (Notes 4 and 33)
Notes and accounts payable (Note 33)
Accounts payable - related parties (Notes 33 and 34)
Other payables (Notes 23 and 33)
Current tax liabilities (Notes 4 and 29)
Provisions - current (Notes 4, 5 and 24)
Contract liabilities - current (Notes 4, 5 and 24)
Deferred revenue - current (Notes 4, 5 and 24)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 21, 27 and 33)
Loans and debts - current portion (Notes 20, 33 and 35)
Capital lease obligations - current portion (Notes 4, 22, 33 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 33)
Financial assets measured at cost - non-current, net of current portion (Notes 3, 10 and 33)
Investments accounted for using the equity method (Notes 4 and 15)
Property, plant and equipment (Notes 4, 5, 16 and 35)
Investment properties (Notes 4 and 17)
Other intangible assets (Notes 4 and 18)
Deferred income tax asset (Notes 4, 5 and 29)
Other assets - non-current (Notes 19, 22, 33 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 33)
Financial assets at amortized cost (Notes 9 and 33)
Derivative financial assets for hedging - current (Notes 4, 5, 8 and 31)
Financial assets for hedging - current (Notes 4 and 33)
Notes and accounts receivable, net (Notes 4, 11 and 33)
Notes and accounts receivable - related parties (Notes 31 and 33)
Other receivables (Notes 4 and 33)
Current tax assets (Notes 4 and 29)
Inventories, net (Notes 4 and 12)
Non-current assets held for sale (Notes 4, 5 and 13)
Other assets - current (Notes 6 and 19)

ASSETSCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

59,157,519

2,134,282

57,023,237

206,092
1,458,313
1,664,405(107,641)(43,372)

54,709,846
799,999

166,742,113

106,453,000

926
6,994
21,050,000
65,753,503
8,013,583
190,682
636,222
1,818,265
8,101,565
881,260

60,289,113

120,000
8,655
82,295483,884
590,806
13,033,069
28,722475,725
16,375,789
4,367,100
19,304,674
1,617,321
3,801,073$ 225,899,632$$ 225,899,632

178,487,798

84,0752,507,346
153,617,531
2,075,624
1,019,345
5,519,332
13,664,545

47,411,834$ 22,585,332
306,839293
8,604,265
8,359
714,41332,487
8,731,755
426,553
6,001,538

2017
Amount

100

26

1

25

1
1
-

24
-

74

47

9
29
4
1
4
-

27

6
7
2
9
1
2

100

79

1
68
1
1
2
6

21

10
4
4
3

%

-8-

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Gain on hedging instruments subject to basis
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 29)

NET INCOME

INCOME TAX EXPENSE (Notes 4, 5 and 29)

PRETAX PROFIT

Total non-operating income and loss--

187,881(672,413)

-

-

-

1

1

2

-

(33,242)(851,866)

930

23,8842,272,684

808,565

3,081,249(941,134)-

367,2462

1(1)4,022,383

OPERATING PROFIT

8

10

90

100

%

606,453(534,848)(1,379,985)

13,185,148

OPERATING EXPENSES (Notes 4, 26 and 28)

NON-OPERATING INCOME AND LOSS
Other income (Notes 4, 8 and 28)
Other gains and losses (Notes 10, 13, 16, 28 and 31)
Finance costs (Notes 9, 28 and 33)
Share of the profit of associates and joint ventures(Note 15)

17,207,531

153,504,076$ 170,711,607

GROSS PROFITCOSTS (Notes 4, 9, 12, 18, 25, 26, 28 and 34)

REVENUE (Notes 4, 28 and 34)

2018
AmountCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

-

(1)

-

-

2

-

2

(4)

-

(3)
(1)

6

8

14

86

100

%

173,691(890,301)(1)(Continued)(42,277)(1,021,715)--

2,490,792

1,033,171

3,523,963(5,302,197)

536,236560,399(5,052,031)(1,346,801)

8,826,160

13,146,251

21,972,411

134,149,374$ 156,121,785

2017
Amount147--

85,341(17,858)
94,050

$
$

0.33
0.32

1,694,321

$

1

1
-

1

1
-

1

-9-

The accompanying notes are an integral part of the consolidated financial statements.

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 30)
Basic
Diluted

1,258,035
436,286$

2,272,684$

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

1,790,361
482,323$NET INCOME ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

1,694,321---(578,363)-%

26,567-$$TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

Other comprehensive loss for the year, net ofincome tax

Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 27)
Cash flow hedges (Notes 4 and 27)
Share of other comprehensive income (loss) of
associates and joint ventures accounted forusing the equity method (Notes 4, 5 and 31)
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 29)2018
AmountCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

$

$

$

$

$

$

$
$

-

-

-

-

1

1
-

2

2
-

1

(1)

%

(Concluded)

0.40
0.39

1,377,616

1,240,677
136,9392,490,792

2,208,066
282,726

1,377,616(1,113,176)

45,419(222,875)-

60(140,074)(128,280)

2017
Amount-

Cash dividends from subsidiaries paid to
non-controlling interests

-

-

-

-

-

-

-

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 for the year ended
December 31, 2018

Gain or loss on non-controlling interest

Treasury shares acquired-$ 54,209,846$$

1,241,214-

30,607

-

-

-

-

-

630

-

-

409,978

799,999-

799,999

-

-

-

-

-

131

(64 )

-

799,932

Capital Surplus

The accompanying notes are an integral part of the consolidated financial statements.

BALANCE AT DECEMBER 31, 2018

Cash dividends from subsidiaries paid to
non-controlling interests(500,000 )-Basis adjustments to gain on hedging instruments

Treasury shares retired-

54,709,846

Issuance of convertible bonds

BALANCE AT JANUARY 1, 2018 AS
RESTATED--

Total comprehensive income (loss) for the year
ended December 31, 2017

Effect of retrospective application andretrospective restatement-

Other comprehensive income (loss) for the year
ended December 31, 2017, net of income tax

54,709,846-

Net income for the year ended December 31,
2017

BALANCE AT DECEMBER 31, 2017-

Difference between cost of the acquisition ofsubsidiaries and net value

945-

Convertible bonds converted to ordinary shares-

Disposal of capital surplus of investments inassociates accounted for using the equity
method$ 54,708,901

Compensation of deficit - capital surplus

BALANCE AT JANUARY 1, 2017

Share Capital

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

148
$

$

351,923

-

-

-

-

-

-

-

-

145,831---206,092-

206,092

-

-

-

-

-

-

-

(81,132 )287,224

Legal Reserve$$

118,810

-

-

-

-

-

-

-

-

118,810
-

-

-

-

-

-

-

-

-

-

-

-

-

(76,486 )

76,486

Special Reserve

Retained Earnings$$

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-

1,460,582(747,484 )2,208,066(2,269 )--157,618(157,618 )UnappropriatedEarnings(Accumulated
Deficit)$$- 10 -(9,664 )

-

-

-

-

25,322

25,322

-

-

-

-

-

(34,986 )-(34,986 )-(113,550 )(113,550 )

-

-

-

-

-

78,564

Exchange
Differences on
Translating
Foreign Operations

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

(1,774 )

1,774

-

60

60

-

-

-

-

-

1,714

Unrealized Gain
(Loss) on
Available-for-saleFinancial Assets

Equity Attributable to Owners of the Company$$

42,619

-

-

-

-

268

268

-

-

-

-

-

42,35142,351

-

-

-

-

-

-

-

-

-

-

Other Equity
Unrealized Gain on
Financial Asset atFair Value
Through Other
Comprehensive
Income

$

$

-

-

-

-

-

-

-

-

-

-

-

-

-

74,429(74,429 )-(106,415 )(106,415 )

-

-

-

-

-

31,986

Cash Flow Hedges$$

25,268----87,57987,579---12,118-(74,429 )(74,429 )

-

-

-

-

-

-

-

-

-

-

Gain (Loss) on
Hedging
Instruments$$(43,372 )-469,393(469,393 )

-

-

-

-

-

-

-

-

(43,372 )-(43,372 )

-

-

-

-

-

-

-

-

(43,372 )Treasury Shares
Held by
Subsidiaries$ 57,081,572--(469,393 )-

1,258,035(532,326 )

1,790,361

630(1,193,670 )

12,118409,978

57,063,874

40,63757,023,237-

1,240,677(967,389 )

2,208,066(2,269 )

1,076

(64 )

-

$ 55,783,817

Total

$

$

2,965,512(171,019 )--

565,963436,286(46,037 )482,323

-

-

-

-

2,134,282-

2,134,282(39,920 )

136,939(145,787 )

282,726(46,118 )---

2,083,381

Non-Controlling
Interests

Total Equity$ 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

40,63759,157,519(39,920 )1,377,616(1,113,176 )2,490,792(48,387 )

1,076

(64 )

-

$ 57,867,198

149- 11 -

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments for operating activities:
Depreciation expenses
Amortization expenses
Bad debts expense
Net (gain) loss on fair value changes of financial assets andliabilities held for trading
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 (gain) 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
Impairment loss on financial assets measured at cost
Net loss (gain) on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leasebacks
Changes in operating assets and liabilities
Financial assets held for trading
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
Derivative financial assets for hedging
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Deferred revenue
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash generated from operations$

77,133-

269,682
9,580(298,519)(101,830)
215,027(616,396)(1,474,384)(464,147)
309,7292,239,296
1,564,292(1,755,029)
314,740(876,289)(23,007)
29,372,561(Continued)(101,105)(252,467)
3,571,301
690,579
644,005
56,023(327,854)
1,346,801
3,201,642(14,512)(450,195)
368,992
75,43750,000623,022298,787
1,379,985
3,386,052(13,888)(9,359)(1,304,948)
253,540(100,400)(288,941)(1,838,950)
15,763
993,434(97,753)535,2113,256,101(3,310,089)
73,958(205,340)
2,698
26,162,804

32,039(210,264)(9,564)(536,236)(6,153)(11,168)(330,710)(9,603)(367,246)
270,597

3,523,963
18,340,022
259,12945,016$

19,325,083
191,979
49,824

3,081,249

2017- 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
Decrease in short-term bills payable
Proceeds from issuance of bonds payable
Repayments of bonds payable
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
Cash dividends paid to non-controlling interests
Acquisition of subsidiaries' shares

Net cash used in investing activities

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of associates
Proceeds from disposal of non-current assets held for sale
Proceeds from disposal of investments accounted for using the equity
methodPayments 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
Acquisition of subsidiaries

Net cash generated from operating activities

Interest received
Dividends received
Interest paid
Income tax paid

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

2018

CHINA AIRLINES, LTD. AND SUBSIDIARIESCHINA AIRLINES, LTD. AND SUBSIDIARIES$(8,231)(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)-(18,440,662)

232,888(Continued)(4,669,431)(18,021)(900,000)
5,850,000(2,700,000)
30,657,300(37,506,405)
250,062(214,060)(39,920)(48,387)(25,792,340)

380,850(2,535,293)
95,929(289,911)
245,505(24,756,184)(716)(141,448)
82,906-(4,608,600)
333,284(265,335)
391,487(14,991,412)(785)(184,223)
59,726
136,769

28,547,018

228,247
443,509(1,319,910)(177,389)(2,450)1,128,472$

2017

688,427

25,188,007

301,465
228,636(1,319,690)(185,208)

2018

150
$

2017

$ 24,937,537

22,585,332

2,352,205- 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 (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS(Concluded)$ 22,585,332

24,267,197$ (1,681,865)- 14 -On the basis of the facts and circumstances that existed as of January 1, 2018, the Group has
performed an assessment of the classification of recognized financial assets and has elected not torestate prior reporting periods.

The requirements for classification, measurement and impairment of financial assets have been
applied retrospectively starting from January 1, 2018, and the requirements for hedge accounting
have been applied prospectively. IFRS 9 is not applicable to items that have already been
derecognized as of December 31, 2017.

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, withconsequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards.
IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets
and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

1) IFRS 9 “Financial Instruments” and related amendments

Except for the following, whenever applied, the initial application of the amendments to theRegulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs
endorsed and issued into effect by the FSC would not have any 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 and authorized for issue on March 20, 2019.

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, 2018 and 2017, CADF and NDF
held 44.03% and 43.63% 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, 2018 AND 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

2018

CHINA AIRLINES, LTD. AND SUBSIDIARIESCHINA AIRLINES, LTD. AND SUBSIDIARIES

151

$

$

-

-

-

IAS 39Carrying
Amountas ofJanuary 1,
2018

$

$

84,07584,075-

Reclassifications$$

47,51047,510-Remeasurements$

131,585-$ 131,585$

IFRS 9Carrying
Amount asofJanuary 1,
2018

Financial assets at fairvalue through profit orloss (i.e. FVTPL)Fair value through othercomprehensive
income (i.e. FVTOCI)- equity instruments
Amortized cost

$

$

60

-

60

Retained
Earnings
Effect on
January 1,
2018483,318

1,323,095

84,075$$$40,637

40,637

(60 )

Other
EquityEffect on
January 1,
2018483,318

1,323,095

131,585

Carrying AmountIAS 39IFRS 9a)b)

Remarkc)a)Remark- 15 -IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers
and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number ofrevenue-related interpretations. Refer to Note 4 for related accounting policies.

2) IFRS 15 “Revenue from Contracts with Customers” and related amendmentse) In line with the equity adjustments above, the Group’s deferred tax liabilities increased by$6,873 thousand.

d) Except for the above, the remaining financial assets classified as loans and receivables
amounting to $34,792,801 thousand based on IAS 39 are classified as financial assets at
amortized cost under IFRS 9.

c) Contracts such as principal-protected notes signed by the Group and financial institutions are
hybrid instruments. Since the related master contracts included in these hybrid instruments areassets within the scope of IFRS 9, the overall master contracts should be classified under IFRS
9.

b) Mutual funds held by investments accounted for using the equity method previously classified
as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9,
because the contractual cash flows are not solely payments of principal and interest on theprincipal outstanding and they are not equity instruments. The retrospective adjustment resulted
in a decrease of $60 thousand in other equity - unrealized gain (loss) on available-for-salefinancial assets and an increase of $60 thousand in retained earnings on January 1, 2018.

a) Investments in unlisted shares previously measureded at cost under IAS 39 have been classified
as designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an
increase of $47,510 thousand was recognized in both financial assets at FVTOCI and other
equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

Equity instruments
Add: Reclassification from FVTPL(IAS 39)
Add: Financial assets measured at cost
(IAS 39)FVTOCI

Financial Asset

Loans and receivables

Time deposits with original
maturities of more than 3months (other financial
assets)Principal-protected notes (otherfinancial assets)

Loans and receivables

Financial assets
measured at cost

Measurement Category
IAS 39IFRS 9Equity securities

Financial Asset

The following table shows the original measurement categories and carrying amounts under IAS 39
and the new measurement categories and carrying amounts under IFRS 9 for each class of theGroup’s financial assets and financial liabilities as of January 1, 2018.

January 1, 2019

January 1, 2019

January 1, 2019
January 1, 2019 (Note 3)

To be determined by IASB

January 1, 2019
January 1, 2019 (Note 2)

Effective Date
Announced by IASB (Note 1)- 16 -

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 in
determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on orafter January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not bereassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

Definition of a lease

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related
interpretations.

IFRS 16 “Leases”

Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting fromJanuary 1, 2019.

Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.

Annual Improvements to IFRSs 2015-2017 Cycle
Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between An Investor and Its Associate or Joint Venture”
IFRS 16 “Leases”
Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”
Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”
IFRIC 23 “Uncertainty over Income Tax Treatments”

New IFRSs

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

In identifying performance obligations, IFRS 15 and the related amendments require that a good orservice is distinct if it is capable of being distinct (for example, the Group regularly sells it
separately) and the promise to transfer it is distinct within the context of the contract (i.e. the natureof the promise in the contract is to transfer each good or service individually rather than to transfer a
combined output). The Group chooses to apply retroactively IFRS 15 only for contracts that have
not yet been completed on the conversion date. Also, the revenue-related amount received should berecognized as contract liabilities. Therefore, the previously classified deferred revenue - current andnon-current are reclassified to contract liabilities - current and non-current which amounted to$16,375,789 thousand and $1,818,265 thousand, respectively, on January 1, 2018.

152- 17 -The Group will 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 will apply to the leaseback portion. In addition, for asset currently accounted for as a saleand a finance lease under IAS 17, the Group will continue to amortize any gains on sales over the leaseterm.

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 will be accounted for as a financing transaction. If it
satisfies the requirements to be accounted for as a sale of an asset, the Group will recognize only theamount of any gain or loss which relates to the rights transferred to the buyer-lessor. Currently, theleaseback portion is classified as either a finance lease or an operating lease and accounted for
differently.

For leases currently classified as finance leases under IAS 17, the carrying amount of right-of-use assets
and lease liabilities on January 1, 2019 will be determined as the carrying amount of the leased assets
and finance lease payables as of December 31, 2018.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases
with the application of IAS 17. Lease liabilities will be 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 will be measured at an amount equal to the lease liabilities, adjusted by the amountof any prepaid or accrued lease payments. The Group will apply IAS 36 to all right-of-use assets.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial
application of this standard recognized on January 1, 2019. Comparative information will not berestated.

$

37,865(861,045)(215,425)
78,499,374
189,808(30,682)

9,276,226
68,343,669(37,775)(90)$ 77,582,030$$ 77,582,030$

874,265
78,499,374
189,808
163,077,036

9,276,226
68,343,669$ 77,619,895$$ 242,640,483$

Adjusted
Carrying
Amount as ofJanuary 1, 2019

January 1, 2021
January 1, 2020 (Note 3)

January 1, 2020 (Note 2)
To be determined by IASB

Effective Date
Announced by IASB (Note 1)- 18 -

Except for the above impact, 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.

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”
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 and IAS 8 “Definition of Materiality”

New IFRSs

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Except for the above impact, 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.

Total effect on liabilities$

Lease liabilities - current
Lease liabilities - non-current
Capital lease obligation - non-current
Accrued rent payable

37,77590$ 165,058,453

Total effect on assets

861,045
1,089,690
163,107,718$

Prepaid rent
Refundable deposits
Right-of-use assets
Other financial assets
Property, plant and equipment

Adjustments
Arising from
InitialApplication

The Group will not make any adjustments for leases in which it is a lessor and will account for thoseleases with the application of IFRS 16 starting from January 1, 2019.

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, or investment
properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for
all leases on the consolidated balance sheets except for those whose payments under low-value andshort-term leases will be recognized as expenses on a straight-line basis. On the consolidated statementsof comprehensive income, the Group will present the depreciation expense charged on right-of-use
assets separately from the interest expense accrued on lease liabilities; interest is computed using theeffective interest method. On the consolidated statements of cash flows, cash payments for the principal
portion of lease liabilities will be classified within financing activities; cash payments for the interest
portion will be classified within operating activities. Currently, payments under operating lease
contracts, including property interest qualified as investment properties, are recognized as expenses on astraight-line basis. Cash flows for operating leases are classified within operating activities on the
consolidated statements of cash flows. Leased assets and finance lease payables are recognized forcontracts classified as finance leases.
Carrying
Amount as ofDecember 31,
2018

The Group as lessor

The Group as lessee

153- 19 -

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;- 20 -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;

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.

Current liabilities include:

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:2) Assets expected to be realized within 12 months after the reporting period; and1) Assets held primarily for the purpose of trading;Current assets include:

Current and Non-current Assets and Liabilities

3) Level 3 inputs are unobservable inputs for an asset or liability.

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

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;

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.

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

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

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 POLICIES

154- 21 -

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- 22 -

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

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.

155

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual
provisions of the instruments.

Investment Properties- 24 -

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.

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.

- 23 -

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. The financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; andFinancial 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 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.

20181) 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

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 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.

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 Instruments

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.

Investment properties are properties held to earn rentals or for capital appreciation. Investment properties
also include land held for a currently undetermined future use.

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.

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.

156- 25 -

Dividends on available-for-sale equity instruments are recognized in profit or loss when theGroup’s right to receive the dividends is established.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amountsof available-for-sale monetary financial assets (relating to changes in foreign currency exchange
rates, interest income calculated using the effective interest method and dividends onavailable-for-sale equity investments) are recognized in profit or loss. Other changes in the
carrying amount of available-for-sale financial assets are recognized in other comprehensive
income and will be reclassified to profit or loss when such investments are disposed of or are
determined to be impaired.

- 26 -

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end ofeach reporting period. Financial assets are considered to be impaired when there is objective
evidence, as a result of one or more events that occurred after the initial recognition of the financial
assets, that the estimated future cash flows of the investments have been affected.

2017

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments witha corresponding adjustment to their carrying amounts through a loss allowance account, except forinvestments in debt instruments that are measured at FVTOCI, for which the loss allowance isrecognized in other comprehensive income and does not reduce the carrying amounts of thefinancial assets.

Available-for-sale financial assets are non-derivatives that are either designated asavailable-for-sale or are not classified as loans and receivables, held-to-maturity investments orfinancial assets at FVTPL.

b) Available-for-sale financial assets

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 (i.e. ECLs) for trade receivables andother receivables. 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, thecredit risk on a financial instrument has not increased significantly since initial recognition, theGroup measures 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.

Financial assets at FVTPL are stated 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 financial assets are either held for tradingor designated as at fair value through profit or loss.

a) Financial assets at FVTPL

Financial assets are classified into the following categories: Financial assets at FVTPL,
available-for-sale financial assets, and loans and receivables.

2017

2018

2) Impairment of financial assets

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.

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.

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.

Loans and receivables (including trade receivables, cash and cash equivalents, other financial
assets and other receivables) are measured at amortized cost using the effective interest method,less any impairment, except for short-term receivables when the effect of discounting isimmaterial.

c) Loans and receivables

Available-for-sale equity investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured and derivatives that are linked to and must be
settled by delivery of such unquoted equity investments are measured at cost less any identified
impairment loss at the end of each reporting period and presented in a separate line item asfinancial assets measured at cost. If, in a subsequent period, the fair value of the financial assets
can be reliably measured, the financial assets are remeasured at fair value. The difference
between the carrying amount and the fair value is recognized in other comprehensive income on
financial assets. Any impairment losses are recognized in profit and loss.

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.

157- 27 -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 carrying amount of a financial asset is reduced by the impairment loss directly for all financial
assets, with the exception of trade receivables and other receivables, where the carrying amount isreduced through the use of an allowance account. When trade receivables and other receivables are
considered uncollectible, they are written off against the allowance account. Subsequent recoveriesof amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognized in profit or loss except for uncollectible
trade receivables and other receivables that are written off against the allowance account.

For financial assets that are measured at cost, the amount of the impairment loss is measured as thedifference between such an asset’s carrying amount and the present value of the estimated future
cash flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss will not be reversed in subsequent periods.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit orloss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognized in other comprehensive income. In respect of available-for-sale debt securities,
impairment loss is subsequently reversed through profit or loss if an increase in the fair value of theinvestment can be objectively related to an event occurring after the recognition of the impairment
loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses
previously recognized in other comprehensive income are reclassified to profit or loss in the period.

For all other financial assets, objective evidence of impairment could include significant financial
difficulty of the issuer or counterparty, breach of contract such as a default or delinquency ininterest or principal payments, it becoming probable that the borrower will enter bankruptcy or
financial re-organization, or the disappearance of an active market for those financial assets becauseof financial difficulties.

For any available-for-sale equity investments, a significant or prolonged decline in the fair value ofthe security below its cost is considered to be objective evidence of impairment.

For financial assets at amortized cost, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment wasrecognized, the previously recognized impairment loss is reversed through profit or loss to theextent that the carrying amount of the investment (at the date the impairment is reversed) does notexceed what the amortized cost would have been had the impairment not been recognized.

For a financial asset at amortized cost, the amount of the impairment loss recognized is thedifference between the asset’s carrying amount and the present value of its estimated future cash
flows, discounted at the financial asset’s original effective interest rate.

For financial assets at amortized cost, such as trade receivables and other receivables, such assets
are assessed for impairment on a collective basis even if they were assessed not to be impaired
individually. Objective evidence of impairment for a portfolio of receivables could include theGroup’s past experience with collecting payments, an increase in the number of delayed paymentsin the portfolio past the average credit period of 60 days, as well as observable changes in nationalor local economic conditions that correlate with defaults on receivables.

- 28 -

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

All financial liabilities are measured at amortized cost using 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 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.

158
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.

- 29 -

1) Financial leases

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.

- 30 -

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.

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

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.

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.

The Group as lessee

a. Financial leases

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.

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







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

Before 2017, hedge accounting was discontinued prospectively when the Group revoked the designatedhedging relationship; when the hedging instrument expired or was sold, terminated, or exercised; or when
the hedging instrument no longer met the criteria for hedge accounting. Starting from 2018, the Groupdiscontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; forinstance, when the hedging instrument expires or is sold, terminated or exercised. The cumulative gain orloss on the hedging instrument that has been previously recognized in other comprehensive income fromthe 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, the gain 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

Revenue Recognition

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.

When applying IFRS 15 during 2018, the Group recognizes revenue by applying the following steps:

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.

Aircraft lease contracts

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 and fuel swaps.

e. Derivative financial instruments

159- 31 -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- 32 -

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

160- 33 -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

15,784,323
969,875

413,1397,770,200

4,812,734
5,970,387

374,445
11,427,766

2017$ 22,585,332$

December 31$ 24,937,537

$

2018

0%-1.90%
0.59%-3.55%
0.63%-3.30%

2017
0%-2.00%
0.59%-4.20%
0.36%-2.20%

December 31- 34 -

The amount of time deposits with original maturities more than three months for the year ended December
31, 2017 were $1,323,095 thousand, respectively, and the market rate intervals were 0.16%-1.42%, whichwere recognized as other current assets. (Refer to Note 18.)

Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

2018

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.

161

Current

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

$ 3,856,660

December 31,
2018

221

$

$

$

9,581

8,655
926

NTD/USD

NTD/USD

Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

Non-current

Investments in Equity Instruments

8. FINANCIAL ASSETS AT FVTOCI - 2018

Buy forward contracts

December 31, 2017

Buy forward contracts

December 31, 2018

Currency- 35 -

2018.01.31-2019.01.31

2019.01.02-2019.01.31

Maturity Date

$ 132,191

21,746$ 110,445

December 31,
2018

NTD194,030/USD6,500

NTD30,923/USD1,000

Notional Amount(In Thousands)

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

221
-

$

$

$

$

84,07584,075473

52,704
19,89811,00083,602

14
15
3
5
11

December 31, 2017
% ofCarrying
OwnerAmountship- 36 -On the reporting date, the above unlisted share investments held by the Group were measured at cost after
deducting impairment losses because their range of reasonable fair value estimates were significant andunable to be reasonably evaluated. Thus, the management considered their fair values unable to bemeasured.

Due to the permanent decrease in the value of Jardine Aviation Service held by the Group, the Group
recognized an impairment loss of $56,023 thousand in June 2017, which was classified as other gains andlosses.

Classified according to financial asset measurement categories
Available-for-sale financial assets

Unlisted preference shares
Everest Investment Holdings Ltd. (AH)

Unlisted ordinary shares
Everest Investment Holdings Ltd. (AH)
Jardine Aviation Service
Taikoo (Xiamen) Landing Gear Service Co., Ltd.
Taikoo Spirt Aerospace Systems (Jin Jiang) Composite Co., Ltd.
Chung Hwa Express Co.

10. FINANCIAL ASSETS CARRIED AT COST - 2017

The interest rates for time deposits with original maturities of more than 3 months ranged from 0.40% to
1.36% as of the end of the reporting period. The time deposits were classified as other financial assets under
IAS 39. Refer to Notes 3, 6 and 19 for information relating to their reclassification and comparative
information for 2017.

$ 306,839-

Derivative financial instruments (not under hedge accounting)Current
Non-current

-

2017

Time deposits with original maturities of more than 3 months (e)$$December 31$ 206,001

2018

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. These investments in equity instruments were classified as available-for-sale andfinancial assets measured at cost under IAS 39. Refer to Notes 3 and 10 for information relating to theirreclassification and comparative information for 2017.

Financial liabilities held for trading

Non-derivative financial assets
Beneficial certificates

Financial assets held for trading - current

Non-derivative financial assets
Beneficial certificates

Financial assets mandatorily classified as at FVTPL

7. FINANCIAL INSTRUMENTS AT FVTPL

162
8,604,265

362,855$ 10,038,528

$

$

2017

8,423,278(181,868)
8,241,410

598,824

December 31

9,667,010(227,306)
9,439,704$

2018- 37 -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.

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.

For the year ended December 31, 2018

Accounts receivable
Less: Allowance for impairment loss

Accounts receivable

Notes receivable

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE$ 1,423,565(856)$ 7,851,502$ 1,424,421(4,546)

0.06%

Up to 30 Days

$ 7,856,048

0.06%

Not Past Due$$

99,702(3,796)

103,498

3.67%

31 to 60 Days$$

59,773(16,642)

76,41521.78%

61 to 90 Days

206,628$ 9,439,704(227,306)$ 9,667,010$ 181,868

Ending balance- 38 -$ 191,398
45,016(54,570)24

Beginning balance
Impairment loss recognized on receivables
Amounts written off during the current period
Amounts receivable during the current period

For the Year
Ended
December 31,
2017

Movement in the allowance for impairment loss recognized on notes receivable and trade receivables wereas follows:

The Group applied the same credit policy in 2018 and 2017.

December 31, 2017

$ 227,306

Balance at December 31, 2018

For the Year
Ended
December 31,
2018

5,162

(201,466)

Total$ 181,868
181,868
49,824(2,975)(1,411)

$

$

97.5%

Over 90 Days

Balance at January 1, 2018 per IAS 39
Adjustment on initial application of IFRS 9
Balance at January 1, 2018 per IFRS 9
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses

The movements of the loss allowance of trade receivables were as follows:

Amortized cost

Gross carrying amount
Loss allowance (lifetime
ECLs)

Expected credit loss rate

December 31, 2018

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

163$ 8,082,993
576,429
71,046
1,287$ 8,731,755$ 8,654,710

2017$ 7,847,082
556,365
227,975
23,2882018

December 31$$$ 426,553

117,223

46,154$ 309,330

2017

46,1542018

December 31

China Airlines, Ltd.

Investor Company

CAL-Asia Investment
Hwa Hsia100

A holding company, real estate and hotel
services
General investment
Cleaning of aircraft and maintenance ofmachine and equipment

100
100

100
100

Main Businesses and Products(Continued)

100
100

100

100
100

Proportion of
Ownership (%)
December 31
2018
2017

Air transportation
Aircraft maintenance- 39 -

Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance
And Engineering Co., Ltd.
CAL-Dynasty International

Investee Company

Subsidiary included in the consolidated financial statements:

14. SUBSIDIARIESIn 2018 and 2017, the Company recognized impairment losses of $75,436 thousand and $3,571,301
thousand, respectively. In 2018 and 2017, the Company recognized disposal gains and losses of $(368,992)
thousand and $252,467 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 isclassified 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.

Aircraft held for saleLong-term equity investments held for sale - Asian Compressor
Technology Services

13. NON-CURRENT ASSETS HELD FOR SALE

The operating costs recognized for the years ended December 31, 2018 and 2017 included losses frominventory write-downs of $371,275 thousand and $324,447 thousand, respectively.

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
Others12. INVENTORIES

48
25
100
100
100

51
49

Travel businessAirport services
Airport services
Forwarding and storage of air cargo
Real estate management
Hotel businessAirport supporting service and investment

54

59

94

100
100
100
94

In-flighting catering

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

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

Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)

Investee Company(Concluded)

48
25
100
100
100

51
49

36

59

94

100
100
100
94

Investments in associates
Investments in jointly controlled entities- 40 -$ 2,507,346$ 2,200,149

2017$ 1,576,753
930,593

December 31$ 1,217,863
982,2862018

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHODThe Group paid $243,743 thousand on March 7, 2018 to acquire an additional 18% of Kaohsiung Catering,
Ltd. (Kaohsiung Catering) of which the Group’s holding of the issued share capital exceeded 50%.
Kaohsiung Catering is listed as a subsidiary because the Group has control over the investee. For thedisclosure of the Group’s acquisition of Kaohsiung Catering, refer to Note 31.

The Group’s respective holdings of the issued share capital of China Pacific Catering Services, China
Pacific Laundry Services and Delica International Co., Ltd. exceeded 50%, yet the Group did not havecontrol over the investees. For related information, refer to Note 15b.

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. The financial information for the years ended
December 31, 2018 and 2017 of these subsidiaries was reported according to the information which was
audited independently.

Note:

Cal-Dynasty
International
Taiwan Airport Services

Investor Company

Proportion of
Ownership (%)
December 31
2018
2017

164
497,362442,891
233,417
44,193493,077
300,400
483,814
256,291
43,1712017$ 1,576,753$

December 31$ 1,217,863

$

2018

20%
28%
28%
35%

6,402
15,113
22,57132,196
6,895
93,375$ 83,177$

24,47086,757
88,943
21,81922,381
27,8864,806$ 277,062

$

2017

20%
36%
28%
28%
35%

- 41 -In August 2017, the Group sold all of its holdings of Science Park Logistics to a non-related party, HCT
Logistics Co., Ltd. The agreed upon price was $380,850 thousand, and a disposal gain of $101,166
thousand was recognized.

Other comprehensive income of associates accounted for using the equity method in 2018 and 2017 arelosses in the amounts of $0 thousand and $(740) thousand, respectively.

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

2018

The investment income of associates accounted for using the equity method were as follows:

Proportion of ownership is considered from the perspective of the Group.

Note: Kaohsiung Catering Services was list as a subsidiary on March 7, 2018.

China Aircraft Services
Kaohsiung Catering Services
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

Name of Associate

Proportion of Ownership andVoting Rights
December 31
2018
2017

At the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Group were as follows:

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:$ 930,593$ 982,286

2017$ 756,965
171,229
2,399-

December 31$ 805,157
166,901
2,358
7,870

2018

51%
55%
49%
51%

51%
55%
49%
-

- 42 -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 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 impact.

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.

Proportion of Ownership andVoting Rights
December 31
2018
2017

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:

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

The investments in jointly controlled entities were as follows:b. Investments in jointly controlled entities

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, 2018 and 2017 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.

In October 2017, the Group signed a contract with a non-related party, MB Aerospace, to sell all of its
holdings of Asian Compressor Technology Services and reclassified it as non-current assets held forsale at book value. The transaction was completed and all payments were settled in January 2018. The
total transaction price was $471,132 thousand, and a disposition gain of $353,909 thousand wasrecognized.

165$ 259,174$ 284,069

Balance at December 31,
2017

Balance at January 1,
2017
Depreciation expense
Disposals
Impairment loss
Reclassification
Net exchange difference

Accumulated depreciationand impairment

Balance at December 31,
2017

Balance at January 1,
2017
Additions
Disposals
Reclassification
Net exchange difference

$

$

$

$

-

-

922,626

965,174(42,548)

Freehold Land

$

$

$

$

(6,137,495)(5,781,555)(393,458)
3,926
33,592

13,698,308

13,104,983
674,719(5,942)(75,452)

Buildings- 43 -$ (136,594,765 )$ (135,893,108 )(15,178,386)
4,022,977(690,579)
11,144,331-$ 263,427,144$ 248,262,079
1,022,602(4,550,399)
18,692,862-

FlightEquipment

26,187,556

28,898,891
1,607(479,936)(2,232,883)(123)$ (14,142,872)$ (15,846,688)(1,919,407)
619,775
3,003,549
(101)

$

$

Equipment
under FinanceLeases$$$$(9,972,982)(9,554,839)(848,492)
415,421
8,271
6,657

16,230,011

15,981,800
821,218(825,699)
260,432(7,740)

Others(Continued)$ (166,848,114)$ (167,076,190)(18,339,743)
5,062,099(690,579)
14,156,151
40,148$ 320,465,645$ 307,212,927
2,520,146(5,861,976)
16,720,411(125,863)

Total

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, 2018 and 2017 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.

16. PROPERTY, PLANT AND EQUIPMENT

Cost$ 235,871
23,354(51)-$ 267,413
16,695(41)
2

Other comprehensive income of associates accounted for using the equity method in 2018 and 2017 arelosses in the amounts of $(33,242) thousand and $(41,477) thousand, respectively.

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

For the Year Ended December 31
2018
2017

Details of investment income attributable to investment in jointly controlled entities were as follows:

$

$

$

$

-

-

1,015,564

76,704

922,626
16,234$$$$(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$ (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$ (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$ (10,601,997)

$

$

$

Others(Concluded)$ (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
48,439Total

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- 44 -

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 and 2017 of $50,000 thousand and$690,579 thousand, respectively.

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:

Balance at December 31,
2018

Balance at January 1,
2018
Depreciation expense
Disposals
Impairment loss
Reclassification
Net exchange difference

Accumulated depreciationand impairment

Balance at December 31,
2018

Balance at January 1,
2018
Additions
Disposals
Reclassification
Net exchange difference
Gain of acquisitions
through businesscombinations

Cost

Freehold Land

166
$ 2,075,345

2017$ 2,075,624

December 31$ 2,082,390$ 2,082,390-$ 2,082,390

Balance at December 31, 2017

Balance at January 1, 2018
Depreciation expense

Balance at December 31, 2018

- 45 -$ 2,082,390-

Balance at January 1, 2017
Depreciation expense

Cost

$

$

$

$

(7,045)(6,766)(279)(6,766)(6,487)(279)

Accumulated

All of the Group’s investment properties were held under freehold interest.

$ 2,075,345$ 2,075,624(279)$ 2,075,624$ 2,075,903(279)

Net Value

The fair value of the investment properties held by the Group was $2,506,230 thousand as of both
December 31, 2018 and 2017, respectively. The fair value valuation was performed by independent
qualified professional valuers, and the future income evaluated by management was based on market
transactions.

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

2018$ 4,608,600

Purchase of property, plant and equipment paid

17. INVESTMENT PROPERTIES$ 4,610,547(1,947)

Increase in property, plant and equipment
Capitalized interest paid

December 31,
2018

The Group generated the following non-cash investment activities related to the purchase of property, plantand equipment in 2017:

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.

$ 2,237,382

$

$

$

$

186,197

186,197----

Relationship
Between
Clients(761,039)(259,129)(89)$ (1,212,783)(10,036)(540)(7)$ (1,020,257)(181,943)$ (1,020,257)$

Accumulated
Amortization

529,963
1,603,400
1,089,690
100,141
19,33588,2243,430,753$

4,147,882

556,860
3,028,808
18,623
543,591

6,001,538

1,806,413
464,258
2,834,936
895,9312017$ 13,664,545$ 10,942,604
1,164,604
1,377,136
161,398
18,803-$$

December 31

$

$

$

2018

$ 1,210,796

176,847
12,331(7)$ 1,019,345
184,223(181,943)$ 1,019,345$ 1,137,115
141,448(259,129)(89)

Net Value- 46 -The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A350-900 and ATR72-600 aircraft. For details on the A350-900 aircraft purchase contracts, refer to Note36.

Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersNon-current

Other financial assets
Temporary payments
Prepayments
Restricted assets
OthersCurrent

19. OTHER ASSETS

The above other intangible assets are amortized on a straight-line basis over 2-16 years.

Balance at December 31, 2018

686
12,871-$ 2,039,602
184,223-$ 2,039,602

Balance at December 31, 2017
Balance at January 1, 2018
Additions
Amortization expenses
Acquisitions through businesscombinations
Reclassification
Effects of exchange rate changes$ 1,898,154
141,448-

Computer
Software Cost
Balance at January 1, 2017
Additions
Amortization expense
Exchange influence

18. OTHER INTANGIBLE ASSETS

167

0.92%-1.56%$ 65,753,503$ 60,686,148
0.92%-1.46%

26,100,000
37,89785,058,177
19,304,674

2017

30,770,000
59,03376,395,635
15,709,487

December 31

1.04%-1.15%$ 120,000

2017$ 26,820,000
32,176,074

2018

-

-

December 31

9,354,457
36,330,211

$

$

2018

2007.5.242030.4.25

2007.5.242029.11.9

2017- 47 -The Company 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, 2018 and 2017, the commercial papers were issued at discount rates of
1.0693%-1.2960% and 0.9983%-1.2897%, respectively.

Periods

2018

December 31

Bank loans (New Taiwan dollars and US 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 freehold land, buildings, machinery
equipment and flight equipment, refer to Note 35.

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

20. BORROWINGS- 48 -

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

2013.01.172018.01.17

Five-year private unsecured bonds - issued at parin January 2013; repayable in January 2017and 2018; 1.6% interest p.a., payable annually
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
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

PeriodCategory

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
Convertible bonds - fifth-time issues
Convertible bonds - sixth-time issues

21. BONDS PAYABLE

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

Rate(%)
Principal repayable in
1.60
January of 2017 and2018; indicator rate;
payable annuallyPrincipal repayable in
1.85
January of 2019 and2020; indicator rate;
payable annuallyPrincipal repayable in May
1.19
of 2020 and 2021; interest
p.a. payable annuallyPrincipal repayable in
1.08
September of 2020 and2021; interest p.a. payableannually
Principal repayable on due
1.20date; indicator rate;
payable annuallyPrincipal repayable on due
1.75date; indicator rate;
payable annuallyPrincipal repayable on due
1.14date; indicator rate;
payable annuallyPrincipal repayable in
1.45
October of 2021 and2022; indicator rate;
payable annually(Continued)

Conditions

8,200,000
4,700,000
5,000,000
2,350,000
3,500,000
1,667,100
25,417,100
4,367,100

2017$ 21,050,000$

December 31$ 28,473,710

$

2018

168

2018.01.302023.01.30

2013.12.262018.12.26

Principal repayable in
1.32
November of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable in
1.45
November of 2022 and2023; indicator rate;
payable annually
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- 49 -

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:

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.

Five-year convertible bonds - issued at discountin December 2013; repayable in lump sum
upon maturity; 1.3821% discount rate p.a.

2018.11.302023.11.30

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 convertible bonds - issued at discountin December 2013; repayable in lump sum
upon maturity; 1.8245% discount rate p.a.

2018.11.302025.11.30

PeriodCategoryRate(%)$ 5,481,379

Liability component at the date of issuance- 50 -$

Present value of minimum lease payments
Interest rates$

Within one year
Later than one year and no later than five years

Minimum lease payments -flight equipmenta. Sale-leasebacks - finance leases

1.0680%596,000

596,000-2017

1.0617%1.1317%$ 2,176,000$ 1,580,000
596,000

December 31$ 5,602,022

Liability component at the date of issuance

22. LEASING$ 6,012,000(409,978)

Proceeds from issuance
Equity component

2018

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 August 14, 2018, the conversion price was adjusted to NT$12.9.

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:$ 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.

169

636,343$4.756%

77,54337,32140,222

77,54337,48440,851
78,335(792)$ 2,253,543$ 1,617,321
636,222

$

$

$

$

2017

- 51 -The rental rates stated in the aircraft lease agreements some are fixed and some are floated. If theagreed-upon rental rate is floating and will be revised monthly or semiannually, subleasing is notallowed for all the lease arrangements. As of December 31, 2017, the Group has rented elevenA330-300 planes, fifteen B737-800 planes, ten 777-300ER planes, six ERJ 190 planes, three
ATR72-600 and ten A320-200 planes under operating contracts which the lease terms range from 6 to
12 years, with an extension option.

China Airlines, Ltd., Mandarin Airlines, Tigerair Taiwan and Taiwan Air Cargo Terminal rented
planes, hangars and etc. under various operating lease contracts expiring on various dates until May
2028. The Group does not have a bargain purchase option to acquire the leased planes and hangar at the
expiration of the lease periods.

c. Operating lease arrangements (include sale-leaseback-operating leases)

633,398
2,945$

Total amount of present value of minimum lease payments
Current
Non-current

40,343$4.756%

37,3982,945

40,34337,9982,974
40,972
(629)

$

$

$

December 31

Discount rate

Within one year
Beyond one year and within five years

Present value of minimum lease payments - cargoterminal and other

Present value of minimum lease payments

Less: Financial cost

Within one year
Beyond one year and within five years

Minimum lease payments - cargo terminal and other2018

Taiwan Air Cargo Terminal Co. (TACT) entered into a terminal construction contract. Refer to Note 34
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.

b. Finance leases

As of December 31, 2017, the Company leased engines and a total of three A330-300 aircraft bysale-leaseback contracts under finance leases. The lease terms are from June 2006 to April 2019. During
the lease term, the Company retained all risks and rewards attached to the aircraft and engines andenjoyed the same substantive rights as were enjoyed prior to the transactions. Interest rate underlying all
obligation under finance leases were floated. Therefore, the minimum lease payments under thesale-leaseback aircraft contracts are not inclusive of interest expense.

$ 78,030,370$ 11,785,442
44,559,429
21,685,499

Frequent flyer programs
Advance ticket sales- 52 -

24. CONTRACT LIABILITIES/DEFERRED REVENUE

Fuel costs
Ground service expenses
Repair expenses
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

23. OTHER PAYABLES

Minimum lease payments

2017

3,822,018
1,167,214
1,031,700
266,268
2,237,409
1,151,578
484,341
3,985,670

2,493,551
18,956,569

2,450,877
15,743,177$ 18,194,054(Continued)$

December 31
2018
2017
Contract
Deferred
Liabilities
Revenue$ 21,450,120$

3,484,288
1,187,329
926,686
290,9022,550,551
876,108
407,109
3,310,096$ 13,033,069

$

2017

$ 10,432,620

December 31$ 14,146,198

$

2018

$ 11,735,495

For the Year Ended December 31
2018
2017

$ 84,438,166$ 11,499,501
43,175,899
29,762,766

December 31

The lease payments recognized in profit or loss for the current period are as follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

2018

The future minimum lease payments for the non-cancelable operating lease commitments are as
follows:

As of December 31, 2018 and 2017, the refundable deposits paid by the Group under operating lease
contracts were $693,466 thousand and $807,629 thousand, respectively. Part of the refundable deposits
is secured by credit guarantees, and outstanding credit guarantee as of December 31, 2018 and 2017
were $1,682,774 thousand and $1,394,791 thousand, respectively.

170$

Current
Non-current

475,725
8,013,583$ 8,489,308$ 8,489,308
3,386,052(3,310,089)
229,268$ 8,794,539

Balance at December 31, 2017

Balance at January 1, 2018
Additional provisions recognized
Usage
Effect of exchange rate changes

Balance at December 31, 2018

- 53 -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.

$ 7,490,154
3,201,642(1,755,029)(447,459)

Aircraft Lease
Contract$ 8,489,308$$ 8,489,308

2017

Balance at January 1, 2017
Additional provisions recognized
Usage
Effect of exchange rate changes$ 8,794,539

321,075
8,473,464$ 8,794,539

December 31$ 18,194,054(Concluded)$ 21,450,120

2018$ 16,375,789
1,818,265

2017
Deferred
Revenue$ 19,546,455
1,903,665

Operating leases - aircraft

25. PROVISIONS

Current
Non-current

2018
Contract
Liabilities

December 31

Balance at January 1, 2017
Service cost
Current service cost
Cost from consolidation
Net interest expense (income)
Recognized in profit or loss

8,803,382(90,471)(90,471)939,046(319)
178,259
1,116,986- 54 -$ (7,162,275)

Fair Value ofthe Plan Assets$$ 17,464,856(8,661,474)

2017

8,101,565$

939,046(319)
87,7881,026,515(Continued)

7,956,835

Net Defined
BenefitLiabilities(Assets)$$ 16,149,382(8,047,817)

December 31$ 15,119,110

Present Valueof the Defined
BenefitObligation

Movements in net defined benefit liabilities (assets) were as follows:

Deficit (net defined benefit liabilities)

Present value of funded defined benefit obligation
Fair value of plan assets

2018

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans
were as follows:

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

26. RETIREMENT BENEFIT PLANS

171

23,429(1,769,694)
951,194(8,047,817)(82,595)(82,595)(236,287)(236,287)(1,486,550)
1,210,839(19,064)

458,746
520,343998,286(951,194)(133,806)
16,149,382
1,384,213
163,283
1,547,496

15,538344, 716
727,899
1,088,153(1,210,839)(109,336)$ (8,661,474)-

19,197$ 17,464,856

23,429-Fair Value ofthe Plan Assets$

8,803,382(Concluded)

727,899
851,866(1,486,550)(128,400)

344, 716

15,538(236,287)

1,384,213
80,6881,464,901

520,343
1,021,715(1,769,694)(133,806)
8,101,565

458,746458,746

19,19723,429Net Defined
BenefitLiabilities(Assets)- 55 -

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:

Balance at December 31, 2018

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, 2017
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
OthersPresent Valueof the Defined
BenefitObligation

0.86%-1.35%
1.00%-2.50%

2017
0.88%-1.25%
1.00%-2.00%

December 31

811,485(760,793)$ (777,193)
841,488

6,000,000$ 60,000,000$ 54,209,846

2017
6,000,000$ 60,000,000$ 54,709,846

December 31

8-12 years$ 887,216

2017- 56 -For the years ended December 31, 2017, the Company issued the 5th domestic unsecured convertible
bonds, and holders of such bonds amounting to $1,100 thousand applied for conversion, for which 95
thousand of the Company’s ordinary shares were exchanged. In accordance with the law, the Company
may apply for a change of registration after issuing new shares.

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued

Ordinary sharesa. Share capital

20188-12 years

The average duration of the defined benefit obligation

27. EQUITY$ 916,927

December 31

The expected contributions to the plan for the next year

2018

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% decrease

December 31,
2018

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 increase2018

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:

172
$

$

$ 1,241,214

December 31

315,114
11,74733,513
3,303
955
409,978
466,604$2018

799,999

318,020
11,747
2,673
955
146,589
320,0152017- 57 -The legal reserve of $81,132 thousand and special reserve of $76,486 thousand used to offset
deficits are subject to resolution by the shareholders in their meeting to be held on June 22, 2017.

1) Appropriation of earnings in 2016

The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.

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. 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.

c. Appropriation of earnings and dividend policy

The capital surplus from long-term investments and employee share options expired may not be used
for any purpose. Besides, capital surplus 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 donations 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 to a certain percentage of the Company’s paid-in capitalon yearly basis).

Issuance of convertible bonds in excess of par value andconversion premium
Expired employee share options
Retirement of treasury shares
Gain on sale of treasury shares held by subsidiaries
Long-term investments
Bonds payable equity component
Othersb. Capital surplus$

145,831
118,810
1,193,670$0.2181820086

Dividends Per
Share (NT$)$

114,493
1,136,278$0.20960737

Dividends Per
Share (NT$)

60(113,550)$ (34,986)

Balance at December 31,
2017

$

60
-

-

$

$

-

--

-

-

-

-

-

Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI- 58 -

1,774

-

-

-

1,714

-

$

(136,476)

78,56422,926$

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsBalance at January 1,
2017
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
Share of profit ofassociates accounted
for using equity
methodEffects of income tax
Other comprehensive
income recognized in
the period

Exchange
Differences on
Translating
Foreign
Operations

The movement of other equity items is as follows:d. Other equity items(106,415)

21,795

176,927(305,137)-

31,986$ (74,429)$

Cash Flow
Hedges

$

$

-

-

-

-

-

-

-

Gain (Loss) on
Hedging
Instruments(Continued)$ (107,641)(219,905)

60
44,721

176,927(305,137)(136,476)$ 112,264

Total

The appropriation of earnings for 2018 should be resolved in the shareholders’ meeting to be heldon June 25, 2019.

Company undistributed special reserve of $105,844 thousand.

Legal reserve
Cash dividends

Appropriationof Earnings

The appropriation of earnings for 2018 should be resolved in the board of directors meeting to beheld on March 20, 2019. The appropriation and dividends per share were as follows:3) 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, 2017.
The appropriations and dividends per share were as follows:

2) Appropriation of earnings in 2017

173

-

-

-

25,322-(9,664)

Balance at December 31,
2018
42,619-268(1,209)547--

Ending balance- 59 -

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
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries

e. Non-controlling interests

$

-

-

1,198
(5,773)

-

-

-

$

930

-

-

$

-

-

29,89742,35142,351--$(34,986)

1,774(1,774)$

Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI-$ (34,986)

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

$

$

$

25,268

12,11887,5792,530(24,117)-

31,731

77,435-(74,429)(74,429)-

Gain (Loss) on
Hedging
Instruments

58,223(Concluded)$

12,118113,1692,519(29,343)930

31,731

77,43529,897(67,064)

40,577$ (107,641)

Total$ 2,134,282

61
64,702(46,118)(39,920)105
26,888565,963(171,019)$ 2,965,512$ 2,083,381
282,726(3,598)(206,821)(131)$ 2,134,282
482,323(3,330)(69,654)(46)

For the Year Ended December 31
2018
2017

-

-

-

-

-

-

-

-

-

74,429$ (74,429)

Cash Flow
Hedges

2,075
814

2,075
814

Shares(In Thousands)$ 24,169
9,485$ 33,654$ 33,654$ 31,777$ 22,821
8,956

Market Value

2,889

2,889
-

2,889

2,889
50,000(50,000)

Total$ 24,169
9,485$ 31,777$ 22,821
8,956

Carrying
Amount

2,889

2,889
-

2,889

2,889
-

Company’s
Shares Held by
Its Subsidiaries- 60 -

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, 2017

Mandarin Airlines
Hwa Hsia

December 31, 2018

Subsidiary--

Number of shares, January 1, 2017
Addition during the year
Number of shares, December 31, 2017-

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

(Shares in Thousands)

Treasury shares are the Company’s shares held by its subsidiaries as of December 31, 2018 and 2017
were as follows:f. Treasury shares

174$ 156,121,785$ 170,711,607$ 560,399$ 606,453(270,597)(368,992)
11,168450,195
41,843(75,437)(50,000)(273,028)(534,848)

$

$

6,153
252,467(32,039)
101,105(51,756)(3,571,301)(690,579)(56,023)(1,010,058)$ (5,052,031)$

For the Year Ended December 31
2018
2017

$ 210,264
32,332
9,564
308,239$ 330,710
11,2009,603
254,940

For the Year Ended December 31
2018
2017

$ 102,216,106
43,336,068
10,569,611$ 108,345,648
49,847,065
12,518,894

For the Year Ended December 31
2018
2017

- 61 -

After consulting with the lawyers and considering the cost of litigation, the Company settled with theplaintiff in the amount of US$19,500 thousand, and the settlement was recognized in 2017 financial
statement. The settlement funds will be divided into four-phase payments in three years.

The Company has been named as a defendant, together with other airline members of the Association ofAsia Pacific Airlines, in a civil class action lawsuit filed at the US Northern District Court of California
by a group of passengers who alleged that there was an antitrust violation in December 2007.

(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
Impairment loss on financial assets measured at cost
Othersc. Other gains and losses

Interest income
Subsidy income
Dividend income
Othersb. Other income

Passenger
Cargo
Othersa. Revenue

28. NET INCOME-

412,422
949,483
18,0802,814

319,315
974,535
50,137

216,305

Post-employment benefits
Defined contribution plan
Defined benefit planf. Employee benefits expense

191,979$$$

259,129281
258,848

538,915
1,464,901
2,003,816

$

$

$

$

1,509,101(Continued)

482,586
1,026,515

For the Year Ended December 31
2018
2017

10,597
181,382$$ 18,340,022$ 19,325,083
An analysis of amortization by function
Operating costs
Operating expenses$ 17,667,649
672,373$ 18,648,142
676,941

An analysis of depreciation by function
Operating costs
Operating expenses$ 18,599,151$ 18,339,743
279
259,129$ 19,517,062$ 19,324,804
279
191,979

For the Year Ended December 31
2018
2017

1.31%-1.41%$$ 1,346,801$

Depreciation and amortization expense

Property, plant, equipment
Investment properties
Intangible assets

e. Depreciation and amortization expense

1.16%-1.45%

Capitalization rate

41,925$$ 1,379,985$

For the Year Ended December 31
2018
2017

Capitalization interest- 62 -

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

175$ 22,640,698
4,734,127$ 27,374,825(Concluded)$ 28,706,047$ 25,865,724$ 26,702,231$ 23,857,265
4,848,782$ 20,287,418
5,578,306$ 20,910,604
5,791,627- 63 -

Income tax expense recognized in profit or loss

Current tax
Current year
Prior year adjustment
Income tax on unappropriated earnings
Deferred tax
Current year
Effect of income tax

The major components of tax expense were as follows:a. Income tax expense recognized in profit or loss

29. INCOME TAX$$

808,565

1,467,343(933,932)

264,527
10,59235

883,064-

148,743
1,364-$ 1,033,171$

For the Year Ended December 31
2018
2017

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2018 and 2017 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 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.

To be in compliance with the Company Act as amended, the Articles stipulate the distribution of
employees’ compensation at rates of no less than 3% of the net profit before income tax and employees’
compensation. For the year ended December 31, 2017, the employees’ compensation was $799,768
thousand, respectively, of the base net profit. The employees’ compensation and profit bonus for theyear ended December 31, 2018 was $51,656 thousand and $594,810 thousand.

An analysis of employee benefits expense by function
Operating costs
Operating expenses

Other employee benefits
Salary expenses
Personnel service expenses

For the Year Ended December 31
2018
2017

$

$

808,565

1,088,650
10,592(933,932)
1,861

35
22,786

20,662(25,730)

616,250
7,391$ 3,081,249

517,071
1,364(37,190)9,906
17,474

5,593(95,556)

599,074
15,435$ 1,033,171$$ 3,523,963- 64 -

Total income tax recognized in other comprehensive income

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$ 170,023$

2018

21,807
10,893
173,691-

23,612-$ 219,110$2017

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%.

Income tax expense recognized in profit or loss

Income tax expense calculated at the statutory rate (20% for2018, 17% for 2017)
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
Additional income tax under the Alternative Minimum Tax
Act
Income tax on unappropriated earnings (10%)
Oversea income tax expense
Unrecognized loss carryforwards, investment tax credits andtemporary difference
Adjustments for prior years’ tax
Adjustments to changes in tax rates and laws
Other

Profit before tax

For the Year Ended December 31
2018
2017

A reconciliation of accounting profit and income tax expense is as follows:176

197,555

31,010165,630915$$(20,165)(31,010)
11,743

(898)

$

$

$

$

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

Temporary differences
Unrealized foreign exchange gains
Depreciation difference from fixed assets
OthersDeferred tax liabilities

Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserves
Allowance for reduction of inventory
OthersLoss carryforwards

Deferred tax assets

273,610$- 65 -

85,949187,661$$$$ 6,256,665$$$ 1,351,205
421,695
1,250,075
200,841
651,976
2,380,873

Beginning
Balance(49,953)915(54,939)
4,071(933,017)(143,358)
4,411
257,210
38,274
469,902(1,559,456)

Recognized in
Profit or Loss

$

$

$

$

(22,796)(22,796)

196,314173,691
22,623-

Recognized in
Other
Comprehensive
Income$$$$(10,179)(10,179)

(630)

(630)
-

Exchange
Difference$$

190,682915
31,010158,757$ 5,519,332$ 1,381,538
426,106
1,507,285
239,115
1,143,871
821,417

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

For the year ended December 31, 2017

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, 2018c. Deferred tax assets and liabilities

$

2025
2026
2027
2028

- 66 -

Taiwan Aircraft Maintenance And Engineering Co., Ltd.

2022

Cal Hotel Co., Ltd.

2026
2028

Mandarin Airline Co., Ltd.

2019
2021
2022
2026
2028

China Airlines, Ltd.

Expiry Year90,350$ 17,728,773

2017

UnusedAmount323,173

18,124
31,476
68,415
103,151
221,166$970

667,345584,023
83,322$$$$$ 16,839,292$ 11,790,770
2,899,496
619,799
202,699
1,326,528$$ 12,507,288$ 10,900,000
17,9299,617
71,861
34,048221,121
1,184,297
68,415-

December 31$ 11,790,770
2,899,496
620,769
18,124
818,198
68,415
1,513,001

d. Unused tax loss carryforwards as of December 31, 2018 were as follows:

Difference in depreciation

Loss carryforwards
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028

2018

Deductible temporary differences, and unused loss carryforwards for which no deferred tax assets havebeen recognized in the balance sheets.

177

0.33
0.32

$
$

0.40
0.39

5,684,052

145,763
70,259457,4818,821

5,919,881

5,468,030

5,453,579

For the Year Ended December 31
2018
2017

$ 2,232,867

24,801

81,463$ 1,871,824$ 2,208,066$ 1,790,361

For the Year Ended December 31
2018
2017

$
$

- 67 -

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:

31. 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

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

For the Year Ended December 31
2018
2017

The numerators and denominators used in calculating earnings per share were as follows:

30. EARNING PER SHARE

The income tax returns for 2016 of the Company and its subsidiaries, have been examined by the tax
authorities.

e. Income tax assessment
918,033
553,390
186,883
49,4791,707,785(486,356)$ 1,221,429$$ 1,823,950$ 229,665- 68 -

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

Had these business combinations been in effect at the beginning of the annual reporting period, the Group’s
revenue from continuing operations would have been $171,039,102 thousand and the profit fromcontinuing operations would have been $2,310,159 thousand. This pro-forma information is for illustrative
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 Groupe. 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.

178$ 33,919,610
76,395,635

Fair Value$ 31,651,865
74,404,225

2018
Fair Value$ 25,818,511
87,070,820

2017$ 25,417,100
85,058,177

Carrying
AmountFinancial assets at FVTPL
Domestic money market
funds

December 31, 2018

- 69 -$ 206,001

Level 1$

Level 2-$

Level 3-

$ 206,001(Continued)

Totalc) 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).

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, 2018 and 2017, 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 0.68% and 0.75%, 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
AmountDecember 31

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

Level 1

-

-

-

-

-

-

-

-

$
$

-

$

$ 306,839

$

$

$

$

$

$

$

$

$

$

$

$

$

$

-

-

-

-

89,289293

9,581

Level 2560

28,005

221

Level 2

110,445

21,746

$

$

$

$

$

$

$

Level 332,906

221

$

$

$

89,289293

9,581$ 306,839

Total

$
560
(Concluded)$$

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.

110,445

21,746Total$ 132,191$

Valuation Techniques and Inputs- 70 -

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 a 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$

Level 3

There were no transfers between Levels 1 and 2 in the current periods.

Financial assets at FVTPL
Beneficial certificates
Financial liabilities at
FVTPL
Derivative instruments
Derivative financial assets
for hedging
Derivative financial
liabilities for hedging

December 31, 2017

Financial liabilities forhedging

Financial assets for hedging

Financial liabilities at
FVTPL
Derivative instruments

Financial assets at FVTOCI
Investments in equity
instruments
United shares domestic
Unlisted shares foreign

Level 1

179

4,901

$

Balance at September 30,2018

606

84,07547,510$ 132,191$

EquityInstruments

$

221
560
127,271,892

206,001
32,90640,496,618
132,191

2018

$

2017

9,581
89,289127,928,250

306,839
84,075
293
35,276,119-

December 31- 71 -

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
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

Financial liabilities

Financial assets at FVTPL
Available-for-sale financial assets (Note 3)
Financial assets for hedging
Derivative financial assets for hedging
Loans and receivables (Note 1)
Financial assets at amortized cost (Note 4)
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.

There were no financial assets measured using Level 3 fair value measurements in 2017.

4,901

-

$

Balance at January 1,2018
Adjustments on initial application of IFRS 9
Other comprehensive income recognized during theperiodDerivative
Instruments

The movements of Level 3 financial instruments are as follows:

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 multiplier on September 30, 2018 ranged from 0.85 to
18.68, and the liquidity discount is 80%.

- 72 -

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

Note 4: 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 and other restricted financial assets.

Note 3: The balances include financial assets measured at cost.

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 and long-term loans, capital lease obligations,part of other current liabilities, part of other non-current liabilities and guarantee deposits.

180

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

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)- 73 -

And the amount of gains and losses on hedging instruments for the three months 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

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 US dollars
and Aircraft prepayment) are $27,445 thousand.

Cash flow hedge
Aircraft rentals forward exchange
contracts

Hedging Instruments

December 31, 2018

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.

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.

For the year ended December 31, 2018

When New Taiwan dollar strengthens one dollar against the US dollar and all other variables
were held constant, there will be an increase in pre-tax profit in 2018 of $142,244 thousand anda decrease in pre-tax profit in 2017 of $60,437 thousand.

$ 34,919,610
75,031,9782017$ 27,537,100
85,311,720

December 31

USD

Currency

NT$4,901

Notional
Amount2019.1.312019.12.31

Maturity

US$72-US$88

Forward Rate

Financial assets forhedgingLine Item in
Balance Sheet

$

4,901

$

-

Carrying AmountAsset
Liability- 74 -

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

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

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, 2017 would havedecreased by $213,279 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, 2018 would havedecreased by $187,580 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

2018

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

181

Increase in operating costs.

$

4,901

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
Income$(9,421)

AmountReclassified toProfit and Lossand theAdjusted Line
Item
(Note)

$

-

-

$
-

-

$
-

-

$
-

-

293

$

$

Current
Non-current- 75 -$ 82,295
6,994

Current
Non-current$ 89,289$ 89,289

Foreign exchange forwards contracts

Derivative financial liabilities under hedge accounting

293
-

$

293

December 31,
2017

Foreign exchange forward contracts

Derivative financial assets under hedge accounting

Derivative financial instrument for hedging

The relevant hedging strategies of the Group in 2017 are the same as the aforementioned in2018, except for the following special instructions.

d) Hedge accounting in 2017

Fuel price increase of5%
Fuel price decrease of5%

For the Year Ended December 31
2018
2017
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
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

Note:

Cash flow hedges - fuel options

Comprehensive Income

For the year ended December 31, 2018

NTD/USD

Currency

2018.1.5-2019.6.21

Maturity Date

NTD7,105,942/USD236,924

Notional Amount(In Thousands)$ (76,621)$ (52,034)(2,814)(21,773)- 76 -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

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.

2) Credit risk

The amount of gains and losses on hedging instruments for the year ended December 31, 2017
reclassified from profit or loss to prepayments for equipment was $100,367 thousand.

Increase in operating costs
Increase in finance costs
Other foreign exchange losses

December 31,
2017

Gains and losses of hedging instruments reclassified from equity to profit or loss were includedin the following line items in the consolidated statements of comprehensive income:Buy forward contracts

December 31, 2017

The Group entered into foreign exchange forward contracts to minimize cash flow exposure
related to fuel payments and aircraft payments, which will be paid in US dollars.

Foreign exchange forward contracts

Cash flow hedges

The fair value of each derivative contract is determined using quotes from financial institutions.

182$ 16,295,918$ 10,332,359

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable
9,402,003$ 14,331,857

1.3905- 77 -

1,122,203

239,138
4,877,118$-

7,723,817

555,9832,000,517$

7,129,543

85,5410.1034$1.81051.31041-3 Months

3 Months to
1 Year6,496,270-

14,797,669

2,181$ 21,296,120$

1-2 Years

24,339,179-

27,346,290

843$ 51,686,312$

2-5 Years

1,051,418-

20,810,464-$ 21,861,882$

5+ Years

17,70053,885
1,911,231

193,648

6,994
301,932

2,023,600

18,465,141

455,544

20,651,932-

28,374,270-

1,014,142-

18,151,425

2017$ 19,165,567$

5+ Years$ 25,181,000

December 31$ 49,481,746$

2-5 Years$ 17,337,000

2018$ 20,991,315$

1-2 Years- 78 -

Kaohsiung Catering Services
Science Park Logistics
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.
China Aviation Development Foundation
OthersNamea. Related parties’ names and relationships

Associate (become subsidiary in March 2018)
Associate (disposal in August 2017)
Associate (disposal in January 2018)
Associate
Associate
Associate
Associate
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

Relationship with the Company

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 Weighted
Average
Effective
Interest Rate(%)

1,406,511
12,906,591

5,900

$

28,4102,790,923

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.

December 31, 2018

236,138
7,270,988

1.4142$3 Months to
1 Year

1.18001.12511.2090

1-3 Months

Loan commitments

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable

The Weighted
Average
Effective
Interest Rate(%)

December 31, 2017

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.

Liquidity and interest risk rate table

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

183

Related Party Type

Major shareholder of theCompany
Associate
Joint venture investment
523
41,410

$
$

$
$

$
1,938
46,461

31,971

7,589
1,454
9,043

$

$

$

8,359

6,431
1,928

2017

$
71,852$ 745,686$ 1,857,684

December 31

$

2018

$
64,188$ 501,609$ 1,912,995

For the Year Ended December 31
2018
2017

28,670$For the Year Ended December 31
2018
2017

54,948474,499
3,368
532,815

$

$

2018

$

$

December 31

590,806

116,525
469,827
4,454

2017

- 79 -

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 2018 and 2017, the Company had paid rentals of about $64,188 thousand and $71,852
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)

Major shareholder of the Company
Associate
Joint venture investment

Related Party Typec. Purchases

Other income

Account Items

b. Operating income$ 3,850,000
1,080,000
1,081,792
2,000,000

Authorized
Amount$ 2,339,700
418,491
605,457$ 2,850,000
318,611405,998--

ActualAmount Used

2017

$

$

47,84644,551
3,295$$

50,812

46,805
4,007

For the Year Ended December 31
2018
2017

$ 3,850,000
1,080,000
1,055,604-

Authorized
AmountDecember 31
ActualAmount Used2018

161,398$ 39,983,064$ 38,455,830$ 39,821,666

2017

118,764$ 38,337,066

December 31- 80 -

a. In January 2008, the Company entered into a contract to buy fourteen A350-900 aircraft from Airbus,
with the option to buy six more A350-900 aircraft, as of December 31, 2018, fourteenth of the aircraft
had been handed over to the Company.

As of December 31, 2017, the Group had commitments and contingent liabilities (except for thosementioned in other notes) as follows:

36. COMMITMENTS AND CONTINGENT LIABILITIESProperty, plant and equipment
Restricted assets - non-current
Pledged certificate deposits

2018

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

CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenance

The Company

g. Endorsements and guarantees

184

Cargo Terminal Expansion Construction Consultant
Contract

CECI Engineering
Consultant, Inc., Taiwan$ 552,285- 81 -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, 2018, the cumulated consultant service expense and construction equipment had
amounted to $481,776 thousand (VAT included) and $5,143,529 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,755 thousand (VAT included) and$5,143,510 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, 2018, TACT had signed the following construction contracts with unrelatedparties:

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.

c. 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.

b. 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, 2018, two of the aircraft has
been handed over to the company, and the total list price of the lefts four aircraft was $80,000 thousand,which has been paid in the amount of US$10,190 thousand (recognized as prepayments for aircraft).
Additionally, Mandarin Airlines signed a lease contract for three ATR72-600 aircraft, which weredelivered in 2017.

- 82 -The Company failed to mediate labor disputes with the labor union. After obtaining the right to strike, thelabor union went on strike at 0:00 February 8, 2019, and the flights resumed normal operation on February
14, 2019. The initial estimated compensation for customer losses and various expenses were $154 million.
For other information, refer to “Pubic Information Observatory” of the Taiwan Stock Exchange.

37. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

e. Taiwan Aircraft Maintenance Company contracted out Ronggong Engineering Co., Ltd. for aconstruction repair project. The contract expiration date is March 5, 2019, and the estimated total costof the project is $1.964 billion. As of December 31, 2018, $1,547,499 thousand was paid (recognized as
construction in progress).

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.

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.

AL 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.

d. 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.

185

Monetary items
USD
EUR
HKD
JPY
CNY

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
CNY

Financial assets

December 31, 2017

Monetary items
USD
EUR
HKD
JPY
CNY

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
CNY

Financial assets

December 31, 2018

391,865
6,516
79,716
5,586,337
150,529

533,10920,519302,930
6,479,942
394,503418,839
5,971
87,927
4,972,250
150,678

351,90221,358
293,872
6,147,548
469,241- 83 -$

Foreign
Currencies (InThousands)$

Foreign
Currencies (InThousands)

29.850735.71433.81830.26484.583029.850735.71433.81830.26484.5830Exchange Rate

30.7692
35.21133.92310.27784.480330.7692
35.21133.92310.27784.4803

Exchange Rate

12,503,415
213,250
335,732
1,316,652
690,557$ 10,504,521
762,786
1,122,091
1,627,871
2,150,530

Carrying
Amount12,057,386
229,440
310,978
1,552,067
674,413$ 16,403,335
722,514
1,188,425
1,800,967
1,767,491

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$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: 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, 2018 and 2017, the Group’s net foreign exchange gain (losses) were$41,843 thousand and $(51,756) 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.

186

Total assets- 85 -$

8,381,813$ 225,899,632

2,507,346
67,699,131

8,826,160
210,264$ 155,693,155$ 147,311,342$

Identifiable assets
Investments accounted for using
the equity method
Assets-3,523,963$$

916,670$ 156,121,785

Profit before income tax$(6,375,116)

536,236
626,533(1,346,801)(5,328,429)

7,909,490$$

7,984,517

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses$Total$ 230,136,582

2,200,149
62,753,372$ 154,512,384

For the Year Ended December 31, 2017
Air
Adjustments
Transportation
Othersand Write-offs

138,787

Operating revenue

Total assets$ 11,036,945

4,022,383
330,710$ 165,183,061$ 154,007,329$

Identifiable assets
Investments accounted for using
the equity method
Assets(24,617)

3,081,249$$

1,429,884

Profit before income tax$$ 170,711,607

367,246
146,667(1,369,351)(416,406)

2,617,116(7,089,474)$$

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses$ 10,430,156

Total$ 167,370,925

For the Year Ended December 31, 2018
Adjustments
Othersand Write-offs

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$

1,324,134$

18,8382,498,885

32,933,348

94,631$$$

91,893(932,071 )

34,290,529

Southeast Asia

$

$

$

$

$

$

$

$

2,619

(904,416 )

6,760,146

Australia

$

$

$

China

- 86 -

4,407

818,324

13,226,468

Europe

$

$

$

3,616

(272,090 )4,727,678

Australia

$

$

$

9,178

2,503,460

18,990,132

China

10,1742,454,935

22,114,227

For the Year Ended December 31, 2017

2,796

756,263 )

16,092,452

2,365,591

16,958,615

Domestic

2,143,650

14,505,044

Domestic$ 154,241,089$$$ 163,590,530$$

138,787

24,617 )(7,089,474 )

$

$

$

-

-

(6,375,116 )Adjustment andEliminations

$

($

$

Adjustment andEliminations

Consolidation

4,022,383
330,7108,826,160
210,264$ 225,899,632

2,507,346
67,699,131$ 155,693,155$$$ 156,121,785

Consolidation$ 230,136,582

2,200,149
62,753,372$ 165,183,061$$$ 170,711,607

3,523,963

Identifiable assets
Investments
accounted forusing the equity
methodAssets$$Northeast Asia

15,520($$

Profit before
income tax

2,066,002

43,823,702

America$(2,412,823 )

34,132,301

536,236
626,533(1,346,801 )(5,328,429 )$$

1,328,004$$

Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
Expenses

Operating revenue

Total assets$

2,717,255

38,464,450

3,081,249

Identifiable assets
Investments
accounted forusing the equity
methodAssets$$For the Year Ended December 31, 2018
EuropeProfit before
income tax

582,721

43,278,890

Southeast Asia

367,246
146,667(1,369,351 )(416,406 )$$Northeast Asia

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 2018 and 2017 are listed
below:

b. Geographical segment

2,000,000$ 3,850,000
1,080,000
1,087,224
2,000,000$ 3,850,000
1,080,000
1,081,792
605,457$ 2,339,700
418,491$- 87 -

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s shareholders’ equity.

11,416,314$ 11,416,314
11,416,314
11,416,314

Note 2:

100% subsidiary
54% subsidiary
100% subsidiary by direct
and indirect holdings
100% subsidiary

Nature of Relationship

ActualBorrowingAmount

-

3.50

6.74
1.89
1.90

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 Ltd.

Name

Limit on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmount(Note 1)

Note 1:0No.

Endorsement/
Guarantee
ProviderCounter-party

ENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

187

28,540,786$ 28,540,786
28,540,786
28,540,786

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 by Parent
Given byGiven on Behalf
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

TABLE 1Marketable Security Type and Issuer/Name

Kaohsiung Catering Services

Beneficiary certificates
Prudential Financial Money Market Fund

Beneficiary certificates
Taishin 1699 Money Market Fund

SharesChina Airlines-

Beneficial certificatesFuh Hwa Emerging Market Short-term Income
Fund

Hwa Hsia-

SharesTransAsia Airways

Taiwan Airport Services

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 FVTPL - current--- 88 -

Financial assets at FVTPL - current

Financial assets at FVTPL - current

Parent company Financial assets at FVTOCI - non-current-

Beneficiary certificatesFranklin Templeton SinoAm Money Market Fund

Sabre Travel Network (Taiwan)--

Parent company Financial assets at FVTOCI - non-current

Financial assets at FVTOCI - non-current
Financial assets at FVTPL - current
Financial assets at FVTPL - current-

SharesTaikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang)
Composite

Beneficiary certificates
Barclays America Bonds Fund

SharesChina Airlines

Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current

Financial Statement Account-Relationshipwith the Holding
Company

Cal-Asia Investment

Mandarin Airlines

China Airlines (“Parent company”) Shares
Everest Investment Holdings Ltd. - ordinary shares
Everest Investment Holdings Ltd. - preference
sharesChung Hua Express Co.
Jardine Air Terminal Services
The Grand Hi Lai Hotel

Holding Company Name

MARKETABLE SECURITIES HELDDECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

188
7,939,173

349,523

814,152

787,0072,277,786

3,492,097-

1,000,000

2,074,628

1,100,000
12,000,000
4,021

1,495,305
135,937

Number of
Shares/Units$

125,360

4,721

8,956

9,042

-

36,041

48,82530,837

22,821

21,746-56,018
5,602

-

-

-

-

0.4

-

2.59
5.45

-

-

11.00
15.00
0.02

13.59
-

December 31, 2018
Percentage
CarryingofAmountOwnership(%)$

125,360

4,721

8,956

9,042

-

36,041

48,82530,837

22,821

21,746-

61,620Market Valueor Net Asset
Value(Continued)

-

-

-

-

-

-

Note 2
Note 2--

Note 1Note

TABLE 2

Note 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 $61,620 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2018.

189(Concluded)$3,330,000--$

3,330,000

-

-

$

-

-

-

-

-

-

$

-

-

-

- 90 -

Paid-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.

-

-

-

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.

3,030,000--

Ending Balance
Number ofAmountShares

Note 4-$Gain (Loss) on
Disposal

Note 3300,000--

Disposal (Note 3)
Carrying
AmountAmountMarketable securities which are recognized as investments accounts for using the equity method are required to be filled in the second column.

-

-

-

Number of
Shares

Note 2:

Non-related party-

Non-related party$

Acquisition (Note 3)
Number ofAmountSharesThe marketable securities in this table refer to shares, bonds, beneficial certificates and the securities derived from the above items.

President Securities
Corp.

-

Beginning Balance
Number ofAmountShares

Non-related party

Relationship(Note 2)TABLE 3Note 1:

NT-dollar 100%
Financial assets at
principal-protected
FVTPL - current
structural products

Tigerair Taiwan Co.,Ltd.

Counterparty(Note 2)

Investments accounted MB Aerospacefor using the equity
methodInvestments accounted TransAsia Airlines
for using the equity
methodFinancial Statement
Account

SharesAsian Compressor
Technology
Services
Kaohsiung Catering
Services

Type and Name ofMarketable
Securities (Note 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, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

190

Taiwan Air Cargo Terminal
Taiwan Airport Services
CAL Park
Cal Hotel
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Service
Kaohsiung Catering Services
Hua Hsia
Tigerair Taiwan
Tigerair Taiwan
Eastern United International Logistics
China Pacific Catering Services
China Aircraft Services
China Pacific Laundry Services

Taiwan Airport Services

Taoyuan International Airport Service

CAL Park

Mandarin Airlines

Tigerair Taiwan

Cal Hotel

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
Equity-method investee
Equity-method investee
Equity-method investee
Equity-method investee

Nature of Relationship

Purchase

Purchase

Purchase

Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase

Purchase/
Sale

114,281

179,798

152,652

599,309434,538
231,288
107,273(2,155,732)
236,744
1,247,054
462,577
333,255(336,530)
141,030
238,356
1,784,963
180,238
128,033- 91 -$

Amount1 months

30 days
40 days
2 months
1 months
2 months
2 months
40 days
60 days
2 months
1 months
1 months
2 months
90 days
30 days
2 months

Payment Terms

28.70

1 months(3.28) 1 months

2.71

0.44
0.32
0.17
0.08
(1.43)
0.17
0.91
0.34
0.24
(0.22)
0.10
0.17
1.30
0.13
0.09

% of
Total

Transaction Details

$

-

-

-

-

-

-

-

$

(388)

(17,699)(24,608)(46,076)(74,816)(121,426)(13,982)
235,253(278,323)(365,115)(74,641)(54,352)
42,084(21,538)(22,145)(454,920)(31,988)(19,579)(17.50)(2.96)(2.02)(5.40)(8.77)(14.24)(1.64)
2.35(32.64)(42.82)(8.75)(6.37)
0.42(2.53)(2.60)(53.35)(3.75)(2.30)

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, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

191

-

-

-

-

Note

TABLE 4

China Airlines

China Airlines

China Airlines

China Pacific Catering Services

CAL Park

Taoyuan International Airport Service

Parent company

Parent company

Parent company

Parent company

Subsidiary

Nature of Relationship

365,115

121,426

454,920

278,323$ 235,253

Ending Balance

3.48

1.90

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, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

192
-

-

-

-

-

-

-

-

-

-

Action Taken

Overdue

362,163

121,426

301,208

276,142$ 235,253

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.

Investee acquired by merger.

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

Taoyuan, Taiwan- 93 -Air transportation and maintenance of aircraft
Airport services

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Taipei, Taiwan
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

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, 2018
(In thousands of New Taiwan Dollars and Foreign Currencies in Thousands, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

193

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

US$

HK$

10,200

5,877

3,329

200,000
11,6582,450

26,265
JPY
20,4002,500
1,600,000
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
12,289140,240
465,000
137,500$

December 31,
2017

Investment Amount

1,020,000-

1,050,000

20,000,000
469,755

245,000

1,600,000
408
250,000
180,000,000
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

10.00
1.08

49.00

100.00
51.00
25.00
90.00
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

$

7,870

388,910

44,193200,658
6,068

2,358

26,946
26,0596,996
1,805,921
1,128,138

89,101

1,507,445
1,201,109
1,533,244
1,266,921
805,157
755,619494,098
454,149
497,362
266,775
662,817461,239
166,901

Balance as of December 31, 2018
Percentage
Number ofof
Carrying
Shares/Units Ownership
Amount(%)$

3

27,353

19,703

981,713
133,894

(83)

1,437
(2,297)
5,137
981,713(103,410)

14,616

3,143
24,824359,195
43,975524,339282,254
26,115
188,247
32,012
133,894
296,678
25,27430,355Net Income(Loss) of theInvestee$

2

27,353

6,865

98,171
1,442

(41)

1,438
(1,172)
1,284
883,542(103,410)

14,4393,143
22,878
193,964
43,975
267,413138,305
26,115
176,820
6,402
63,399138,460
25,274
16,695Investment
Income (Loss)

Note 4Note 3---Note 1

Note 1
Note 2
Note 5-Note

TABLE 6

Landing gear
1,135,077
maintenance services (US$ 36,890)

Composite material

Taikoo (Xiamen) Landing
Gear Services

Taikoo Spirit Aerospace
Systems (Jinjang)

Investment Amount
Authorized by Investment
Commission, MOEA

$665,586 (Note 3)

Accumulated Investment in
Mainland China as ofDecember 31, 2018

$274,481 (US$8,920)

358,862
11,663)Forwarding and storage
62,724of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

(US$

Forwarding and storage $ 1,140,143
of air cargo(RMB 254,480)

Main Business andProduct

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

19,569636)

66,191
2,151)

59,921
1,947)$36,028,250 (Note 4)

Limit on Investment

(US$

(US$

(US$

$
128,799 $(US$4,186)

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2018

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company Name

China Airlines

INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2018
(In thousands of New Taiwan Dollars/Renminbi/US Dollars)

CHINA AIRLINES, LTD. AND INVESTEES

194
Outflow

-

-

-

-

- 94 -$

Inflow

Investment Flow

-

-

-

-

Net Income(Loss) of
the Investee

(US$

(US$

(US$

19,569636)

66,191
2,151)--

59,921
114,760
1,947) (RMB 25,175)$
128,799 $
80,455(US$
4,186) (RMB 17,650)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2018

5.45

2.59

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

-

-

48,825(RMB 10,898)

-

-

-

26,933875)(Note 2)

(Continued)

16,130116,600
3,525) (RMB 26,025) (US$86,2082,802)(Note 2)

Accumulated
InwardRemittance ofEarnings as ofDecember 31,
2018$
11,307 $222,073 $(RMB 2,471) (RMB 49,567) (US$Investment
Gain (Loss)

Carrying
Amountas ofDecember 31,
2018

TABLE 7

(US$

-

-

$

Inward$338,046 (Note 4)Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

59,285
1,927)$
123,642 $(US$4,018)

Outward

Remittance of Funds

-

-

(US$

59,285
114,760
1,927) (RMB 25,175)

14

14% Ownershipof Direct orIndirect
Investment

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2018

(RMB

16,066
116,817
3,525) (RMB 26,073) (US$- 95 -

Note 6: The RMB and US 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)

43,2801,407)$
11,264 $
220,818 $
117,118(RMB 2,471) (RMB 49,287) (US$3,806)

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2018

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 2018 amounted to US$2,801,749 and US$875,330.

Net Income(Loss) of theInvestee$
123,642 $
80,455(US$
4,018) (RMB 17,650)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2018

Note 1: China Airlines, Ltd. the “Company” invested in CAL-Asia Investment, which, in turn, invested in a company located in mainland China.

$182,926 (US$5,945)$182,926 (US$5,945)

Indirect(Note 5)Investment Amounts Authorized by
Investment Commission, MOEA

Forwarding and storage
62,724of 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, 2018

Forwarding and storage $ 1,140,143
of air cargo(RMB 254,480)

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2018

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company

Taiwan Airport Services

195

China Airlines, Ltd.

Taiwan Air Cargo Terminal

Mandarin Airlines

Taoyuan International Airport Services

Taiwan Airport Service

1

2

3

4

Company Name

0No.

China Airlines, Ltd.
Mandarin Airlines

China Airlines, Ltd.
China Airlines, Ltd.
Tigerair Taiwan Co., 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.

Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan Co., Ltd.
Taoyuan International Airport Services
Taiwan Airport Service
Hwa Hsia
Mandarin Airlines
Tigerair Taiwan Ltd.
Kaohsiung Catering Services
Taiwan Air Cargo Terminal
CAL Park
Cal Hotel Co., Ltd.
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Services
CAL Park
Mandarin Airlines

Related Party

b
c

b
b
c

b
b
c
b
b
b
b

b

a
a
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

Airport service revenue
Accounts receivable - related parties
Operating revenue

Passenger costs
Operating expenses
Airport service costs
Passenger revenue
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
Airport service costs
Airport service costs
Airport service costs
Passenger costs
Passenger costs
Passenger service cost
Other operating costs
Other operating costs
Other operating costs
Accounts receivable - related parties
Accounts payable - 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, 2018
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

196
434,538
152,652

1,247,054
365,115
179,798

1,891,339
264,393
152,652
236,744278,323
250,000
235,253599,309$ 1,891,339
264,393
336,530
1,247,054
434,538
333,255
236,744
141,030
462,557
599,309231,288
107,273
235,253
278,323
365,115
121,426
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
The same as ordinary transactions

Intercompany Transactions(Continued)

0.25
0.09

0.73
0.16
0.11

1.10
0.15
0.09
0.14
0.12
0.11
0.10

0.35

1.10
0.15
0.20
0.73
0.25
0.19
0.14
0.08
0.27
0.35
0.14
0.06
0.10
0.12
0.16
0.05
0.11

% of Total
Consolidated
Total Revenue
or Assets

TABLE 8Tigerair Taiwan Co., Ltd.

Hwa Hsia

Kaohsiung Catering Services

CAL Park

Cal Hotel Co., Ltd.

6

7

8

9

Company Name

5

No.

China Airlines, Ltd.
CAL Park

China Airlines, Ltd.
Cal Hotel Co., Ltd.
China Airlines, Ltd.

China Airlines, Ltd.

China Airlines, Ltd.

China Airlines, Ltd.
China Airlines, Ltd.
Taoyuan International Airport Services

Related Party

b
c

b
c
b

b

b

b
b
b

Natural of
Relationship(Note 1)

Operating revenue
Other operating expense

Operating revenue
Operating revenue
Accounts receivable - related parties

Operating revenue

Operating revenue

Operating expense
Passenger revenue
Airport service costs

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:197$

107,273
114,281

231,288
114,281
121,426

462,557

333,255

336,530
141,030
179,798

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

Intercompany Transactions(Concluded)

0.06
0.07

0.14
0.07
0.05

0.27

0.19

0.20
0.08
0.11

% of Total
Consolidated
Total Revenue
or Assets

198

-1-

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. As of
December 31, 2018, passenger revenue was NT$94,248,291 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 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, 2017. These matters wereaddressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matters

We 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 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 our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient 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, thefinancial position of the Company as of December 31, 2018 and 2017, 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, 2018 and 2017, and the statements ofcomprehensive income, changes in equity and cash flows for the years then ended, and the notes tothe financial statements, including a summary 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)

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
tickets2.

3.

We conducted an assessment on the rationality of the aircraft’s useful life based on aircraft
performance in the industry, historical experience of aircraft operations, and documents that
described the basis used by management to determine the useful life of its new aircraft.
2.

-2-

Some investments accounted for using the equity method and disclosure information in Note 14
were audited by other independent auditors, and our audit opinion is based solely on the audit
report of other independent auditors. As of December 31, 2018, the aforementioned investment
accounted for using the equity method was NT$1,805,921 thousand, representing 0.84% of total
assets. For the year ended December 31, 2018, comprehensive income (including share of profit orloss of subsidiaries, associates and joint ventures and share of other comprehensive income (loss)of subsidiaries, associates and joint ventures accounted for using the equity method) was
NT$890,786 thousand.

Other Matter - Audited by Other Independent Auditors

We reviewed the certificates issued by the aircraft and engine manufacturers, the suggested
operating cost of the aircraft manufacturer, and the historical experience of the maintenancedepartment to assess the rationale used to determine the allocated amount by management.

1.

The main audit procedures that we performed included the following:

Since the Company introduced A350-900 brand new aircraft this year, the allocation base wasadjusted. Moreover, the carrying amount of the flight equipment and the depreciation expense
recognized will be subject to the allocation of acquisition cost and the estimated useful life, whichwere made in accordance with management’s judgment. Therefore, we identified new aircraft
acquisition cost as a key audit matter.

In accordance with IAS 16 “Property, Plant and Equipment”, aircraft acquisition costs wereallocated into several significant components, which include airframe, airframe overhaul, engine,engine overhaul, landing gear, etc., and are depreciated over different useful lives. As of December
31, 2018, the carrying amount of the flight equipment was NT$133,222,119 thousand. Refer toNotes 4, 5 and 15 to the accompanying financial statements for related detailed information.

New Aircraft Acquisition Cost

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.

199

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 Company’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 Company’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 financial statements or,if such disclosures are inadequate, to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditors’ report. However, future events orconditions may cause the Company to cease to continue as a going concern.

2.

3.

4.

-3-

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 fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride 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:

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat 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 canarise 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 thesefinancial statements.

Auditors’ Responsibilities for the Audit of the Financial Statements

Notice to Readers-4-

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 usedin 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 financial statements shall prevail.

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.

March 20, 2019

Deloitte & Touche
Taipei, Taiwan
Republic of China

The engagement partners on the audit resulting in this independent auditors’ report are Chen-Hsiu
Yang and Jui-Chan Huang.

From the matters communicated with those charged with governance, we determine those mattersthat were of most significance in the audit of the financial statements for the year ended December
31, 2018 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 report because theadverse 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.

Those charged with governance, including the audit committee and supervisors, are responsible foroverseeing the Company’s financial reporting process.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Company to express an opinion on the financial statements.
We are responsible for the direction, supervision and performance of the audit. We remainsolely responsible for our audit opinion.

Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

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.

In preparing the financial statements, management is responsible for assessing the Company’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 to liquidate theCompany 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 inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud
or error.

Responsibilities of Management and Those Charged with Governance for the Financial
Statements

200

The accompanying notes are an integral part of the financial statements.

TOTAL

Total equity

EQUITY (Notes 20 and 26)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings
Total retained earnings
Other equity
Treasury shares$ 214,914,221

100

27

1
1
-

351,923
118,810
1,144,928
1,615,661
58,223(43,372)
57,081,572

25
1

73

48

13
27
1
4
3
-

25

1
8
1
5
2
7
1

100

80

54,209,846
1,241,214

157,832,649

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
11,739,299
2
268,901
4,445,900
15,335,005
596,000
2,946,455

102,652,815$$ 214,914,221

171,981,362

Total liabilities

-5-

20

42,932,859

6
69
1
1
2
1

4
4
2

9,280,662
298,311656,790
15,8108,451,892
46,154
3,157,864

83,366
13,158,355
149,029,054
2,047,448
979,708
4,561,346
2,122,085

9
1
-

%

$ 18,688,022
2,310,000
27,3542018
AmountTotal non-current liabilities

NON-CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - non-current (Notes 4, 7 and 32)
Derivative financial liabilities for hedging - non-current (Notes 4 and 32)
Bonds payable - non-current (Notes 4, 20, 26, 32 and 33)
Loans and debts - non-current (Notes 19, 32 and 34)
Contract liabilities - non-current (Notes 4 and 23)
Provisions - non-current (Notes 4 and 24)
Deferred tax liabilities (Notes 4 and 28)
Capital lease obligations - non-current (Notes 4, 21, 32 and 34)
Deferred revenue - non-current (Notes 4 and 23)
Accrued pension costs (Notes 4, 5 and 25)
Other non-current liabilities (Note 32)

Total current liabilities

CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - current (Notes 4, 7 and 32)
Derivative financial liabilities for hedging - current (Notes 4 and 32)
Financial liabilities for hedging - current (Notes 4 and 32)
Notes and accounts payable (Note 32)
Contract liabilities current (Notes 4 and 23)
Accounts payable - related parties (Notes 32 and 33)
Other payables (Notes 22 and 27)
Current tax liabilities (Notes 4 and 28)
Provisions - current (Notes 4 and 24)
Deferred revenue - current (Notes 4 and 23)
Bonds payable and put option of convertible bonds - current (Notes 4, 20, 26, 32 and 33)
Loans and debts - current (Notes 18, 32 and 34)
Capital lease obligations - current portion (Notes 4, 21, 32 and 34)
Other current liabilities (Note 32)

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 32)
Financial assets measured at cost - non-current (Notes 4, 10 and 32)
Investments accounted for using the equity method (Notes 4 and 14)
Property, plant and equipment (Notes 4, 15 and 34)
Investment properties (Notes 4 and 16)
Other intangible assets (Notes 4 and 17)
Deferred tax assets (Notes 4 and 28)
Other non-current assets (Notes 18, 21 and 32)

Total current assets

CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 32)
Derivative financial assets for hedging - current (Notes 4 and 32)
Financial assets at amortized cost (Notes 9 and 32)
Financial assets for hedging - current (Notes 4 and 32)
Receivables:
Notes and accounts, net (Notes 4, 11 and 32)
Accounts - related parties (Notes 32 and 33)
Other receivables
Current tax assets (Notes 4 and 28)
Inventories, net (Notes 4 and 12)
Non-current assets held for sale (Notes 4 and 13)
Other current assets (Note 18)

ASSETSBALANCE SHEETSDECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD.

57,023,237

206,092
1,458,313
1,664,405(107,641)(43,372)

54,709,846
799,999

154,894,755

99,969,391

926
6,994
21,350,000
61,907,978
7,352,194
38,946
596,000
1,818,265
6,158,744
739,344

54,925,364

8,655
77,639297,952
1,494,006
10,908,752
2
406,457
14,048,025
4,367,100
18,814,633
1,580,000
2,922,143$ 211,917,992$$ 211,917,992

173,984,296

64,177
11,551,369
142,265,548
2,047,448
989,327
4,974,941
12,091,486

37,933,696

8,044,940
510,588532,974
24,0968,610,958
426,553
3,219,735$ 16,563,559
293
-

2017
Amount

4
4
2

8
-

100

27

1
1
-

26
-

73

47

10
29
4
1
3
-

26

1
5
7
2
9
1
1

100

82

5
67
1
1
2
6

18

%

-6-

OTHER COMPREHENSIVE INCOME
Items that will not be reclassified subsequently to
profit or loss:
Gain on hedging instruments subject to basis
adjustments (Notes 4, 26 and 32)
Unrealized (loss) gain on investments in equity
instruments designated as at fair value throughother comprehensive income (Notes 4 and 26)
Remeasurement of defined benefit plans (Notes 4
and 25)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 28)

NET INCOME

INCOME TAX EXPENSE (Notes 4, and 28)

PROFIT BEFORE INCOME TAX

Total non-operating income and expenses

127,120(105,569)(674,905)(23,830)

23,884

1,790,361

525,270

2,315,631

468,064

-

-

-

-

-

1

-

1

-

1

1,918,922

1(1)

1,847,567

OPERATING PROFIT

7

8

92

100

%

420,416(559,230)(1,312,044)

10,802,269

OPERATING EXPENSES (Notes 4, 27 and 33)

NON-OPERATING INCOME AND EXPENSES
Other income (Note 27)
Other gains and losses (Notes 10, 13, 15 and 27)
Finance costs (Notes 10, 27 and 33)
Share of the profit of associates and joint ventures(Note 14)

12,649,836

137,614,956

COSTS (Notes 4, 12, 27 and 33)
GROSS PROFIT$ 150,264,792

REVENUE (Notes 4, 27 and 33)

2018
Amount

STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD.

-

(1)

-

-

2

-

2

(3)

1

(3)
(1)

5

8

13

87

100

%

109,687(Continued)(211,952)(645,219)--

2,208,066

880,137

3,088,203(4,269,911)

1,627,786

360,980(4,980,870)(1,277,807)

7,358,114

10,608,283

17,966,397

121,848,814$ 139,815,211

2017
Amount

201

$

$

-

-

75,454(18,193)

$
$

0.33
0.32

1,258,035

-7-

1

-

-

29,573(532,326)-%

34,140-

The accompanying notes are an integral part of the financial statements.

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 28)
Basic
DilutedTOTAL COMPREHENSIVE INCOME FOR THE
YEAR

Other comprehensive loss for the year, net ofincome tax

Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 26)
Cash flow hedges (Notes 4 and 26)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method (Notes 4 and 26)
Gain on hedging instruments not subject to basis
adjustment (Notes 4, 26 and 32)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 28)

2018
Amount

STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA AIRLINES, LTD.

$

$

$
$

-

-

-

-

1

(1)

%

(Concluded)

0.40
0.39

1,240,677(967,389)

42,744-(11,212)(134,857)(116,580)

2017
Amount--

Net income for the year ended December 31, 2017

Other comprehensive income (loss) for the year ended December 31, 2017,
net of income tax

Total comprehensive income (loss) for the year ended December 31, 2017

-

-

-

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

The accompanying notes are an integral part of the financial statements.

BALANCE AT DECEMBER 31, 2018

$ 54,209,846(500,000)-

Treasury shares retired-

Basis adjustments to gain on hedging instruments

54,709,846

Issuance of convertible bonds

BALANCE AT JANUARY 1, 2018 AS RESTATED

Effect of retrospective application and retrospective restatement

54,709,846-

BALANCE AT DECEMBER 31, 2017-

Difference between cost of the acquisition of subsidiaries and net value945-$ 54,708,901

Share Capital

Changes in capital surplus from investments in associates and joint
ventures accounted for using the equity method

Convertible bonds converted to ordinary shares

Compensation of deficit - capital surplus

BALANCE AT JANUARY 1, 2017

STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD.

202
$

$

1,241,214

30,607

-

-

-

-

630

-

-

409,978

799,999-

799,999

-

-

-

-

(64)

131

-

799,932

Capital Surplus$$

351,923

-

-

-

-

-

-

145,831---206,092-

206,092

-

-

-

-

-

-

(81,132)

287,224

Legal Reserve$$

118,810

-

-

-

-

-

-

118,810
-

-

-

-

-

-

-

-

-

-

-

-

(76,486)

76,486

Special Reserve

Retained Earnings(2,269)--157,618(157,618)

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

1,460,582(747,484)

2,208,066

-8-

$

$

UnappropriatedEarnings(Accumulated
Deflect)$$(9,664)--25,322

25,322

-

-

-

-

-

(34,986)-(34,986)(113,550)(113,550)

-

-

-

-

-

78,564

Exchange
Differences on
Translating
Foreign
Operations

$

$

-

-

-

-

-

-

-

-

-

-

-

(1,774)

1,774

60

60

-

-

-

-

-

1,714

Unrealized Gain
(Loss) on
Available-forsale Financial
Assets$$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)(106,415)(106,415)

-

-

-

-

-

31,986

Cash Flow
Hedges$$25,268--87,57987,579---12,118-(74,429)(74,429)

-

-

-

-

-

-

-

-

-

Gain (Loss) on
Hedging
Instruments$$(43,372)

469,393(469,393)

-

-

-

-

-

-

-

(43,372)-(43,372)

-

-

-

-

-

-

-

(43,372)

Treasury Shares
Held by
Subsidiaries$ 57,081,572-(469,393)

1,258,035(532,326)

1,790,361

630(1,193,670)

12,118409,978

57,063,874

40,63757,023,237

1,240,677(967,389)

2,208,066(2,269)

(64)

1,076

-

$ 55,783,817

Total Equity

203

-9-

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments for:Bad debt expenses
Depreciation expenses
Amortization expenses
Net loss on fair value changes of financial assets and liabilities held
for trading
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 (gain) 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
Impairment loss recognized on financial assets measured at cost
Impairment loss recognized on non-current assets held for sale
Changes in operating assets and liabilities
Financial assets held for trading
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
Financial assets at amortized cost - current
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Deferred revenue
Provisions
Other current liabilities
Accrued pension liabilities
Cash generated from operations
Interest received
Dividends received$(32,185)-

11,0769,580(271,309)(71,079)
266,338(591,043)(733,731)(305,161)
146,999
2,073,621
653,161(1,138,140)
157,417(703,821)
26,486,083
192,138
639,454(Continued)(101,105)(252,467)
642,423
690,579(343,681)
1,277,807
2,524,079(14,512)56,023
3,571,301(450,195)
368,992
623,01250,000288,598
1,312,044
2,566,045(13,888)
75,437(9,359)(1,260,344)
212,277(94,232)(225,553)(2,310,000)
62,151
878,219
89,678513,674
3,102,855(2,539,210)
10,515
99,13522,143,417
244,604
624,834

33,385(176,329)(9,564)(1,627,786)(5,839)(11,076)(274,189)(9,603)(1,918,922)
273,3083,088,203
50,00017,375,194
247,725$

50,00018,192,291
165,050

2,315,631

2017- 10 -

The accompanying notes are an integral part of the financial statements.

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESNet cash used in financing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term bills payable
Payments for buy-back of treasury shares
Proceeds from issuance of bonds payable
Repayments of bonds payable
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 ACTIVITIESAcquisition 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

Net cash generated from operating activities

Interest paid
Income tax paid

STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars)

2018

CHINA AIRLINES, LTD.

CHINA AIRLINES, LTD.

$ 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)(Concluded)$ 16,563,559

19,734,590(3,171,031)(68,245)(4,276,664)(900,000)
5,850,000(2,700,000)
30,380,000(36,947,007)
233,015(192,672)-(24,867,173)

380,850(107,935)
180,381(24,215,469)(121,951)(51,378)
103,593(13,798,867)(155,431)(15,689,250)(1,240,837)(953,218)
82,534
1,128,472

26,041,051$ (1,245,421)(31,203)2017(243,743)(2,561,987)
330,136
688,427

21,751,492$ (1,242,278)(19,085)

2018

204

- 11 -On the basis of the facts and circumstances that existed as of January 1, 2018, the Company has
performed an assessment of the classification of recognized financial assets and has elected not torestate prior reporting periods.

The requirements for classification, measurement and impairment of financial assets have been
applied retrospectively starting from January 1, 2018, and the requirements for hedge accounting
have been applied prospectively. IFRS 9 is not applicable to items that have already been
derecognized as of December 31, 2017.

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, withconsequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards.
IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets
and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

1) IFRS 9 “Financial Instruments” and related amendments

Except for the following, whenever applied, the initial application of the amendments to theRegulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs
endorsed and issued into effect by the FSC would not have any 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 and authorized for issue on
March 20, 2019.

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, 2018 and 2017, CADF and NDF
held a combined 44.03% and 43.63% of the Company’s shares. As of December 31, 2018 and 2017, theCompany had 12,418 and 12,654 employees, respectively.

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 FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD.

11,551,369

-

$

$

64,177-64,177

Reclassifications$$

47,5104,491

43,019Remeasurements$$

11,603,056

11,555,860

107,196

IFRS 9Carrying
Amount as ofJanuary 1, 2018

$

$

$

60

-

60

Retained
Earnings
Effect on
January 1,
201864,177$$47,4504,491

42,959Other
EquityEffect on
January 1,
2018$ 107,196

Carrying AmountIAS 39IFRS 9- 12 -IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers
and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number ofrevenue-related interpretations. Refer to Note 4 for related accounting policies.

2) IFRS 15 “Revenue from Contracts with Customers” and related amendmentse) In line with the equity adjustments above, the Company’s deferred tax liabilities increased by$6,873 thousand.

d) Except for the above, the remaining financial assets classified as loans and receivables
amounting to $26,095,060 thousand based on IAS 39 are classified as financial assets at
amortized cost under IFRS 9.

c) Mutual funds held by investments accounted for using the equity method previously classified
as available-for-sale under IAS 39 were classified mandatorily as at FVTPL (FVTPL) under
IFRS 9, because the contractual cash flows are not solely payments of principal and interest on
the principal outstanding and they are not equity instruments. The retrospective adjustment
resulted in a decrease of $60 thousand in other equity - unrealized gain (loss) on
available-for-sale financial assets and an increase of $60 thousand in retained earnings on
January 1, 2018.

b) Investment using equity method previously measured at cost have been classified as designatedas at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of$4,491 thousand was recognized in both investment using equity method and other equity unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

a) Investments in unlisted shares previously measured at cost under IAS 39 have been classified as
designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an
increase of $43,019 thousand was recognized in both financial assets at FVTOCI and other
equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

$ 11,551,369$

IAS 39Carrying
Amountas ofJanuary 1,
2018

Fair value through othercomprehensive
income (i.e.
FVTOCI) - equity
instruments

Measurement Category
IAS 39IFRS 9Financial assets
measured at cost

Equity instruments
Add: Financial assets measured atcost (IAS 39)
Investments using equity method

FVTOCI

Financial Asset

Equity securities

Financial Asset

The following table shows the original measurement categories and carrying amounts under IAS 39
and the new measurement categories and carrying amounts under IFRS 9 for each class of theCompany’s financial assets and financial liabilities as of January 1, 2018.

205

January 1, 2019

January 1, 2019

January 1, 2019
January 1, 2019 (Note 3)

January 1, 2019
January 1, 2019 (Note 2)

Effective Date
Announced by IASB (Note 1)- 13 -

Upon initial application of IFRS 16, the Company will elect to apply the guidance of IFRS 16 in
determining whether those 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 will
not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS
16.

Definition of a lease

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17, IFRIC 4 “Determining
whether an Arrangement contains a Lease ” and a number of related interpretations.

IFRS 16 “Leases”

Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting fromJanuary 1, 2019.

Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.

Annual Improvements to IFRSs 2015-2017 Cycle
Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”
IFRS 16 “Leases”
Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”
Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”
IFRIC 23 “Uncertainty over Income Tax Treatments”

New IFRSs

b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers
and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS),
Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsedby the FSC for application starting from 2019

In identifying performance obligations, IFRS 15 and the related amendments require that a good orservice is distinct if it is capable of being distinct (for example, the Company regularly sells it
separately) and the promise to transfer it is distinct within the context of the contract (i.e. the natureof the promise in the contract is to transfer each good or service individually rather than to transfer
a combined output). The Company chooses to apply retroactively IFRS 15 only for contracts thathave not yet been completed on the conversion date. Also, the revenue-related amount received
should be recognized as contract liabilities. Therefore, the previously classified deferred revenue current and non-current are reclassified to contract liabilities - current and non-current whichamounted to $14,048,025 thousand and $1,818,265 thousand, respectively, on January 1, 2018.

- 14 -The Company will 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 will apply to the leaseback portion. In addition, for assets currently accounted for as a saleand a finance lease under IAS 17, the Company will continue to amortize any gains on sales over thelease 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 will be accounted for as a financing transaction. If it
satisfies the requirements to be accounted for as a sale of an asset, the Company will recognize only theamount of any gain or loss which relates to the rights transferred to the buyer-lessor. Currently, theleaseback portion is classified as either a finance lease or an operating lease and accounted for
differently.

For leases currently classified as finance leases under IAS 17, the carrying amount of right-of-use assets
and lease liabilities on January 1, 2019 will be determined as the carrying amount of the leased assets
and finance lease payables as of December 31, 2018.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases
with the application of IAS 17. Lease liabilities will be 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 will be measured at an amount equal to the lease liabilities, adjusted by the amountof any prepaid or accrued lease payments. The Company will apply IAS 36 to all right-of-use assets.

The Company anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial
application of this standard recognized on January 1, 2019. Comparative information will not berestated.

Upon initial application of IFRS 16, the Company will recognize right-of-use assets, or investment
properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for
all leases on the standalone balance sheets except for those whose payments under low-value andshort-term leases will be recognized as expenses on a straight-line basis. On the standalone statementsof comprehensive income, the Company will present the depreciation expense charged on right-of-use
assets separately from the interest expense accrued on lease liabilities; interest is computed using theeffective interest method. On the standalone statements of cash flows, cash payments for the principal
portion of lease liabilities will be classified within financing activities; cash payments for the interest
portion will be classified within operating activities. Currently, payments under operating lease
contracts, including property interest qualified as investment properties, are recognized as expenses on astraight-line basis. Cash flows for operating leases are classified within operating activities on thestandalone statements of cash flows. Leased assets and finance lease payables are recognized forcontracts classified as finance leases.

The Company as lessee

206

$

$

$

Total effect on assets

Lease liabilities - current
Lease liabilities - non-current

Total effect on liabilities--

1,076,675

699,098
377,577-(699,098)(215,426)
69,988,735
189,808

8,746,080
60,517,939$ 69,264,019$$ 69,264,019$

Adjustments
Arising from
InitialApplication
162,151
69,988,735
189,808-

8,746,080
60,517,939-$ 69,264,019$$ 70,340,694$

Adjusted
Carrying
Amount as ofJanuary 1, 2019- 15 -

Except for the above impact, as of the date the standalone financial statements were authorized for issue,
the Company is continuously assessing the possible impact that the application of other standards andinterpretations will have on the Company’s financial position and financial performance and will
disclose the relevant impact when the assessment is completed.

Note 3: The amendment is applied for the annual period beginning after January 1, 2020.

- 16 -

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:

Note 2: Business combinations that began after January 1, 2020 and acquisition of assets after the
aforesaid date, are subjected to the amendment.

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 Liabilitiesc. 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.

January 1, 2021
January 1, 2020 (Note 3)

January 1, 2020 (Note 2)
To be determined by IASB

Effective Date
Announced by IASB (Note 1)

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.

c. Level 3 inputs are unobservable inputs for an asset or liability.

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:

Basis of Preparation

The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

Statement of Compliance

4. SIGNIFICANT ACCOUNTING POLICIESNote 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 a Business”
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 and IAS 8 “Definition of Materiality”

New IFRSs

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Except for the above impact, as of the date the standalone financial statements were authorized for issue,
the Company is continuously assessing the possible impact that the application of other standards andinterpretations will have on the Company’s financial position and financial performance and will
disclose the relevant impact when the assessment is completed.

$

Prepaid rent
Refundable deposits
Right-of-use assets
Other financial assets

Carrying
Amount as ofDecember 31,
2018

The Company will not make any adjustments for leases in which it is a lessor and will account for thoseleases with the application of IFRS 16 starting from January 1, 2019.

The Company as lessor

207

a. Investment in subsidiaries- 17 -

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- 18 -

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.

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).

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.

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.

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.

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.

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for: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;

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.

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

208

Freehold land is not depreciated.

- 19 -

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
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 the investment 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.

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.

- 20 -

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

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.

209- 21 -

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. The financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; andFinancial 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 33.

- 22 -

Available-for-sale financial assets are measured at fair value. Changes in the carrying amountsof available-for-sale monetary financial assets (relating to changes in foreign currency exchange
rates, interest income calculated using the effective interest method and dividends onavailable-for-sale equity investments) are recognized in profit or loss. Other changes in the
carrying amount of available-for-sale financial assets are recognized in other comprehensive
income and will be reclassified to profit or loss when such investments are disposed of or are
determined to be impaired.

Available-for-sale financial assets are non-derivatives that are either designated asavailable-for-sale or are not classified as loans and receivables, held-to-maturity investments orfinancial assets at FVTPL.

b) Available-for-sale financial assets

Financial assets at FVTPL are stated 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 32.

Financial assets are classified as at FVTPL when such financial assets are either held for tradingor designated as at FVTPL.

a) Financial assets at FVTPL

Financial assets are classified into the following categories: Financial assets at FVTPL,
available-for-sale financial assets, and loans and receivables.

a) Financial assets at FVTPL

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.

2017

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

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.

Financial assets are classified into the following categories: financial assets at FVTPL, financial
assets at amortized cost, and investments in equity instruments at FVTOCI.

20181) 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 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.

210- 23 -The Company recognizes an impairment gain or loss in profit or loss for all financial instrumentswith a corresponding adjustment to their carrying amounts through a loss allowance account, except
for investments in debt instruments that are measured at FVTOCI, for which the loss allowance isrecognized in other comprehensive income and does not reduce the carrying amounts of thefinancial assets.

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 (i.e. ECLs) for trade receivables
and other 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, the credit risk on a financial instrument has not increased significantly since initialrecognition, the Company measures the loss allowance for that financial instrument at an amountequal 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.

20182) Impairment of financial assets

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.

Loans and receivables (including trade receivables, cash and cash equivalents, other financial
assets and other receivables) are measured at amortized cost using the effective interest method,at amortized cost less any impairment, except for short-term receivables when the effect of
discounting is immaterial.

c) Loans and receivables

Available-for-sale equity investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured and derivatives that are linked to and must be
settled by delivery of such unquoted equity investments are measured at cost less any identified
impairment loss at the end of each reporting period and presented in a separate line item asfinancial assets measured at cost. If, in a subsequent period, the fair value of the financial assets
can be reliably measured, the financial assets are remeasured at fair value. The difference
between the carrying amount and the fair value is recognized in other comprehensive income on
financial assets. Any impairment losses are recognized in profit and loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the
Company’s right to receive the dividends is established.

- 24 -

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial
assets, with the exception of trade receivables and other receivables, where the carrying amount isreduced through the use of an allowance account. When trade receivables and other receivables are
considered uncollectible, they are written off against the allowance account. Subsequent recoveriesof amounts previously written off are credited against the allowance account. Changes in the
carrying amount of the allowance account are recognized in profit or loss except for uncollectible
trade receivables and other receivables that are written off against the allowance account.

For financial assets that are measured at cost, the amount of the impairment loss is measured as thedifference between such an asset’s carrying amount and the present value of the estimated future
cash flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss will not be reversed in subsequent periods.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit orloss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognized in other comprehensive income. In respect of available-for-sale debt securities,
impairment loss is subsequently reversed through profit or loss if an increase in the fair value of theinvestment can be objectively related to an event occurring after the recognition of the impairment
loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses
previously recognized in other comprehensive income are reclassified to profit or loss in the period.

For all other financial assets, objective evidence of impairment could include significant financial
difficulty of the issuer or counterparty, breach of contract such as a default or delinquency ininterest or principal payments, it becoming probable that the borrower will enter bankruptcy or
financial re-organization, or the disappearance of an active market for those financial assets becauseof financial difficulties.

For any available-for-sale equity investments, a significant or prolonged decline in the fair value ofthe security below its cost is considered to be objective evidence of impairment.

For financial assets at amortized cost, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment wasrecognized, the previously recognized impairment loss is reversed through profit or loss to theextent that the carrying amount of the investment (at the date the impairment is reversed) does notexceed what the amortized cost would have been had the impairment not been recognized.

For a financial asset at amortized cost, the amount of the impairment loss recognized is thedifference between the asset’s carrying amount and the present value of its estimated future cash
flows, discounted at the financial asset’s original effective interest rate.

For financial assets at amortized cost, such as trade receivables and other receivables, such assets
are assessed for impairment on a collective basis even if they were assessed not to be impaired
individually. Objective evidence of impairment for a portfolio of receivables could include theCompany’s past experience with collecting payments, an increase in the number of delayed
payments in the portfolio past the average credit period of 60 days, as well as observable changes innational or local economic conditions that correlate with defaults on receivables.

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end ofeach reporting period. Financial assets are considered to be impaired when there is objective
evidence, as a result of one or more events that occurred after the initial recognition of the financial
assets, that the estimated future cash flows of the investments have been affected.

2017

211

- 25 -

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

All financial liabilities are measured at amortized cost using 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

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.

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- 26 -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.

Provisions

Before 2017, hedge accounting was discontinued prospectively when the Company revoked the designatedhedging relationship; when the hedging instrument expired or was sold, terminated, or exercised; or when
the hedging instrument no longer met the criteria for hedge accounting. Starting from 2018, the Company
discontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; forinstance, when the hedging instrument expires or is sold, terminated or exercised. The cumulative gain orloss on the hedging instrument that has been previously recognized in other comprehensive income fromthe 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, the gain 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

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 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 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.

212

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 Company satisfies a performance obligation.

- 27 -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

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.

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.

The Company as lessee

a. Financial leases

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.

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







When 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.

- 28 -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.

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 Company 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 Company 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

This transaction does not actually dispose of the assets. The accounting treatment used is to treats
the transaction as if it did not occur, and the assets are continuously recognized at the book value ofthe asset before sale.

1) Financial leases

213

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.

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.

- 29 -

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

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 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.

Share-based Payment Arrangements- 30 -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

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.

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.

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

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.

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

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

214$ 16,563,559

46,287
8,284,609$ 18,688,022$

3,098,063
5,134,600

51,264
6,367,527

201712,269,231-$

December 31- 31 -

Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

2017
0%-2%
0.59%-4.2%
0.38%-2.2%

December 31

0%-1.90%
0.60%-3.55%-

2018

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

2018

Buy forward contracts

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.

6. CASH AND CASH EQUIVALENTS

December 31, 2017

Defined Benefit Obligations
NTD/USD

NTD/USD

Currency

2018.01.13-2019.01.31

2019.01.2-2019.01.31

Maturity Date

NTD194,030/USD6,500

NTD30,923/USD1,000

Notional Amount(In Thousands)$ 83,366

21,746$ 61,620

December 31,
2018- 32 -

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. These investments in equity instruments were classified as available-for-sale andfinancial assets measured at cost under IAS 39. Refer to Notes 3 and 10 for information relating to theirreclassification and comparative information for 2017.

Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

Non-current

Investments in Equity Instruments

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 2018

Buy forward contracts

December 31, 2018

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.

8,655
926

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:$$

Depreciation of Property, Plant and Equipment - Flight Equipment

221
-

2017

Derivative financial instruments (not under hedge accounting)Current
Non-current$$

December 31

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.

2018
Financial liabilities held for trading

7. FINANCIAL INSTRUMENTS AT FVTPL (FVTPL)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.

215$ 2,310,000

December 31,
2018$ 64,177$ 64,177$ 63,704
473

December 31,
2018

Accounts receivable
Less: Allowance for impairment loss

Accounts receivable

Notes receivable- 33 -

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE$ 8,044,940

361,910$ 9,280,662$

7,825,667(142,637)
7,683,030

596,739

2017

8,875,002(191,079)
8,683,923$

2018

December 31

On the reporting date, the above unlisted share investments held by the Company were measured at cost
after deducting impairment losses because their range of reasonable fair value estimates were significant
and unable to be reasonably evaluated. Thus, the management considered their fair values unable to bemeasured.

Due to the permanent decrease in the value of Jardine Aviation Service held by the Company, the Company
recognized an impairment loss of $56,023 thousand in June 2017, which was classified as other gains andlosses.

Classified according to financial asset measurement categories
Available-for-sale financial assets

Unlisted ordinary shares
Unlisted preference shares

10. FINANCIAL ASSETS MEASURED AT COST - 2017

The interest rates for time deposits with original maturities of more than 3 months ranged from 0.40% to
0.68% as of the end of the reporting period. The time deposits were classified as other financial assets under
IAS 39. Refer to Notes 3, 6 and 18 for information relating to their reclassification and comparative
information for 2017.

Time deposits with original maturities of more than 3 months (e)Current

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

Amortized cost

$ 7,290,761(1,149)0.06%$ 7,291,910

Gross carrying amount
Loss allowance (lifetime
ECLs)

Not Past Due
Expected credit loss rate

December 31, 2018$$33,023(3,796)36,8193.67%

31 to 60 Days

- 34 -$ 1,330,830(699)$ 1,331,529

0.06%

Up to 30 Days$$

29,309(12,611)41,92021.78%

61 to 90 Days

$

$

-

(172,824)

172,824

97.5%

Over 90 Days

$ 8,683,923(191,079)$ 8,875,002

Total

The following table details the loss allowance of trade receivables based on the Company’s provision
matrix.

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.

For the year ended December 31, 2018

216
$ 191,079

Balance at December 31, 2018

$ 7,970,618
569,294
71,046$ 8,610,958$ 7,669,834
554,084
227,974$ 8,451,892

2017- 35 -The operating costs for the years ended December 31, 2018 and 2017 included losses from inventory
write-downs of $371,275 thousand and $324,447 thousand, respectively.

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services

2018

December 31$ 142,637

Ending balance

12. INVENTORIES$ 147,204
50,000(54,567)

Beginning balance
Impairment loss recognized on receivables
Amounts written off during the current period

For the Year
Ended
December 31,
2017

Movement in the allowance for impairment loss recognized on notes receivable and trade receivables wereas follows:

The Company applied the same credit policy in 2018 and 2017.

December 31, 2017

$ 142,637
142,637
50,000(2,555)997

For the Year
Ended
December 31,
2018

Balance at January 1, 2018 per IAS 39
Adjustment on initial application of IFRS 9
Balance at January 1, 2018 per IFRS 9
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses

The movements of the loss allowance of trade receivables were as follows:$$

46,154-2017$ 426,553

117,223$ 309,330

December 31

46,1542018- 36 -

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.

Unlisted companies

a. Investment in subsidiaries

Investments in subsidiaries
Investments in associates
Investments in jointly controlled entities

$

2017

$

915,135
1,522,696
1,211,739
1,185,323
1,339,450
654,104
478,933
450,600
435,965
259,459
83,014
1,231,548(Continued)

2017$ 11,551,369

9,827,299
793,477
930,593

December 31

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

2018$ 13,158,355$

December 31$ 11,686,577
497,362
974,4162018

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

In 2018 and 2017, the Company recognized impairment losses of $75,437 thousand and $3,571,301
thousand, respectively. In 2018 and 2017, the Company recognized disposal gains and losses of $(368,992)
thousand and $252,467 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 isclassified 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.

Aircraft held for saleLong-term equity investments held for sale - Asian Compressor
Technology Services

13. NON-CURRENT ASSETS HELD FOR SALE

217

$

$

26,946
26,0596,996
662,817$ 11,686,577$

9,827,299(Concluded)

25,90425,992
7,437
-

2017

Kaohsiung Catering Services was list as a subsidiary on March 7, 2018.

20%(Note)

December 31

20%
36%

2017

6,402
6,402

$

$

24,47086,757
88,943
21,819$ 221,989$

2017

The share of profit or loss

- 37 -$ 1,628,453

2018$ 1,146,623

2017

The share of profit or loss of subsidiaries recognized under the equity method was as follows:

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.

- 38 -In October 2017, the Company signed a contract with a non-related party, MB Aerospace, to sell all of
its holdings of Asian Compressor Technology Services, and reclassified it as Non-current assets held
for sale at book value. The transaction was completed and all payments were settled in January 2018.
The total transaction price was $471,132 thousand, and a disposition gain of $353,909 thousand wasrecognized.

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics

2018

The recognized investment income of associates accounted for using the equity method were as
follows:

Note:

China Aircraft Services
Kaohsiung Catering Services

2018

The Company increased its investment in Taiwan Aircraft Maintenance and Engineering Co., Ltd., withpayments of $490,000 thousand, $700,000 thousand in April and November 2017, for the purpose ofbuilding hangars.

90%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
51%
100%
25%
-

2017

$ 793,477

In August 2017, the Company sold all of its holdings of Science Park Logistics to a non-related party,
HCT Logistics Co., Ltd. The agreed upon price was $380,850 thousand, and a disposal gain of$101,166 thousand was recognized.

90%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
51%
100%
25%
54%

December 31$ 497,362

2017$ 493,077
300,400

December 31$ 497,362-

2018

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
Kaohsiung Catering Services

Unlisted companies

b. Investments in associates

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

2018

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by
the Company were as follows:

Yestrip
Dynasty Holidays
Global Sky Express
Kaohsiung Catering Services

2018

December 31

218$ 930,593$ 974,416

2017$ 756,965
171,229
2,399

December 31$ 805,157
166,901
2,358

2018

51%
55%
49%

December 31

51%
55%
49%

2017

$ 235,871
23,354(51)$ 259,174$ 267,413
16,695(41)$ 284,067

2017- 39 -

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, 2018 and 2017 were all independently audited,
except of China Aircraft Services and NORDAM Asia Limited. However, the management determinedthat 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 $(75,996) thousand and $(223,164) thousand in 2018 and 2017, respectively.

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2018

December 31

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 Company in December 2017 to provide thrust reversers and composite repair
services in Asia under the NORDAM brand. NORDAM has filed for bankruptcy reorganization in the
USA on July 22, 2018 to solve the business disputation with, their cooperative partner, so theircompany operation was not impact.

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

2018

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:

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

The investments in jointly controlled entities were as follows:c. Investments in jointly controlled entities

$

$

$

$

$

$

$

$

-

-

193,013

193,013---

193,013

193,013-

Freehold Land

$

$

$

$

$

$

$

$

(3,880,602)(3,717,055)(172,873)
9,326-

7,335,537

7,304,328
41,016(10,349)542(3,717,055)(3,550,002)(170,979)
3,926-

7,304,328

7,277,753
32,517(5,942)-

Buildings$ (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$ (135,671,634)$ (135,129,522 )(15,017,928)
4,022,065(690,579)
11,144,330$ 261,114,631$ 246,308,549
662,706(4,549,486)
18,692,862

FlightEquipment- 40 -

Reclassification is mainly from prepaid equipment.

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

Balance at December 31,
2017

Balance at January 1,
2017
Depreciation expense
Disposals
Impairment losses
Reclassification

Accumulated depreciationand impairment

Balance at December 31,
2017

Balance at January 1,
2017
Additions
Disposals
Reclassification

Cost

15. PROPERTY, PLANT AND EQUIPMENT

25,594,436

28,307,255(479,936)(2,232,883)

25,211,677

25,594,436(1,811,222)
1,428,463$ (14,074,608)$ (13,613,023)(1,993,631)
1,532,046-$$$ (13,613,023)$ (15,347,140)(1,889,207)
619,775
3,003,549$$

Equipment
under FinanceLeases

$

$

$

$

$

$

$

$

(5,318,708)(5,102,584)(293,769)
89,841(12,196)

6,340,546

6,163,436
212,288(108,752)
73,574(5,102,584)(5,014,501)(297,080)
200,761
8,236

6,163,436

6,076,227
257,995(211,216)
40,430

Others$ (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$ (158,104,296)$ (159,041,165)(17,375,194)
4,846,527(690,579)
14,156,115$ 300,369,844$ 288,162,797
953,218(5,246,580)
16,500,409

Total

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.

219

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

2017- 41 -

The fair value of the investment properties held by the Company was $2,473,771 thousand as of December
31, 2018 and 2017, respectively. 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

2018

The investment properties (land) held Company, located in Nankan, were leased to others.

Carrying amount
Investment properties

16. 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 34 for the carrying amounts of property, plant and equipment pledged by the Company.

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 and$690,579 thousand in 2018 and 2017, respectively.

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:$ 2,060,785(916,027)(165,050)(916,027)(668,302)(247,725)$ (1,081,077)

$

$

$

Accumulated
Amortization

$

$

$

$

2,122,085

223,745
1,501,429
377,577
19,334

3,157,864$$

290,6622,549,376
317,826

3,219,735

315,372
2,391,132
513,2312017$ 12,091,486$ 10,578,892
1,069,595
424,196
18,803$$

December 31

$

2018

- 42 -The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A350-900 aircraft. For details on the A350-900 aircraft purchase contracts, refer to Note 35.

Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Other financial assets

Non-current

Temporary payments
Prepayments
OthersCurrent

18. OTHER ASSETS

979,708

989,327
155,431(165,050)

989,327$ 1,115,101
121,951(247,725)

Net Value

The above items of other intangible assets are amortized on a straight-line basis over 2-10 years.

Balance at December 31, 2018

$ 1,905,354
155,431-$ 1,905,354

Balance at December 31, 2017
Balance at January 1, 2018
Additions
Amortization expense$ 1,783,403
121,951-

Computer
Software Costs
Balance at January 1, 2017
Additions
Amortization expense

17. OTHER INTANGIBLE ASSETS

220
0.92%-1.56%$ 61,907,978$ 56,827,738
0.92%-1.46%

26,100,000
37,89780,722,611
18,814,633

30,300,000
58,132
72,162,743
15,335,005

2017$ 23,949,000
30,711,508

December 31

7,749,000
34,171,875

$

2018

2007/5/242030/4/25

2017
2007/5/242029/11/9

December 31- 43 -

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
Convertible bonds - fifth-time issue
Convertible bonds - sixth-time issue

20. BONDS PAYABLE

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

8,200,000
5,000,000
5,000,000
2,350,000
3,500,000
1,667,100
25,717,100
4,367,100

2017$ 21,350,000$

December 31$ 28,773,710

$

2018

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until December 2021, were used by the Company to guarantee commercial paper
which it issued. The commercial paper was issued at discount rates of 1.0693%-1.2960% in 2017 and
0.9983%-1.2897% in 2016.

Periods

2018

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 buildings, machinery equipment and flightequipment, refer to Note 34.

Interest rates

Less: Current portion

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountLong-term Borrowings

19. BORROWINGS

Five-year private unsecured bonds - issued
at par in January 2013; repayable in
January 2017 and 2018; 1.6% interestp.a., payable annually
Seven-year private unsecured bonds issued at par in January 2013; repayable
in January 2019 and 2020; 1.85% interestp.a., payable annually
Five-year unsecured bonds - issued at par in
May 2016; repayable in May 2020 and2021; 1.19% interest p.a., payableannually
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., payableannually
Seven-year private unsecured bonds issued at par in May 2017; repayable ondue date; interest of 1.75% p.a., payableannually
Three-year private unsecured bonds - issued
at par in October 2017; repayable on due
date; interest of 1.14% p.a., payableannually
Five-year private unsecured bonds - issued
at par in October 2017; repayable in
October 2021 and 2022; 1.45% interestp.a., payable annually
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 in November 2022 and 2023;
1.45% interest p.a., payable annually
Five-year convertible bonds - issued at
discount in December 2013; repayable inlump sum upon maturity; 1.8245%
discount rate p.a.
Five-year convertible bonds - issued at
discount in January 2018; repayable inlump sum upon maturity; 1.3821%
discount rate p.a.

Category

Related issuance conditions were as follows:

Principal 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 annually

2016.09.272021.09.27

2017.05.192024.05.19

Principal repayable in
October of 2021 and2022; indicator rate;
payable annuallyPrincipal repayable inNovember of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable inNovember of 2022 and2023; indicator rate;
payable annually
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

2017.10.122022.10.12- 44 -

2018.01.302023.01.30

2013.12.262018.12.26

2018.11.302025.11.30

2018.11.302023.11.30

Principal repayable on due
date; indicator rate;
payable annually2017.10.122020.10.12

2017.05.192020.05.19

2016.05.262021.05.26

2013.01.172020.01.17

Principal repayable in
January of 2017 and2018; indicator rate;
payable annuallyPrincipal repayable in
January of 2019 and2020; indicator rate;
payable annuallyPrincipal repayable in May
of 2020 and 2021; interest
p.a. payable annually

Conditions

2013.01.172018.01.17

Period

-

-

1.45

1.32

1.45

1.14

1.75

1.20

1.08

1.19

1.85

1.6

Rate
(%)

221

$ 5,481,379

Liability component at the date of issuance- 45 -

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 August 14, 2018, the conversion price was adjusted to NT$12.9.

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:$ 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.

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 July 31, 2016, there was adjustment the conversion price to NT$11.64, 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:

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
standalone financial statements.

1.0617%1.1317%$ 2,176,000$ 1,580,000
596,000$ 2,176,000$ 1,580,000
596,0002017- 46 -

As of December 31, 2018 and 2017, the refundable deposits paid by the Company under operating lease
contracts were $215,425 thousand and $208,995 thousand, respectively. Part of the refundable deposits
is secured by credit guarantees. The credit guarantees were $1,437,707 thousand and $1,394,791
thousand, respectively.

The rental rates stated in the aircraft lease agreements are fixed or floated. If the agreed-upon rental rate
is floating and will be revised monthly or semiannually. Subleasing is not allowed for all the leasearrangements. As of December 31, 2017, the Company has rented eleven A330-300 aircraft, fifteen
737-800 aircraft and ten 777-300ER aircraft under operating contracts; the lease terms range from 8 to
12 years.

The Company rented planes, headquarters, and hangars under various operating lease contracts expiring
on various dates until May 2028. The Company does not have a bargain purchase option to acquire theleased planes and hangars at the expiration of the lease periods.

b. Operating leases (including sale-leasebacks - operating leases)

As of December 31, 2017, the Company had leased A330-300 aircraft, totaling three aircraft, undersale-leaseback finance leases. The lease terms are from June 2006 to April 2019. During the lease term,
the Company retained all risks and rewards attached to the aircraft and engines and enjoyed the same
substantive rights as were enjoyed prior to the transaction. Interest rate underlying all obligations underfinance leases were floated. Therefore, the minimum lease payments under the sale-leaseback aircraft
contracts are not inclusive of interest expense.

1.0680%596,000$
Interest rates

596,000-$

Current
Non-current

596,000

596,000$$

December 31

Present value of minimum lease payments

Within one year
Later than one year and no later than five years

Minimum lease payments - flight equipmenta. Sale-leasebacks - finance leases

2018$ 5,602,022

Liability component at the date of issuance

21. LEASING$ 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.

222$ 10,145,139
39,313,550
26,841,927$ 76,300,616$ 68,174,292

3,571,314
1,089,125
960,138
260,179
2,053,442
914,171484,341
2,406,589

3,243,742
1,089,306
842,845
290,9022,332,644
659,454407,109
2,042,750$ 10,908,752

$

2017

9,989,732

2,489,950
16,479,196

2,450,702
13,415,588$ 14,048,025
1,818,265$ 15,866,290$ 17,065,481
1,903,665$ 18,969,146$ 15,866,290$

December 31
2018
2017
Contract
Deferred
Liabilities
Revenue$ 18,969,146$$

December 31$ 11,739,299

$

2018

$ 10,024,963

For the Year Ended December 31
2018
2017

- 47 -

Amendments to IFRS 15 on January 1, 2018, the related account of deferred revenue was reclassified ascontract liabilities.

Current
Non-current

Frequent flyer programs
Advance ticket sales

23. CONTRACT LIABILITIES/DEFERRED REVENUE

Fuel costs
Ground service expenses
Repair expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

22. OTHER PAYABLES

Minimum lease payments

2017

9,943,373
38,789,047
19,441,872$

December 31

The lease payments recognized in profit or loss for the current period are as follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

2018

The minimum lease payments in the future for the non-cancelable operating lease commitments are as
follows:

406,457
7,352,194$ 7,758,651$$ 7,758,651$ 7,758,651
2,566,045(2,539,210)
213,529$ 7,999,015

Balance at December 31, 2017
Balance at January 1, 2018
Additional provisions recognized
Usage
Effect of exchange rate changes
Balance at December 31, 2018

- 48 -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

25. RETIREMENT BENEFIT PLANS$ 6,770,951
2,524,079(1,138,140)(398,239)

Balance at January 1, 2017
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.

$ 7,999,015

268,901
7,730,114$

Current
Non-current

2017$ 7,758,651

December 31$ 7,999,015

2018
Operating leases - aircraft

24. PROVISIONS

223

Balance at January 1, 2017
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 - 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
Balance at December 31, 2017
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 - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income(61,568)(61,568)

15,362
15,362(1,482,710)
690,295(5,797,479)(56,995)(56,995)(168,987)(168,987)

832,125
126,826
958,951

372,284
257,573
629,857(690,295)(118,494)
11,956,223
1,263,193
116,231
1,379,424

283,774
560,118
843,892- 49 -$ (4,958,858)

Fair Value ofthe Plan Assets$ 11,176,204

Present Valueof the Defined
BenefitObligation

Movements in net defined benefit liabilities (assets) were as follows:$

Net defined benefit liabilities

6,932,783$ 13,117,255(6,184,472)

Present value of defined benefit obligation
Fair value of plan assets

2018

2017

6,158,744$

283,774
560,118
674,905
Continued)(168,987)

1,263,193
59,236
1,322,429(118,494)
6,158,744

372,284
257,573645,219(1,482,710)-

15,362

832,125
65,258897,383

6,217,346

Net Defined
BenefitLiabilities(Assets)$$ 11,956,223(5,797,479)

December 31

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as
follows:

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.

-(174,390)
9,589$ (6,184,472)$ (1,058,494)
897,483(897,483)$ 13,117,255$

Fair Value ofthe Plan Assets$

6,932,783(Concluded)(174,390)
9,589$ (1,058,494)-

Net Defined
BenefitLiabilities(Assets)

0.93%
1.00%

2017
1.01%
1.00%

December 31

Discount rate
0.5% increase
0.5% decrease
Expected rate of salary increase
0.5% increase
0.5% decrease- 50 -$ 557,651$ (523,509)$ 601,326$ (563,743)

2017$ (534,890)$ 580,412

December 31$ (576,271)$ 626,381

2018

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 increase2018

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:

Balance at December 31, 2018

Contributions from the employer
Benefits paid
Payment to employees direct from theemployer
Effect on income tax

Present Valueof the Defined
BenefitObligation

224
6,000,000$ 60,000,000$ 54,209,846

2017
6,000,000$ 60,000,000$ 54,709,846

December 31

10 years$ 688,096

2017

$

$

$ 1,241,214

December 31

315,1143,303
33,513
11,747955
409,978
466,604$2018

799,999

318,020
2,673
11,747955
146,589
320,0152017- 51 -

The capital surplus from long-term investments and employee shares options expired and dividends
distributed to subsidiaries may not be used for any purpose, expect for offsetting a deficit. As for capitalsurplus 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
Gain on sale of treasury shares held by subsidiaries
Retirement of treasury shares
Expired employee share options
Long-term investments
Bonds payable equity component
Othersb. Capital surplus

For the years ended December 31, 2017, the Company issued the 5th domestic unsecured convertible
bonds, and holders of such bonds amounting to $1,100 thousand applied for conversion, for which 95
thousand of the Company’s ordinary shares were exchanged. In accordance with the law, the Company
may apply for a change of registration after issuing new shares.

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued

Ordinary sharesa. Share capital

2018

9.8 years

The average duration of the defined benefit obligation

26. EQUITY$ 722,820

December 31

The expected contributions to the plan for the next year

2018

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.

$

145,831
118,810
1,193,670$0.2181820086

Dividends Per
Share (NT$)$

114,493
1,136,278$0.20960737

Dividends Per
Share (NT$)- 52 -

The appropriation of earnings for 2018 shall be resolved in the shareholders’ meeting to be held on
June 25, 2019.

Company undistributed special reserve of $105,844 thousand.

Legal reserve
Cash dividends

Appropriationof Earnings

The appropriation of earnings for 2018 shall be resolved in the board of directors meeting to be heldon March 20, 2019. The appropriation and dividends per share were as follows:3) Appropriation of earnings in 2018

Legal reserve
Special reserve
Cash dividends

Appropriationof Earnings

The appropriation of earnings for 2017 shall be resolved in the board of directors meeting to be heldon March 22, 2018. The appropriation and dividends per share were as follows:

2) Appropriation of earnings and dividends per share in 2017

The legal reserve of $81,132 thousand and special reserve of $76,486 thousand used to offset
deficits was resolved by the shareholders in their meeting on June 22, 2017.

1) Appropriation of earnings in 2016

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.

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. 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.

c. Appropriation of earnings and dividend policy

225

60

(113,550)$ (34,986)

Balance at December 31,
2017

-

-

-

-

-

-

-

-

-

-

(3,188)

1,198(6,828)25,322-(9,664)

Balance at December 31,
2018
$

$

$

$

42,619-268(1,209)547

24,760(23,830)---

42,35142,351

-

-

--

-

-

-

-

-

Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI- 53 ---

34,140$-(34,986)$(1,774)

1,774

-

$

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$ (34,986)

60-(1,619)22,926

1,774

-

-

$

-

1,714

-

$

-

78,564(134,857)$

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsBalance at January 1,
2017
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
Share of profit ofassociates accounted
for using equity
methodEffects of income tax
Other comprehensive
income recognized in
the period

Exchange
Differences on
Translating
Foreign
Operations

The movement of other equity items is as follows:d. Other equity items(106,415)(9,653)
19,818

166,869(283,449)-

31,986

$

-

-

-

-

-

-

-

-

-

-

74,429$ (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)$ (107,641)(219,905)(11,212)42,744

166,869(283,449)(134,857)$ 112,264

Total

-

Number of shares, December 31, 2017

2,075
814

2,075
814

$ 33,654$ 24,169
9,485$ 31,777$ 22,821
8,956

Carrying
Amount

2,889

2,889
-

2,889

2,889
-

Company’s
Shares Held by
Its Subsidiaries$ 33,654$ 24,169
9,485$ 31,777$ 22,821
8,956

Market Value

2,889

2,889
-

2,889

2,889
50,000(50,000)

Total- 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, 2017

Mandarin Airlines
Hwa Hsia

December 31, 2018

Shares(In Thousands)-

Number of shares, January 1, 2017
Addition 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

Treasury shares are the Company’s shares held by its subsidiaries, as of December 31, 2018 and 2017
were as follows:(Shares in Thousands)e. Treasury shares

226$ 139,815,211$ 150,264,792$ 360,980$ 420,416(273,308)(368,992)
11,076450,195
10,812(75,437)(50,000)(263,576)(559,230)

$

$

5,839
252,467(33,385)
101,105
4,920(3,571,301)(690,579)(56,023)(993,913)$ (4,980,870)$

For the Year Ended December 31
2018
2017

$ 176,329
32,332
9,564
142,755$ 274,189
11,2009,603
125,424

For the Year Ended December 31
2018
2017

$ 90,560,375
42,970,102
6,284,734$ 94,248,291
49,422,018
6,594,483

For the Year Ended December 31
2018
2017

- 55 -

After consulting with the lawyers and considering the cost of litigation, the Company settled with theplaintiff in the amount of US$19,500 thousand, and the settlement was recognized in 2017 financial
statement. The settlement funds will be divided into four-phase payments in three years.

The Company has been named as a defendant, together with other airline members of the Association ofAsia Pacific Airlines, in a civil class action lawsuit filed at the US Northern District Court of California
by a group of passengers who alleged that there was an antitrust violation in December 2007.

(Loss) gain on disposal property, plant and equipment(Loss) gain on Non-current assets held for sale
Net loss on financial assets as held for trading
Gain (loss) on disposal of investment
Gain (loss) on foreign exchange, net
Impairment loss recognized on Non-current assets held for saleImpairment loss recognized on flight equipment
Impairment loss on financial assets measured at cost
Othersc. Other gains and losses

Interest income
Subsidy income
Dividend income
Othersb. Other income

Passenger
Cargo
Othersa. Revenue

27. NET INCOME

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
Intangible assets

e. Depreciation and amortization expenses

Capitalization interest
Capitalization rate

- 56 -

Information about capitalized interest was as follows:

Interest expense
Bonds payable
Bank loans
Interest on obligations under finance leases
Loss on derivatives designated as hedging instruments in cash
flow hedge accounting relationships reclassified from equity
to profit or loss

d. Finance costs-

414,564
882,190
15,2902,814

321,457
907,915
45,621$ 212,557
1.31%-1.41%$ 1,277,807$$

247,725

365,707
1,322,429
1,688,136

$

$

$

$

1,241,611(Continued)

344,228
897,383

For the Year Ended December 31
2018
2017

165,050$ 17,375,194$ 18,192,291$$ 17,097,228
277,966$ 17,622,919$ 17,375,194
247,725$ 17,907,878
284,413$ 18,357,341$ 18,192,291
165,050

For the Year Ended December 31
2018
2017

$ 37,174
1.16%-1.31%$ 1,312,044$

For the Year Ended December 31
2018
2017

227

$ 17,376,793
3,847,976$ 21,224,769(Concluded)$ 21,551,714$ 19,983,158$ 19,863,578$ 17,751,051
3,800,663$ 15,179,456
1,167,348
3,636,354$ 15,010,513
1,242,585
3,610,480- 57 -

Income tax expense recognized in profit or loss

Current tax
Current year
Prior year adjustment
Deferred tax
Current year
Effect of income tax

The major components of tax expense were as follows:a. Income tax recognized in profit or loss

28. INCOME TAX$$

525,270

1,366,740(868,842)

22,5064,866$$

880,137

851,378-

27,142
1,617

For the Year Ended December 31
2018
2017

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2018 and 2017 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.

To be in compliance with the Company Act as amended, the Articles stipulate the distribution of
employees’ compensation at rates of no less than 3% of the net profit before income tax and employees’
compensation. For the year ended December 31, 2017, the employees’ compensation was $799,768
thousand, respectively, of the base net profit. The employees’ compensation and profit bonus for theyear ended December 31, 2018 was $51,656 thousand and $594,810 thousand.

An analysis of employee benefits expense by function
Operating costs
Operating expenses

Other employee benefits
Salary expenses
Labor and health insurance
Personnel service expenses

For the Year Ended December 31
2018
2017

$

$

525,270

20,098(343,107)
22,506
1,227,000(868,842)
4,866
(377)

463,126$ 2,315,631$$

880,137

5,122(283,157)
17,236
9,906
612,000
1,617(7,582)524,995$ 3,088,203- 58 -

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(22,290)134,979547
2,519(6,828)$ 108,927$

19,818109,687-

22,926$ 152,431$

For the Year Ended December 31
2018
2017

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%.

Income tax expense recognized in profit or loss

Income tax expense calculated at the statutory rate (20% for2018, 17% for 2017)
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
OtherProfit before tax

For the Year Ended December 31
2018
2017

A reconciliation of accounting profit and income tax expense is as follows:

228

45,819915
13,89431,010$$(37,560)(915)(5,635)(31,010)

$

$

$

$

12,936

12,936-

121,863(13,117)-

134,980-

Recognized in
Other
Comprehensive
Income$$21,19521,195-$ 4,561,346

333,653646,627-$ 1,396,033
510,060
1,674,973

EndingBalance

Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserves
Allowance for reduction of
inventory
OthersLoss carryforwards

Deferred tax assets- 59 -(905,606)$$ 5,749,714(114,922)
4,411
244,744
38,274
465,069(1,543,182)$

Recognized in
Profit or Loss

199,092
593,708
2,322,951$ 1,061,207
421,695
1,151,061

Beginning
Balance$$

130,833

21,146-109,687-

Recognized in
Other
Comprehensive
Income$ 4,974,941(Continued)

237,366
1,079,923
779,769$ 1,055,972
426,106
1,395,805

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)$

Recognized in
Profit or Loss

237,366
1,079,923
779,769$ 1,055,972
426,106
1,395,805

For the year ended December 31, 2017

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, 2018c. Deferred tax assets and liabilities

85,94928,823
114,772

$

$

$

$

(54,228)(54,939)915(204)

Recognized in
Profit or Loss$$

(21,598)(21,598)$$

38,946(Concluded)

31,010915
7,021

EndingBalance$

UnusedAmount- 60 --$ 16,839,292$ 11,790,770
2,899,496
619,799
202,699
1,326,528$

The income tax returns of the Company through 2016 have been examined by the tax authorities.

e. Income tax returns

2019
2021
2022
2026
2028

Expiry Year39,142$ 10,900,000$ 16,839,292

2017$ 10,900,000-

December 31$ 11,790,770
2,899,496
619,799
202,699
1,326,528

d. Unused tax loss carryforwards as of December 31, 2018 were as follows:

Other

Loss carryforwards
2019
2021
2022
2026
2028

2018

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:

Temporary differences
Depreciation difference fromfixed assets
Unrealized exchange gains
OthersDeferred tax liabilities

Beginning
Balance

Recognized in
Other
Comprehensive
Income

229

0.33
0.32

$
$

0.40
0.39

5,684,052

145,763
70,259457,4818,821

5,919,881

5,468,030

5,453,579$ 2,232,867

24,801

81,463$ 1,871,824$ 2,208,066$ 1,790,361

For the Year Ended December 31
2018
2017

$
$

For the Year Ended December 31
2018
2017

918,033
553,390
186,883
49,4791,707,785(486,356)$ 1,221,429$- 61 -

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 Company’s acquisition of Kaohsiung Catering on March
7, 2018 are as follows:

30. BUSINESS COMBINATIONS

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

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

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

29. EARNINGS PER SHARE$ 123,261

Bonds payable
Bank loans

Financial liabilities

Carrying
Amount- 62 -

Fair Value

Fair Value$ 25,818,511
82,735,255

2017$ 25,717,100
80,722,611

Carrying
AmountDecember 31$ 31,651,865
70,171,333

2018$ 33,219,610
72,162,743

a. Fair values of financial instruments

32. 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.

31. CAPITAL MANAGEMENT

Had these business combinations been in effect at the beginning of the annual reporting period, theCompany’s profit from continuing operations would have been $1,810,474 thousand. This pro-forma
information is for illustrative purposes only and is not necessarily an indication of the revenue andresults of operations of the Company 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.

ProfitKaohsiung
Catering

From the acquisition date, the operating results from the acquired company, which are included in thestandalone statements of comprehensive income, are as follows:f. Impact of acquisitions of the Company

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.

230

-

-

$

$

$

$

$

$

$

$

$

$

-

-

84,633293

9,581

Level 2239

22,453221

Level 2

$

$

$

$

$

$

$

$

Level 3- 63 -

-

-

-

-

4,901

-

83,366

21,746
61,620Level 3

There were no transfers between Level 2 and 3 in the current and prior periods.

Financial assets at FVTPL
Derivative instruments
Derivative financial assets forhedging
Derivative financial liabilities forhedging

Level 1--$

Financial liabilities for hedging

-

$

$

Financial assets for hedging

-

$

-

-

$

December 31, 2017

Level 1$

Financial liabilities at FVTPL
Derivative instruments

Financial assets at FVTOCI
Investments in equity
instruments
United shares - domestic
Unlisted shares - foreign

December 31, 2018

$

$

$

$

$

$

$

$

84,633

293

9,581

Total

239

27,354

221

83,366

21,746
61,620Total3) 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).

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 and capital lease obligations are floating-rate financial liabilities, so theircarrying amounts are their fair values. The fair values of long-term borrowings and private bonds with
fixed interest rates are estimated at the present value of expected cash flows discounted at rates of
0.68% in 2018 and 0.75% in 2017 prevailing in the market for long-term borrowings (Level 2). The fairvalues of bonds payable are based on those which are traded in the stock exchange and based on quoted
market prices (Level 1).
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

$

$

4,901

4,901

Derivative
Instruments$ 83,366$ 64,177
43,019(23,830)

EquityInstruments- 64 -

Because the individual fair values of some financial instruments and non-financial instruments neednot be disclosed, the total fair value disclosed is not the total value of the Company’s financial andnon-financial instruments.

There were no financial assets measured using Level 3 fair value measurements in 2017.

Balance at December 31, 2018

Balance at January 1, 2018
Adjustments on initial application of IFRS 9
Other comprehensive income recognized during the period

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 multiplier on September 30, 2018 ranged from 0.85 to 18.68,
and the liquidity discount is 80%.

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

Valuation Techniques and Inputs

Financial Instruments

4) Valuation techniques and inputs applied for Level 2 fair value measurement

231

$

221
239
120,519,575

$

2017

9,581
84,633
121,598,470

64,177
293
26,095,060-

December 31

27,354
31,630,697
83,3662018- 65 -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 in fuel prices, the Company has its operating costs stay within a specified range
by using 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.

- 66 -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, 2018

Note 4: 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 and other restricted financial assets.

d. Financial risk management objectives and policies

When the New Taiwan dollar increases one dollar against the U.S. dollar and all other variables
are held constant, there will be an increase in pre-tax profit in 2018 of $86,030 thousand and anincrease in pre-tax profit in 2017 of $109,319 thousand.

The following details the Company’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 amountused 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

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

Note 3: The balances include financial assets measured at cost.

Note 2: The balances of financial liabilities measured at amortized cost comprised short-term debts,
short-term notes payable, notes and accounts payable, accounts payable - related parties, otherpayables, bonds payable and long-term loans, capital lease obligations, provisions, part ofother current liabilities, part of other non-current liabilities and guarantee deposits.

Note 1: The balances of loans and receivables measured at amortized cost comprised cash and cash
equivalents, notes and accounts receivable, accounts receivable - related parties, otherreceivables, refundable deposits, other financial assets and other restricted financial assets.

Financial liabilities at FVTPL
Financial liabilities for hedging
Derivative financial assets for hedging
Financial liabilities at amortized cost (Note 2)

Financial liabilities

Available-for-sale financial assets (Note 3)
Financial assets for hedging
Derivative financial assets for hedging
Loans and receivables (Note 1)
Financial assets at amortized cost (Note 4)
Financial assets at FVTPCI - equity instrument investment

Financial assets

c. Categories of financial instruments

232

NTD/USD

NTD1,669,231/
USD54,250

Notional
Amount2019.1.172019.12.23

Maturity

28.3-30.7

Forward Rate

Financial assets forhedging/liabilities forhedgingLine Item in
Balance Sheet$ 22,453$

239

Carrying AmountAsset
Liability(Note)

Fair value interest rate risk
Cash flow interest rate risk

- 67 -$ 33,523,710
70,758,743

2018

2017
$ 27,717,100
80,898,611

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

And the amount of gains and losses on hedging instruments for the three months ended
December 31, 2018 reclassified from profit or loss to prepayments for equipment was $12,118
thousand.

Increase in operating costs.

$ (4,933)$ 94,437

Cash flow hedge
Aircraft rentals
Aircraft prepayments

Note:$ (4,933)-$ 70,553
23,884Comprehensive Income

AmountReclassified toProfit and Lossand theAdjusted Line
Item

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeFor the year ended December 31, 2018

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 $22,214 thousand.

Cash flow hedge
Aircraft rentals forward exchange
contracts

Currency

USD

Currency

NT$4,901

Notional
Amount2019.1.312019.12.31

Maturity

US$72-US$88

Forward Rate

Financial assets forhedgingLine Item in
Balance Sheet

$

4,901

$

-

Carrying AmountAsset
Liability

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)

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

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, 2017 would have decreased by$202,247 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, 2018 would have decreased by$176,897 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.

December 31, 2018

Hedging Instruments

Sensitivity analysis

The following table summarizes the information relating to the hedges of foreign currency risk.

233

$

-

-

$
-

-

$
-

-

$
-

-

293

$

$

Current
Non-current$ 77,639
6,994

Current
Non-current- 69 -

The fair value of each derivative contract is determined using quotes from financial institutions.

$ 84,633$ 84,633

Foreign exchange forwards contracts

Derivative financial liabilities under hedge accounting

293
-

$

293

December 31,
2017

Foreign exchange forward contracts

Derivative financial assets under hedge accounting

Derivative financial instrument for hedging

The relevant hedging strategies of the Company in 2017 are the same as the aforementioned in2018, except for the following special instructions.

d) Hedge accounting in 2017

Fuel price increase of5%
Fuel price decrease of
5%

NTD/USD

Currency

Notional Amount(In Thousands)

2018.1.16-2019.6.21 NTD6,649,254/USD222,750

Maturity Date

$ (66,502)$ (52,034)(2,814)(11,654)- 70 -

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 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.

2) Credit risk

The amount of gains and losses on hedging instruments for the year ended December 31, 2017
reclassified from profit or loss to prepayments for equipment was $103,369 thousand.

Increase in operating costs
Increase in finance costs
Other foreign exchange losses

December 31,
2017

Gains and losses of hedging instruments reclassified from equity to profit or loss were includedin the following line items in the standalone statements of comprehensive income:Buy forward contracts

December 31, 2017

The Company entered into foreign exchange forward contracts to minimize cash flow exposure
related to fuel payments and aircraft payments, which will be paid in U.S. dollars.

Foreign exchange forward contracts.

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
2018
2017
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)

Cash flow hedges

Sensitivity analysis

234

Capital leaseobligations
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable- 71 -

8,828,339$ 13,829,438$

1,122,203

239
4,877,118-

2,005,900

526,160
7,179,976

1.3905$1.180075,5833 Months to
1 Year6,870,598$

1-3 Months

1.10841.0627

The Weighted
Average
Effective
Interest Rate(%)

December 31, 2018-

6,496,270-

14,045,872$ 20,542,142$

1-2 Years-

24,339,179-

25,807,093$ 50,146,272$

2-5 Years-

1,051,418-

18,293,128$ 19,344,546$

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.

Liquidity and interest risk rate table

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 Note 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

1,375,827

50,7171,911,231$ 15,913,848$ 10,119,067

154,430

6,994
301,932

2,023,600

17,915,408

452,833

20,651,932-

27,019,287-

1,014,142-

16,291,168

2017$ 17,305,310$

5+ Years$ 25,181,000

December 31$ 48,124,052$

2-5 Years$ 17,337,100

2018$ 20,402,364$

1-2 Years- 72 -

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate (become subsidiary in March2018)
Associate (disposal in August 2017)
Associate (disposal in January 2018)(Continued)

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.
CAL-Dynasty International Inc.
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance and Engineering Co., Ltd.
Kaohsiung Catering Services
Science Park Logistics
Asian Compressor Technology Services

Relationship with the Company

Namea. Related parties’ names and relationships

Except for the disclosures stated in other notes, transactions between the Company and its related partiesare disclosed below:

33. RELATED-PARTY TRANSACTIONS

17,7005,900
26,9222,790,923

12,558,373

1.4142$

1.1800225,869
7,069,453$

3 Months to
1 Year1.1084

1.0789

1-3 Months

Unused bank loan limit (unsecured)

Loan commitments

Capital leaseobligations
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments
Bonds payable

The Weighted
Average
Effective
Interest Rate(%)

December 31, 2017

235

Related Party Typed. Accounts receivable - related parties (generated by operations)

289,2687,589
1,454
298,311

$

$

2018

$

$

510,588502,229
6,431
1,928

2017

$ 3,081,697$
71,852$ 745,686$ 1,857,684

December 31$ 3,843,308$
64,188$ 501,609$ 1,912,995

For the Year Ended December 31
2018
2017

1,938
46,461

$
$

$
$

523
41,410$ 2,937,333$
31,971$ 2,651,423$
28,670For the Year Ended December 31
2018
2017

- 73 -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 Type

Relationship with the Company
Associate
Associate
Associate
Associate
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(Concluded)

Related Party Type

Subsidiary
Major shareholder of theCompany
Associate
Joint venture investment

Subsidiary
Major shareholder of the Company
Associate
Joint venture investmentc. Purchases

Other income

Account Items

b. Operating income

OthersChina 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.
China Aviation Development FoundationName$ 1,494,006$ 1,583,684

903,200
116,525
469,827
4,454

2017
$

December 31$ 1,050,869
54,948474,499
3,368

2018

CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenance

The Company

g. Endorsements and guarantees- 74 -$ 3,850,000
1,080,000
1,081,792
2,000,000

Authorized
Amount$ 2,339,700
418,491
605,457$ 3,850,000
1,080,000
1,055,604-

Authorized
AmountDecember 31
ActualAmount Used2018

$ 2,850,000
318,611405,998-

ActualAmount Used

2017

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
2018 and 2017, the Company paid rentals of about $231,288 thousand and $228,942 thousand,respectively.

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 2018 and 2017, the Company paid rentals of about $64,188 thousand and $71,852
thousand, respectively.

The Company rented out planes to Mandarin Airlines under an operating lease contract. The monthly
rent received is based on flight hours. In 2018 and 2017, the rentals received amounted to $1,685,494
thousand and $1,105,171 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)236$

250,000
50,00044,551
3,295
47,846$$$$50,812

46,805
4,007

For the Year Ended December 31
2018
2017

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- 75 -

Monetary items
USD
EUR
HKD
JPY
RMB

December 31, 2017

In January 2008, the Company entered into a contract to buy fourteen A350-900 aircraft from Airbus, withthe option to buy six more A350-900 aircraft, as of December 31, 2018, fourteenth of the aircraft had been
handed over to the Company.

$ 39,041,679

2017

Financial assets$ 37,468,142

December 31

Monetary items
USD
EUR
HKD
JPY
RMB

Financial liabilities

Monetary items
USD
EUR
HKD
JPY
RMB

Financial assets

December 31, 2018355,535
6,511
70,9004,866,894
126,539

440,565
20,511
297,496
5,521,288
345,777- 76 -$

290,336
21,347
293,677
5,164,642
365,624

Foreign
Currencies(In Thousands)$

Foreign
Currencies(In Thousands)

29.850735.71433.81830.26484.5830Exchange Rate

30.7692
35.21133.92310.27784.480330.7692
35.21133.92310.27784.4803

Exchange Rate$

8,666,739
762,410
1,212,346
1,367,597
1,675,654(Continued)

Carrying
Amount10,939,528
229,264
278,149
1,352,023
566,931$ 13,555,830
722,232
1,167,107
1,533,814
1,549,187

Carrying
Amount

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:

37. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe Company failed to mediate labor disputes with the labor unions. After obtaining the right to strike, thelabor union went on strike at 0:00 February 8, 2019, and the flights resumed normal operation on February
14, 2019. The initial estimated compensation for customer losses and various expenses were $154 million.
For other information, refer to “Pubic Information Observatory” of the Taiwan Stock Exchange.

36. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATEAs of December 31, 2017, the Company had commitments and contingent liabilities which were as follows:

35. COMMITMENTS AND CONTINGENT LIABILITIESProperty, plant and equipment

2018

The following assets were pledged or mortgaged as collateral for long-term bank loans, lease obligations
and business transactions:34. PLEDGED ASSETS

i.

250
50

In 2018, interest expenses was $3,570 thousand. This bonds payable will be paid off in May 2021. As of
December 31, 2018 the interest payable was $2,142 thousand.

Mandarin Airlines
Sabre Travel Network (Taiwan)

The first issue of unsecured bonds in 2017

Related Party

December 31, 2017
Aggregate
Units
Par/Dollars

Related parties that invested in the first issue of unsecured bonds in 2016 (Note 19) are summarized asfollows:

h. Bonds payable - related parties

237

$

406,155
5,957
77,9294,848,134
120,472

29.850735.71433.81830.26484.5830Exchange Rate

$ 12,124,021
212,759
297,556
1,283,786
552,123(Concluded)

Carrying
Amount- 77 -

b. Investment in mainland China: Table 7 (attached).

10) Derivative financial transactions: Notes 7 and 32.

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:

38. ADDITIONAL DISCLOSURESFor the years ended December 31, 2018 and 2017, the Company’s net foreign exchange gains (losses) were
$10,812 thousand and $4,920 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

Foreign
Currencies(In Thousands)- 78 -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.

39. SEGMENT INFORMATION

2,000,000$ 3,850,000
1,080,000
1,087,224
2,000,000$ 3,850,000
1,080,000
1,081,792
605,457$ 2,339,700
418,491$- 79 -

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s shareholders’ equity.

11,416,314$ 11,416,314
11,416,314
11,416,314

Note 2:

100% subsidiary
54% subsidiary
100% subsidiary by direct
and indirect holdings
100% subsidiary

Nature of Relationship

ActualBorrowingAmount

-

3.50

6.74
1.89
1.90

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 Ltd.

Name

Limit on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmount(Note 1)

Note 1:0No.

Endorsement/
Guarantee
ProviderCounter-party

ENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

238
28,540,786$ 28,540,786
28,540,786
28,540,786

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 by Parent
Given byGiven on Behalf
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

TABLE 1Marketable Security Type and Issuer/Name

Kaohsiung Catering Services

Beneficiary certificates
Prudential Financial Money Market Fund

Beneficiary certificates
Taishin 1699 Money Market Fund

SharesChina Airlines-

Beneficial certificatesFuh Hwa Emerging Market Short-term Income
Fund

Hwa Hsia-

SharesTransAsia Airways

Taiwan Airport Services

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 FVTPL - current--- 80 -

Financial assets at FVTPL - current

Financial assets at FVTPL - current

Parent company Financial assets at FVTOCI - non-current-

Beneficiary certificatesFranklin Templeton SinoAm Money Market Fund

Sabre Travel Network (Taiwan)--

Parent company Financial assets at FVTOCI - non-current

Financial assets at FVTOCI - non-current
Financial assets at FVTPL - current
Financial assets at FVTPL - current-

SharesTaikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang)
Composite

Beneficiary certificates
Barclays America Bonds Fund

SharesChina Airlines

Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current

Financial Statement Account-Relationshipwith the Holding
Company

CAL-Asia Investment

Mandarin Airlines

China Airlines (“Parent company”) Shares
Everest Investment Holdings Ltd. - ordinary shares
Everest Investment Holdings Ltd. - preference
sharesChung Hua Express Co.
Jardine Air Terminal Services
The Grand Hi Lai Hotel

Holding Company Name

MARKETABLE SECURITIES HELDDECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

239

7,939,173

349,523

814,152

787,0072,277,786

3,492,097-

1,000,000

2,074,628

1,100,000
12,000,000
4,021

1,495,305
135,937

Number of
Shares/Units$

125,360

4,721

8,956

9,042

-

36,041

48,82530,837

22,821

21,746-56,018
5,602

-

-

-

-

0.4

-

2.59
5.45

-

-

11.00
15.00
0.02

13.59
-

December 31, 2018
Percentage
CarryingofAmountOwnership(%)$

125,360

4,721

8,956

9,042

-

36,041

48,82530,837

22,821

21,746-

61,620Market Valueor Net Asset
Value(Continued)

-

-

-

-

-

-

Note 2
Note 2--

Note 1Note

TABLE 2

Note 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.

- 81 -

Note 1: The subsidiary’s net asset value was $61,620 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2018.

240(Concluded)$3,330,000--$

3,330,000

-

-

$

-

-

-

-

-

-

$

-

-

-

- 82 -

Paid-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.

-

-

-

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.

3,030,000--

Ending Balance
Number ofAmountShares

Note 4:-$Gain (Loss) on
Disposal

Note 3:300,000--

Disposal (Note 3)
Carrying
AmountAmountMarketable securities which are recognized as investments accounts for using the equity method are required to be filled in the second column.

-

-

-

Number of
Shares

Note 2:

Non-related party-

Non-related party$

Acquisition (Note 3)
Number ofAmountSharesThe marketable securities in this table refer to shares, bonds, beneficial certificates and the securities derived from the above items.

President Securities
Corp.

-

Beginning Balance
Number ofAmountShares

Non-related party

Relationship(Note 2)TABLE 3Note 1:

NT-dollar 100%
Financial assets at
principal-protected
FVTPL - current
structural products

Tigerair Taiwan Co.,Ltd.

Counterparty(Note 2)

Investments accounted MB Aerospacefor using the equity
methodInvestments accounted TransAsia Airways
for using the equity
methodFinancial Statement
Account

SharesAsian Compressor
Technology
Services
Kaohsiung Catering
Services

Type and Name ofMarketable
Securities (Note 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, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

241

Taiwan Air Cargo Terminal
Taiwan Airport Services
CAL Park
CAL Hotel
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Service
Kaohsiung Catering Services
Hua Hsia
Tigerair Taiwan
Tigerair Taiwan
Eastern United International Logistics
China Pacific Catering Services
China Aircraft Services
China Pacific Laundry Services

Taiwan Airport Services

Taoyuan International Airport Service

CAL Park

Mandarin Airlines

Tigerair Taiwan

CAL Hotel

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
Equity-method investee
Equity-method investee
Equity-method investee
Equity-method investee

Nature of Relationship

Purchase

Purchase

Purchase

Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase

Purchase/
Sale

114,281

179,798

152,652

599,309434,538
231,288
107,273(2,155,732)
236,744
1,247,054
462,577
333,255(336,530)
141,030
238,356
1,784,963
180,238
128,033- 83 -$

Amount1 months

30 days
40 days
2 months
1 months
2 months
2 months
40 days
60 days
2 months
1 months
1 months
2 months
90 days
30 days
2 months

Payment Terms

28.70

1 months(3.28) 1 months

2.71

0.44
0.32
0.17
0.08
(1.43)
0.17
0.91
0.34
0.24
(0.22)
0.10
0.17
1.30
0.13
0.09

% of
Total

Transaction Details

$

-

-

-

-

-

-

-

$

(388)

(17,699)(24,608)(46,076)(74,816)(121,426)(13,982)
235,253(278,323)(365,115)(74,641)(54,352)
42,084(21,538)(22,145)(454,920)(31,988)(19,579)(17.50)(2.96)(2.02)(5.40)(8.77)(14.24)(1.64)
2.35(32.64)(42.82)(8.75)(6.37)
0.42(2.53)(2.60)(53.35)(3.75)(2.30)

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, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

242
-

-

-

-

Note

TABLE 4

China Airlines

China Airlines

China Airlines

China Pacific Catering Services

CAL Park

Taoyuan International Airport Service

Parent company

Parent company

Parent company

Parent company

Subsidiary

Nature of Relationship

365,115

121,426

454,920

278,323$ 235,253

Ending Balance

3.48

1.90

3.90

Note

Note

Turnover Rate$

Amount- 84 -

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, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

243

-

-

-

-

-

-

-

-

-

-

Action Taken

Overdue

362,163

121,426

301,208

276,142$ 235,253

Amounts Received
in Subsequent
Period

$

-

-

-

-

-

Allowance for
Bad Debts

TABLE 5

Represents the standalone 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.

Investee acquired by merger.

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

Taoyuan, Taiwan- 85 -Air transportation and maintenance of aircraft
Airport services

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Taipei, Taiwan
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

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, 2018
(In Thousands of New Taiwan Dollars and Foreign Currencies in Thousands, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

244
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

US$

HK$

10,200

5,877

3,329

200,000
11,6582,450

26,265
JPY
20,4002,500
1,600,000
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
12,289140,240
465,000
137,500$

December 31,
2017

Investment Amount

1,020,000-

1,050,000

20,000,000
469,755

245,000

1,600,000
408
250,000
180,000,000
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

10.00
1.08

49.00

100.00
51.00
25.00
90.00
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

$

7,870

388,910

44,193200,658
6,068

2,358

26,946
26,0596,996
1,805,921
1,128,138

89,101

1,507,445
1,201,109
1,533,244
1,266,921
805,157
755,619494,098
454,149
497,362
266,775
662,817461,239
166,901

Balance as of December 31, 2018
Percentage
Number ofof
Carrying
Shares/Units Ownership
Amount(%)$

3

27,353

19,703

981,713
133,894

(83)

1,437
(2,297)
5,137
981,713(103,410)

14,616

3,143
24,824359,195
43,975524,339282,254
26,115
188,247
32,012
133,894
296,678
25,27430,355Net Income(Loss) of theInvestee$

2

27,353

6,865

98,171
1,442

(41)

1,438
(1,172)
1,284
883,542(103,410)

14,4393,143
22,878
193,964
43,975
267,413138,305
26,115
176,820
6,402
63,399138,460
25,274
16,695Investment
Income (Loss)

Note 4Note 3---Note 1

Note 1
Note 2
Note 5-Note

TABLE 6

Landing gear
1,135,077
maintenance services (US$ 36,890)

Composite material

Taikoo (Xiamen) Landing
Gear Services

Taikoo Spirit Aerospace
Systems (Jinjang)

Investment Amount
Authorized by Investment
Commission, MOEA

$665,586 (Note 3)

Accumulated Investment in
Mainland China as ofDecember 31, 2018

$274,481 (US$8,920)

358,862
11,663)Forwarding and storage
62,724of air cargo(RMB 14,000)

Airport Air Cargo Service(Xiamen) Co., Ltd.

(US$

Forwarding and storage $ 1,140,143
of air cargo(RMB 254,480)

Main Business andProduct

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

Indirect(Note 1)

19,569636)

66,191
2,151)

59,921
1,947)$$36,028,250 (Note 4)

Limit on Investment

(US$

(US$

(US$

$ 128,799(US$ 4,186)

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2018

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company Name

China Airlines

-

-

-

-

- 86 -$

Inflow

Investment Flow

Outflow

INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars/Renminibi/U.S. Dollars in Thousands, Unless Stated Otherwise)

CHINA AIRLINES, LTD. AND INVESTEES

245

-

-

-

-

Net Income(Loss) of
the Investee

(US$

(US$

(US$

19,569636)

66,191
2,151)--

59,921
114,760
1,947) (RMB 25,175)$
128,799 $
80,455(US$
4,186) (RMB 17,650)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2018

5.45

2.59

14.00

14.00

% Ownershipof Direct orIndirect
Investment

(RMB

-

-

48,825(RMB 10,898)

-

-

-

26,933875)(Note 2)

(Continued)

16,130116,600
3,525) (RMB 26,025) (US$86,2082,802)(Note 2)

Accumulated
InwardRemittance ofEarnings as ofDecember 31,
2018$
11,307 $222,073 $(RMB 2,471) (RMB 49,567) (US$Investment
Gain (Loss)

Carrying
Amountas ofDecember 31,
2018

TABLE 7

(US$

-

-

$

Inward$338,046 (Note 4)Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

59,285
1,927)$
123,642 $(US$4,018)

Outward

Remittance of Funds

-

-

(US$

59,285
114,760
1,927) (RMB 25,175)

14

14% Ownershipof Direct orIndirect
Investment

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2018

(RMB

16,066
116,817
3,525) (RMB 26,073) (US$- 87 -

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)

43,2801,407)$
11,264 $
220,818 $
117,118(RMB 2,471) (RMB 49,287) (US$3,806)

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2018

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 2017 amounted to US$2,801,749 and US$875,330.

Net Income(Loss) of theInvestee$
123,642 $
80,455(US$
4,018) (RMB 17,650)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2018

Note 1: China Airlines, Ltd. the “Company” invested in CAL-Asia Investment, which, in turn, invested in a company located in mainland China.

$182,926 (US$5,945)$182,926 (US$5,945)

Indirect(Note 5)Investment Amounts Authorized by
Investment Commission, MOEA

Forwarding and storage
62,724of 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, 2018

Forwarding and storage $ 1,140,143
of air cargo(RMB 254,480)

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2018

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Investee Company

Taiwan Airport Services

246

China Airlines Co., Ltd.
Chairman：Hsieh, Su-Chien