China Airlines
2019 Investor Conference

August 23, 2019
TSE：2610

LegalDisclaimer• The information contained in this presentation,
including all forward-looking information, issubject to change without notice, whether as aresult of new information, further events orotherwise, and China Airlines(the “Company”)
undertakes no obligation to publicly update orrevise the information contained in thispresentation.

• No guarantees regarding the completeness,accuracy, and reliability of information contained
are made explicitly or implicitly. They are notintended to represent complete statement of theCompany, industry or future development.

2Agenda1. 1st Half 2019 Operating Results

2. Aviation Industry Outlook
3. Passenger Performance andStrategies
4. Cargo Performance and Strategies

5. Operating Fleet

3

1st Half 2019 Operating Results

4Operating Performance
Consolidated Financial Statistics

TWD 100 Million

1st Half 2018

1st Half 2019

YoY %Operating Revenue

810.11

832.98

2.82%

Net Operating Income

11.98

13.34

11.35%Net Income (Loss) After Tax

4.03

-4.38

-

Net Income (Loss) Attributable toOwners of the company

1.89

-6.86

-Earnings (Losses) Per Share (NT$)

0.03

-0.13

-

Financial Statistics (CI only)(Exclude adopting IFRS 16 “Leases” impact)

TWD 100 Million

1st Half 2018
Net Income (Loss) Attributable to
Owners of the company
Reconcile：adopting IFRS 16 “Leases” impact
Adjusted Net Income Attributable to
Owners of the company

1st Half 2019

YoY %

1.89

-6.86

-0

3.95

-

1.89

-2.91

5

Composition of Op. Revenue
1st Half 2018

1st Half 2019

TWD 71.16 Billion

TWD 72.01 Billion

Other Op
Revenue5%

Other Op
Revenue
5%

Cargo
Revenue
29%

Cargo
Revenue
30%
Passenger
Revenue
65%

Passenger
Revenue66%

In the first half of 2019, Passenger, Cargo and other operating

revenues accounted for 66%, 29% and 5% respectively.
6

Composition of Op. Expenses
Pax. Service
4.0%
Sales&General
Adm. 4.0%

1st Half 2018

1st Half 2019

TWD 71.12 Billion

TWD 72.17 Billion

Insurance
0.2%

Others 3.3%

Maintenance
12.3%

Fuel 31.8%

Rental&Depreciation
17.1%

Airport &GroundHandling
13.3%

Insurance
Pax. Service 0.2%
4.0%
Sales &GeneralAdm 4.3%

Others 3.5%

Fuel 30.5%

Maintenance
13.4%

Rental&Depreciation
16.8%

Personnel
14.0%

Airport &Ground
Handling
13.5%
Personnel
13.8%

In the first half of 2019, Fuel cost accounted for 30.5% of operating
expenses mainly due to the decrease in oil prices
7Changes in Op. Income
Pax.
Revenue+14.01

Cargo
Revenue-7.11

Fuel-6.25

TWD 100 Million

Rental,Depreciation &Insurance-0.06
Maintenance+9.42
Airport &Ground
Handling+2.77

Other Op.
Revenue

+1.58

0.42
1st Half 2018
Net Op. Income

Op.
Revenue▲8.48

Op.
Expenses▲10.50Net Op.
Income▼ 2.02

Sales &General Adm.
+3.01
Other Op.
CostPersonnel+0.76 -1.60+0.85

1st Half 2019
Net Op. Loss8Financial Risk Management - Fuel
Fuel Cost
1st Half 2018

1st Half 2019

YoY%

Jet Fuel (MOPS)USD/BBL

83.68

78.05

-6.7%

Fuel Consumption

10KBBL

865.13854.58-1.2%

Fuel Expend

TWD/100Million

225.98219.65-2.6%

Hedging Loss(Gain) TWD/100Million

-0.03

0.05

-225.95

219.70-2.6%

Total Fuel Cost

TWD/100Million

Fuel Hedging
Year

Hedging%

1st Half 2019

2.5%

9Financial Risk Management –Currency of Revenue and ExpenditureRev.

1st Half 2018

100%

Exp.
4%
2%

13%

6%

3%
6%

Rev.
2%

1st Half 2019

Exp.
5%

13%

2%

2%
4%2%
2%

7%

6%

7%

7%

8%

9%

42%

46%

14%

15%

50%

49%

47%

40%

37%

0%

TWD

USDJPYCNYHKD

EUROthers
10Aviation Industry Outlook

11

Passenger Traffic Continues to Grow
• According to IATA forecast, global RPK growth is slowing down, thegrowth rate of Asia-Pacific is larger than global average with similar trend.
• The growth rate of global and Asia-Pacific traffic in 2019 are expected tobe 5% and 6.3% respectively.

15GlobalRPK,% YOY
10.1

10.9

10.9
9.5

10
6.9
57.4

Asia Pacific7.48.1

6.3
7.4

65.00
2014

2015

2016

2017

2018

2019F

Source: IATA Statistics Fact Sheet

12

Air Cargo Growth Slows Down
• Global and Asia-Pacific FTKs have grown by 3.4% and 1.7% respectivelyin 2018.
• IATA expects the growth rate of global FTKs in 2019 will be flat and theAsia-Pacific is expected to be negative growth.
15

Global

FTK, %YOY
9.7

10

9.8

5.8

5

Asia Pacific

5.30
2014

2.3

3.6

1.9

2.1

2015

2016

3.401.7201720182019F-5-10
Source: IATA Air Freight Forecast

13

Passenger Performance and Strategies

14Passenger Performance
Revenue

TWD 46.36 Billion

Composition by Region

TWD 47.76 Billion

Australia/NewTrans
Pacific Zealand 6%
Ocean 15%
Europe 9%▲3.0%Southeast
Asia 18%

MainlandChina 15%

1st Half 2018

Hong Kong
7%

Northeast
Asia 30%

1st Half 2019

• Passenger revenue increased by 3%, reaching TWD 47.76 billion in thefirst half of 2019.
• Northeast Asia accounted for the largest share(30%) of revenue, followedby Southeast Asia with revenue share of 18%.
15

Passenger Operation Index
ASK (MN)

Load Factor
79.8%

78.9%
25,821

26,196▲0.9pptYield (TWD)
2.24

2.32
▲3.6%

▼1.4%

1st Half 2018

1st Half 2019

1st Half 2018

1st Half 20191sth Half 2018

1st Half 2019

ASK decreased by 1.4% while the load factor and yield increased by 0.9ppt

and 3.6% respectively in the first half of 2019.

16

Market Outlook
Long-haul Market

Regional Market
Northeast Asia••

Taiwan outbound flow to NEA region
continues to grow.
The extra or charter flights to Northeast Asia
will be arranged to generate more revenue.

Trans Pacific Ocean••

Mainland China•

Mainland China market is expected to have thenegative growth due to the latest RestrictedPolicy.

Europe•Southeast Asia
•Inbound visitors from Southeast Asia increase
substantially resulting from the implementation ofNew Southbound Policy.

The travel volume between Taiwan and North
America keeps growing.
Aggressive Ontario/Los Angeles 17 flights/weekoffer better service and gain more market share.

Demand stably grows in Taiwan outboundmarket with Direct flight service.

Australia & New Zeeland•Increase frequency to maintain competitive
edge.

17

Secure Taiwan Market by Multiple Brands
In response to intense market competition, China Airlines established Tigerair Taiwan

to differentiate products from traditional airlines in order to achieve competitive
advantage and create positive synergy.

Operate high-end market by elevating thequality of products and service
Regional FlightLong-haul Flight

Within 4 hours

More than 4 hours

Full Service+

Low Cost
Full Service
Low Cost

Taichung International
AirportOperate the low cost market through theyoung and energetic brand image

18

Flight Networks
119 Flights per
week with 28
destinations
EuropeChina

232 Flights per
week with 17
destinations

NortheastNorthAmericaAsia

22 Flights per week with
5 destinations

37 Flights per weekwith 6 destinations

Southeast
Asia/ HongKong

293 Flights perweek with 15
destinations

New
Zealand/
Australia

22 Flights per week with4 destinations

As of W19

19

Cooperation with Other Airlines
China Airlines works with more than 20 airlines worldwide to expand global
flight network and share operation resources.

20

Cargo Performance and Strategies

21Cargo Performance
Revenue
TWD 21.64 Billion

Composition by Region
Australia/
New
Zealand 2%

TWD 20.93 Billion
Europe 12%▼3.3%

Hong Kong
1%

Northeast
Asia 7%

TransPacific
Ocean
54%

MainlandChina 7%

Southeast
Asia 17%

1st Half 2018

1st Half 2019•

Cargo revenue totaled TWD 20.93 billion, a 3.3% decreased, in the first half of 2019.

•Trans Pacific Ocean accounted for the largest share(54%) of revenue, followed bySoutheast Asia and Europe with revenue share of 17% and 12% respectively.

22

Cargo Operation Index
FATK (MN)

Load Factor

Yield (TWD)

3,852

3,938
▼2.2%

70.5%
▼4.7ppt

1st Half 2018

1st Half 2019

1st Half 201865.8%

1st Half 2019

7.79

1st Half 2018

8.25

▲5.9%

1st Half 2019

FATK decreased by 2.2% and the load factor dropped 4.7ppt while yield grewby 5.9% in the first half of 2019.

23

Cargo Performance – Where We Are
In 2018, China Airlines Cargo ranked globally NO. 6 in terms of tonnage

carried and NO. 12 in terms of FRTK basis
Top Air Cargo Carriers in 2018
Rank

(YOY +3.4%)

Airlineby Tonnage(in thousands)

Airlineby FRTK(in millions)

1
2

Emirates (1)Qatar Airways (3)

2,609
2,262

Emirates (1)Qatar Airways (2)12,713
12,695

3

Federal Express (2)2,159Cathay Pacific Airways (3)11,284456789101112

Cathay Pacific Airways (4)United Parcel Service (5)China Airlines (7)Korean Air (6)Turkish Airlines (9)Singapore Airlines (8)Lufthansa (10)Asiana Airlines (11)
Cargolux(15)

1,828
1,548
1,512
1,510
1,302
1,167
969933850

Federal Express (4)Korean Air (5)Lufthansa (7)Cargolux (6)Singapore Airlines (8)United Parcel Service (9)Air China (12)Turkish Airlines (14)China Airlines (10)

8,455
7,815
7,391
7,322
6,491
6,252
5,912
5,860
5,804

(YOY +1.1%)

Source: IATA24Global Cargo Market Trend
Year-over-year FRTK (traffic) and FATK (capacity) growth
12%

FRTK
Growth

10%
8%

FATKs
Growth

6%

3.3%

4%

2%
0%
-2%

-2.0%
-4%
3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

Air Cargo growth is expected to weaken in 2019 due to recent

escalating China-US trade war and overstock resulting from
unexpected cargo growth demand during past 2 years.
Sources: IATA Monthly Statistics, Boeing Market Analysis 25

2019 Business Opportunity-Project Shipment• Continuously focusing on recurrent traffic
Semiconductor, Capital Equipment , Electronic products/semi-products , Functional
textile , auto parts , Pharmaceuticals , Medical Equipment ,Fresh produces , e-Commerce , Aircraft materials• Actively explore potential cargo
Industrial computers/servers、Wearing devices、Internet of Things development

26

Freighter Network Planning
Deploy regional networks such as Southeast Asia and India and optimize the longhaul flight revenues to Europe and America.
Eff. From 2019JUL

53

Flt/week

Regional

6

Flt/week

EuropeNEA 5+PRC 14
HKG 15+SEA 19

36
Flt/week
Trans Pac27

Interline Cooperation
Cooperate with other airlines to develop Mid-Asia and Latin American markets.

TPE28

Challenge: China-US Trade War
China-US Trade war Effect on TW
Many overseas Taiwanese businesses
have taken steps to adjust theirproduction by relocating funds back to
Taiwan or Southeast Asia to diversify risk
amid the China-US trade dispute.

The impact of China-US trade war on air
cargo transport :• Short term: Urgent order shipment due to tariff issue• Mid term: Air cargo demand reduced while overstock• Long term: Cargo volume is expected back tonormal as agreement is made by US and China

Counter Measure of CI• Cargo supply adjustment to cater tomarket needs• Flexible network planning for potential
market• Aggressive development of solid target
suppliers
SOURCE:
工商時報
經濟日報

29

Operating Fleet

30

Operating Fleet as of August 2019•

Aircrafts in storage are excluded.

Aircraft TypeOwned

On Lease

777-300ER
747-400
A350-900
A330-300
737-800
747-400F (Freighter)
Number of aircraft in fleet

4141341853

10101535

To maximize fuel efficiency, CI is expected to receive the first of 3 777F in2020 and the first of 14 leased A321neo in 2021.

31

Thank you

2019.08
China Airlines│No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City, TaiwanTEL│03.399.8888