China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theNine Months Ended September 30, 2017 and 2016 andIndependent Auditors’ Review ReportINDEPENDENT AUDITORS’ REVIEW REPORTThe Board of Directors and the Stockholders
China Airlines, Ltd.
We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. (the“Company”) and its subsidiaries (collectively referred to as the “Group”) as of September 30, 2017and 2016, and the related consolidated statements of comprehensive income for the three months
ended and the nine months ended September 30, 2017 and 2016, and the statements of changes inequity and cash flows for the nine months ended September 30, 2017 and 2016. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to issue a report on these consolidated financial statements based on our reviews.
We conducted our reviews in accordance with Statement of Auditing Standards No. 36 “Review of
Financial Statements” issued by the Auditing Standards Committee of the Accounting Researchand Development Foundation of the Republic of China. A review consists principally of applying
analytical procedures to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit conducted in accordancewith auditing standards generally accepted in the Republic of China, the objective of which is theexpression of an opinion regarding the consolidated financial statements taken as a whole.
Accordingly, we do not express such an opinion.
As disclosed in Notes 14 and 15 to the accompanying consolidated financial statements, thefinancial statements of some non-significant subsidiaries and investments accounted for by using
the equity method were not reviewed. As of September 30, 2017 and 2016, the total combined
assets of these non-significant subsidiaries were NT$15,206,985 thousand and NT$14,629,533
thousand, respectively, representing 6.81% and 6.76%, respectively, of the Group’s total
consolidated assets, and as of September 30, 2017 and 2016, the total combined liabilities of thesesubsidiaries were NT$6,130,646 thousand and NT$6,692,131 thousand, respectively, representing
3.73% and 4.27%, respectively, of the Group’s total consolidated liabilities; and for the threemonths ended and the nine months ended September 30, 2017 and 2016, the combined
comprehensive income of these subsidiaries were NT$239,617 thousand, NT$165,207 thousand,
NT$631,803 thousand and NT$618,764 thousand, respectively, representing 7.78%, 32.52%,
61.56% and 32.41%, respectively, of the Group’s consolidated total comprehensive income. As
of September 30, 2017 and 2016, the aforementioned investments accounted for by using the equity
method were NT$2,678,739 thousand and NT$2,809,980 thousand, respectively; and for the threemonths ended and the nine months ended September 30, 2017 and 2016, the Group’s share of the
profit of associates and joint ventures were NT$130,154 thousand, NT$138,821 thousand,
NT$385,762 thousand and NT$397,508 thousand, respectively.

-1-Based on our reviews, except for the effects of adjustments, if any, as might have been determined
to be necessary had the financial statements of these non-significant subsidiaries and investments
accounted for by using the equity method as described in the preceding paragraph been reviewed,
we are not aware of any material modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the International Accounting Standard
34 “Interim Financial Reporting” endorsed by the Financial Supervisory Commission of the
Republic of China.

Deloitte & Touche
Taipei, Taiwan
Republic of China
November 5, 2017

Notice to Readers
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 review such consolidated financial statements arethose generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ review 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’ review report and consolidated financial statements
shall prevail.

-2-

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In Thousands of New Taiwan Dollars)

September 30, 2017
(Reviewed)
Amount%ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6, 19 and 32)
Financial assets at fair value through profit or loss - current (Notes 4, 5, 7 and 32)
Derivative financial assets for hedging - current (Notes 4, 5, 9 and 32)
Receivables:
Notes and accounts, net (Notes 4, 5, 11 and 32)
Notes and accounts - related parties (Notes 32 and 33)
Other receivables (Note 32)
Current tax assets (Notes 4 and 29)
Inventories, net (Notes 4 and 12)
Noncurrent assets held for sale (Notes 4, 5 and 13)
Other assets - current (Notes 6 and 19)

December 31, 2016
(Audited)
Amount%September 30, 2016
(Reviewed)
Amount%$ 25,848,493
279,822
18,88012-$ 24,267,197
416,641
58,44911-$ 22,192,084
437,847
7,017

10
-

8,297,352
8,920
468,504
48,934
8,662,991
494,686
3,282,388

4
4
1

8,353,785
3,562
952,320
28,2598,434,386
185,100
4,638,502

4
4
2

7,154,355
3,955
1,037,262
50,2188,361,307
121,406
4,032,780

31
42

47,410,970

21

47,338,201

21

43,398,231

20

65
83,885
2,678,739
146,904,608
2,075,693
1,025,808
5,550,436
17,544,598

1
66
1
3
8

3,268
140,357
2,866,431
140,136,737
2,075,903
1,137,115
6,256,665
24,546,082

1
62
1
1
3
11

14,099140,6032,809,980
128,208,152
2,075,972
1,148,515
6,462,820
32,313,108

1
59
1
1
3
15

175,863,832

79

177,162,558

79

173,173,249

80$ 223,274,802

100$ 224,500,759

100$ 216,571,480

100$

33,03010,00013,36046,558638,453
691,440
11,408,984
79,08264,945
15,371,818
2,700,000
27,740,345
1,755,615
3,714,231

5
7
1
13
1
2

$

135,000
900,000
20,854
869,712555,829
11,465,254
48,687
81,925
14,820,860
2,700,000
32,268,540
1,284,001
3,455,062

5
7
1
14
1
2

$

208,135
5,419
237,253
1,486,299
517,401
11,343,881
120,995
35,497
12,784,380
5,279,164
27,949,134
1,457,957
3,291,300

1
5
6
2
13
1
2

64,267,861

29

68,605,724

30

64,716,815

30

2,634
4,957
19,209,457
62,088,579
8,559,375
194,929
725,832
1,801,082
7,164,649
449,216

9
28
4
1
3
-

2,775
19,538,044
56,962,187
7,408,229
273,610
3,645,304
1,808,903
7,956,835
431,950

9
25
3
2
1
4
-

17,900,000
53,278,932
7,096,907
302,914
4,098,317
1,802,227
7,202,558
425,485

8
25
3
2
1
3
-

Total noncurrent liabilities

100,200,710

45

98,027,837

44

92,107,340

42

Total liabilities

164,468,571

74

166,633,561

74

156,824,155

72

54,709,846
799,99924-

54,708,901
799,93225-

54,708,901
799,93225
1

206,092
950,198
1,156,290(46,547)(43,372)1
1-

287,224
76,486(157,618)
206,092
112,264(43,372)-

287,224
76,486
1,802,594
2,166,304(146,098)(43,372)

1
1-

56,576,216

25

55,783,817

25

57,485,667

27

2,230,015

1

2,083,381

1

2,261,658

1

58,806,231

26

57,867,198

26

59,747,325

28$ 223,274,802

100$ 224,500,759

100$ 216,571,480

100

Total current assets
NONCURRENT ASSETS
Available-for-sale financial assets - noncurrent, net of current portion (Notes 4, 8 and 32)
Derivative financial assets for hedging - noncurrent (Notes 4, 5, 9 and 32)
Financial assets carried at cost - noncurrent, net of current portion (Notes 10 and 32)
Investments accounted for by using the equity method (Notes 4 and 15)
Property, plant and equipment (Notes 4, 5, 16 and 34)
Investment properties (Notes 4 and 17)
Other intangible assets (Notes 4 and 18)
Deferred income tax asset (Notes 4, 5 and 29)
Other assets - noncurrent (Notes 19, 22, 32, 34 and 35)
Total noncurrent assets
TOTAL

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Note 20)
Short-term bills payable (Note 20)
Financial liabilities at fair value through profit or loss - current (Notes 4, 5, 7 and 32)
Derivative financial liabilities for hedging - current (Notes 4, 5, 9 and 32)
Notes and accounts payable (Note 32)
Notes and accounts payable - related parties (Notes 32 and 33)
Other payable (Notes 23 and 32)
Current tax liabilities (Notes 4 and 29)
Provisions - current (Notes 4, 5, 25 and 32)
Deferred revenue - current (Notes 4, 5 and 24)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 21, 27 and 32)
Loans and debts - current portion (Notes 20, 32 and 34)
Capital lease obligations - current portion (Notes 4, 22, 32 and 34)
Other current liabilities (Note 32)
Total current liabilities
NONCURRENT LIABILITIESFinancial liabilities at fair value through profit or loss - noncurrent (Notes 4, 5, 7 and 32)
Derivative financial liabilities for hedging - noncurrent (Notes 4, 5, 9 and 32)
Bonds payable - noncurrent (Notes 4, 21, 27 and 32)
Loans and debts - noncurrent (Notes 20, 32 and 34)
Provisions - noncurrent (Notes 4, 5, 25 and 32)
Deferred tax liabilities (Notes 4 and 29)
Capital lease obligations - noncurrent (Notes 4, 22, 32 and 34)
Deferred revenue - noncurrent (Notes 4, 5 and 24)
Accrued pension costs (Notes 4, 5 and 26)
Other noncurrent liabilities

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 21 and 27)
Capital stock
Capital surplus
Retained earnings (accumulated deficits)
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficits)
Total retained earnings (accumulated deficits)
Other equity
Treasury stock
Total equity attributable to owners of the Company
NON-CONTROLLING INTERESTS (Note 27)
Total equity
TOTAL

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 5, 2017)-3-

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings Per Share)(Reviewed, Not Audited)

For the Three Months Ended September 30
2017
2016
Amount%Amount%

For the Nine Months Ended September 30
2017
2016
Amount%Amount%REVENUES (Notes 4, 28 and 33)$ 40,542,703

100$ 36,552,871

100$ 114,495,782

100$ 105,386,860

100

COSTS (Notes 4, 9, 12, 19, 26, 28
and 33)33,474,463

83

31,627,877

86

98,605,365

86

90,834,028

86

GROSS PROFIT

7,068,240

17

4,924,994

14

15,890,417

14

14,552,832

14

OPERATING EXPENSES(Notes 4, 26 and 28)

3,366,153

8

3,499,398

10

9,755,078

9

10,135,114

10

OPERATING PROFIT

3,702,087

9

1,425,596

4

6,135,339

5

4,417,718

4

131,8671

181,036-435,203

1

582,686

1

51,590(345,594)(1)(418,914)(303,921)(1)(1)(3,944,936)(1,013,780)

(3)
(1)

(1,543,317)(978,558)(1)(1)

130,154-

138,821-385,762-

397,508-(31,983)-(402,978)(2)(4,137,751)(3)(1,541,681)(1)

PROFIT BEFORE INCOME
TAX

3,670,104

9

1,022,618

2

1,997,588

2

2,876,037

3

INCOME TAX EXPENSE(Notes 4, 5 and 29)

619,2821

435,7371

808,3891

876,9681

3,050,822

8

586,8811

1,189,199

1

1,999,069

2

3,491

-

(72,231)-(124,213)-(130,588)

-

-

-

(637)

-

-

-

(8,934)-29,766-(16,623)-(71,854)-

42,193-(5,706)-

10,568-33,196

-

7,658

-

27,551-(78,923)-(162,871)-(89,671)-

3,078,373

8

507,958

1

1,026,328

1

NONOPERATING INCOME
AND EXPENSES
Other income (Notes 10
and 28)Other gains and losses (Notes
9, 10, 13, 15, 16 and 28)
Finance costs (Notes 9 and 28)
Share of the profit of associates
and joint ventures (Note 15)
Total nonoperating
income and expenses

NET INCOME
OTHER COMPREHENSIVEINCOME (LOSS)
Items that may be reclassified
subsequently to profit orloss:
Exchange differences ontranslating foreign
operations (Notes 4
and 27)
Unrealized gain (loss) on
available-for-sale financial
assets (Notes 4 and 27)
Cash flow hedges (Notes 4
and 27)
Income tax relating to items
that may be reclassified
subsequently to profit orloss (Note 29)
Other comprehensive
income (loss) for theyear, net of income tax
TOTAL COMPREHENSIVEINCOME FOR THE PERIOD

$

$

-4-

$

$

1,909,398
2(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings Per Share)(Reviewed, Not Audited)

For the Three Months Ended September 30
2017
2016
Amount%Amount%NET INCOME
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests

TOTAL COMPREHENSIVEINCOME ATTRIBUTABLE
TO:
Owners of the Company
Non-controlling interests

EARNINGS PER SHARE(NEW TAIWAN DOLLARS;
Note 30)
Basic
DilutedFor the Nine Months Ended September 30
2017
2016
Amount%Amount%$2,951,880
98,9428-$513,42973,452

2-$

952,467
236,7321-$

1,807,768
191,3012-$

3,050,822

8$

586,8812$

1,189,199

1$

1,999,069

2$

2,978,279
100,0948-$

441,067
66,891

1-$

793,656
232,6721-$

1,727,953
181,4452-$

3,078,373

8$

507,958

1$

1,026,328

1$

1,909,3982$ 0.54$ 0.53$ 0.09$ 0.09$ 0.17$ 0.17$ 0.33$ 0.32

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 5, 2017)(Concluded)-5-

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

BALANCE AT JANUARY 1, 2016

Capital Stock

Capital Surplus

Equity Attributable to Owners of the Company
Retained Earnings
Exchange
Unrealized
Unappropriated Differences on
Gain (Loss) on
Earnings
Translating
Available(Accumulated
Foreignfor-sale
Legal Reserve
Special Reserve
Deficits)
Operations
Financial Assets$ 54,708,901$$

798,415-$-$ 2,872,235$

157,959$

1,755

Cash Flow
Hedges$TreasuryStock(225,997)

$

Total

Non-controlling
Interests

Total Equity(43,372)$ 58,269,896$ 2,286,647$ 60,556,543

Change in unappropriated earnings from investments in associates
and joint ventures accounted for by using the equity method

-

-

-

-

(1,638)

-

-

-

-

(1,638)-(1,638)Difference between cost and net value of acquired subsidiaries

-

-

-

-

(3,536)

-

-

-

-

(3,536)(4,548)(8,084)

Appropriation of 2015 earnings
Legal reserve
Special reserve
Cash dividends - $0.458522382 per share--

287,224-

76,486-(287,224)(76,486)(2,508,525)

-

-

-

-

(2,508,525)-(2,508,525)

Change in capital surplus from dividends distributed tosubsidiaries

-

1,517

-

-

-

-

-

-

-

1,517

-

1,517

Net income for the nine months ended September 30, 2016

-

-

-

-

1,807,768

-

-

-

-

1,807,768

191,301

1,999,069

Other comprehensive income (loss) for the nine months ended
September 30, 2016, net of income tax

-

-

-

-

-

(107,804)(2,359)30,348-(79,815)(9,856)(89,671)

Total comprehensive income (loss) for the nine months ended
September 30, 2016

-

-

-

-

1,807,768(107,804)(2,359)30,348-1,727,953

181,445

1,909,398

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(201,886)(201,886)

BALANCE AT SEPTEMBER 30, 2016

$ 54,708,901$

799,932$

287,224$

76,486$ 1,802,594$

50,155

$

(604)

$

(195,649)$(43,372)$ 57,485,667$ 2,261,658$ 59,747,325

BALANCE AT JANUARY 1, 2017

$ 54,708,901$

799,932$

287,224$

76,486$$78,564

$

1,714

$

31,986$(43,372)$ 55,783,817$ 2,083,381$ 57,867,198

Convertible bonds converted to common stock(157,618)

945

131

-

-

-

-

-

-

-

1,076

-

1,076

Disposal of capital surplus of investments in associates accounted
for by using the equity method

-

(64)

-

-

-

-

-

-

-

(64)

-

(64)

Compensation of deficits for 2016--

(81,132)(76,486)

157,618

-

-

-

-

-

-

-

Difference between cost and net value from acquiring subsidiaries

-

-

-

-

(2,269)

-

-

-

-

(2,269)(46,118)(48,387)

Net income for the nine months ended September 30, 2017

-

-

-

-

952,467

-

-

-

-

952,467

236,732

1,189,199

Other comprehensive loss for the nine months ended
September 30, 2017, net of income tax

-

-

-

-

-

(99,208)-(59,603)-(158,811)(4,060)(162,871)

Total comprehensive income (loss) for the nine months ended
September 30, 2017

-

-

-

-

952,467(99,208)-(59,603)-

793,656

232,672

1,026,328

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(39,920)(39,920)(43,372)$ 56,576,216$ 2,230,015$ 58,806,231

BALANCE AT SEPTEMBER 30, 2017

$ 54,709,846$

799,999$

206,092$-$

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 5, 2017)-6-

950,198$(20,644)

$

1,714

$

(27,617)$

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

For the Nine Months Ended
September 30
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments to reconcile net cash generated from (used in) operating
activities:
Depreciation expenses
Amortization expenses
Bad-debt expenses
Net loss on fair value change of financial assets and liabilities held
for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on disposal of financial assets measured at cost
(Gain) loss on disposal of noncurrent assets held for saleImpairment loss on financial assets measured at cost
Loss on disposal of available-for-sale financial assets
Loss on disposal of investments accounted for by using the equity
methodLoss on inventory and property, plant and equipment
Impairment loss recognized on property, plant and equipment andnoncurrent assets held for sale
Net (gain) loss 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
Derivatives financial assets for hedging
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Deferred revenue
Provisions
Other current liabilities-7-$

1,997,588$

2,876,037

13,707,159
195,164
38,006

13,002,138
92,197
13,94327,488(156,833)(9,057)(385,762)(215)(147,568)
56,023-30,580(193,002)(59,927)(397,508)(11,337)
346
26,42971,826
12(119,739)
601,565

357,667

3,692,410(189,646)
1,013,780
2,371,400(10,884)

138,335(43,618)
978,558
1,908,338(10,884)

124,146(14,893)(5,295)
351,722(554,836)
1,597,777(435,870)
295,765(177,870)
543,818(920,122)
270,548

75,416
13,096
186,095(69,169)
45,003(210,303)(152,009)
325,835
134,720(997,371)(383,111)(936,054)(630,705)(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

For the Nine Months Ended
September 30
2017
2016
Accrued pension liabilities
Other liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income tax paid$

Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESPayment for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of noncurrent assets held for sale
Proceeds from disposal of investments accounted for by using theequity method
Proceeds from disposal of financial assets measured at cost
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Refund in prepayments for aircrafts
Increase in computer software costs
Decrease in restricted assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans
Decrease in short-term loans
Decrease in short-term bills payable
Proceeds from issue of bonds payable
Repayments of bonds payable
Proceeds of long-term debts
Repayments of long-term debts and capital lease obligations
Proceeds of guarantee deposits received
Refund of guarantee deposits received
Proceeds from acquisition of subsidiaries' stocks
Dividends paid to owners of the Company
Cash dividends paid to non-controlling interests
Net cash used in financing activities-8-(804,232)
18,911
22,970,448
143,127
458,880(1,057,576)(141,286)$ (3,363,329)(15,358)
12,802,886
150,200
437,812(956,914)(166,088)

22,373,593

12,267,896(6,711,221)
80,840836,768(6,625,710)
17,94863
384,285

380,850(158,364)
174,876(11,824,421)(83,936)
1,362

5,579
(276,592)
145,051(9,493,653)
5,126,799(231,034)
474,589(17,303,246)(10,472,675)

120,000(225,000)(890,000)
2,350,000(2,700,000)
21,247,000(23,096,592)
122,192(86,715)(48,387)(39,920)

115,000(80,000)(9,995)9,700,000(2,400,000)
19,430,500(27,007,433)
84,851(54,633)(8,084)(2,508,525)(201,886)(3,247,422)(2,940,205)(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

For the Nine Months Ended
September 30
2017
2016
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES$(241,629)$(154,017)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

1,581,296(1,299,001)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD24,267,197

23,491,085

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$ 25,848,493$ 22,192,084

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated November 5, 2017)-9-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)(Reviewed, Not Audited)

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its stocks have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company is primarily involved in (a) air transport services
for passengers, cargo and mail; (b) ground services and routine aircraft maintenance; (c) major maintenanceof flight equipment; (d) communications and data processing services to other airlines; (e) the sale ofaircraft parts and aviation equipment; and (f) leasing of aircrafts.
The major stockholders of the Company are the China Aviation Development Foundation (“CADF”) andthe National Development Fund (“NDF”), Executive Yuan. As of September 30, 2017, December 31,
2016 and September 30, 2016, CADF and NDF held a combined 43.63% of the Company’s stock.

2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiaries (collectively, the “Group”) wereapproved by the board of directors and authorized for issue on November 5, 2017.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
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
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:
1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
The amendment clarifies that the recoverable amount of an asset or a cash-generating unit isdisclosed only when an impairment loss on the asset has been recognized or reversed during theperiod. Furthermore, if the recoverable amount of an item of property, plant and equipment for
which an impairment loss has been recognized or reversed is the fair value less costs of disposal, theGroup is required to disclose the fair value hierarchy. If the fair value measurements are
categorized within Level 3, the valuation technique and key assumptions used to measure the fairvalue are disclosed. The discount rate used is disclosed if such fair value less costs of disposal ismeasured by using the present value technique. The amendment should be applied retrospectively
from January 1, 2017. Refer to Notes 13 and 16 for related disclosures.

- 10 -

2) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities
Issuers
The amendments include additions of several accounting items and requirements for disclosures of
impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by
the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, theamendments also include an emphasis on certain recognition and measurement considerations andadd requirements for disclosures of related party transactions and goodwill.
The amendments stipulate that other companies or institutions of which the chairman of the boardof directors or president serves as the chairman of the board of directors or the president of theGroup, or is the spouse or second immediate family of the chairman of the board of directors orpresident of the Group are deemed to have a substantive related party relationship, unless it can bedemonstrated that no control, joint control, or significant influence exists. Furthermore, theamendments require the disclosure of the names of the related parties and the relationships withwhom the Group has significant transactions. If the transactions or balance with a specific related
party is 10% or more of the Group’s respective total transactions or balance, such transactions
should be separately disclosed by the name of each related party.
When the amendments are applied retrospectively from January 1, 2017, the disclosures of related
party transactions and the impairment of goodwill are enhanced. Refer to Note 33 for related
disclosures.
b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and theInternational 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 2018
New, Amended or Revised Standards and Interpretations(the “New IFRSs”)
Annual Improvements to IFRSs 2014-2016 Cycle
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments withIFRS 4 Insurance Contracts”
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
IFRS 15 “Revenue from Contracts with Customers”
Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue fromContracts with Customers”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”
IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”

Effective Date
Announced by IASB (Note 1)
Note 2January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or afterJanuary 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods
beginning on or after January 1, 2018.

- 11 -

1) IFRS 9 “Financial Instruments” and related amendments
Recognition, measurement and impairment of financial assets
With regard to financial assets, all recognized financial assets that are within the scope of IAS 39“Financial Instruments: Recognition and Measurement” are subsequently measured at amortizedcost or fair value. Under IFRS 9, the requirement for the classification of financial assets is statedbelow.
For the Group’s debt instruments that have contractual cash flows that are solely payments ofprincipal and interest on the principal amount outstanding, their classification and measurement are
as follows:a) For debt instruments, if they are held within a business model whose objective is to collectcontractual cash flows, the financial assets are measured at amortized cost and are assessed for
impairment continuously with impairment loss recognized in profit or loss, if any. Interest
revenue is recognized in profit or loss by using the effective interest method;b) For debt instruments, if they are held within a business model whose objective is achieved byboth the collection of contractual cash flows and the sale of financial assets, the financial assets
are measured at fair value through other comprehensive income (FVTOCI) and are assessed for
impairment. Interest revenue is recognized in profit or loss by using the effective interest
method, and other gains or losses shall be recognized in other comprehensive income, except for
impairment gains or losses and foreign exchange gains and losses. When the debt instruments
are derecognized or reclassified, the cumulative gains or losses previously recognized in othercomprehensive income is reclassified from equity to profit or loss.
Except for above, all other financial assets are measured at fair value through profit or loss.
However, the Group may make an irrevocable election to present subsequent changes in the fairvalue of an equity investment (that is not held for trading) in other comprehensive income, with
only dividend income generally recognized in profit or loss. No subsequent impairment
assessment is required, and the cumulative gains or losses previously recognized in othercomprehensive income cannot be reclassified from equity to profit or loss.
The Group analyzed the facts and circumstances of its financial assets that exist as of September 30,
2017 and performed a preliminary assessment of the impact of IFRS 9 on the classification andmeasurement of financial assets. Listed shares, emerging market shares, and unlisted sharesclassified as available-for-sale will be designated as at fair value through other comprehensive
income, and the fair value gains or losses accumulated in other equity will be transferred directly toretained earnings instead of being reclassified to profit or loss on disposal.
IFRS 9 requires that impairment loss on financial assets is recognized by using the expected credit
loss model. A credit loss allowance is required for financial assets measured at amortized cost,financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising fromIFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments andfinancial guarantee contracts. A loss allowance for 12-month expected credit losses is required fora financial asset if its credit risk has not increased significantly since its initial recognition. A loss
allowance for full-lifetime expected credit losses is required for a financial asset if its credit risk has
increased significantly since its initial recognition and is not low. However, a loss allowance forfull-lifetime expected credit losses is required for trade receivables that do not constitute a financing
transaction.
For purchased or originated credit-impaired financial assets, the Group takes into account the
expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate.
Subsequently, any changes in expected losses are recognized as a loss allowance with acorresponding gain or loss recognized in profit or loss.
- 12 -

After performing a preliminary assessment on the approach the Group will apply, a simplified
approach to recognize lifetime expected credit losses for trade receivables is implemented.
Hedge accounting
The main changes in hedge accounting were amendments of the application requirements for hedge
accounting to better reflect the entity’s risk management activities. Compared with IAS 39, themain changes include: (1) enhancing types of transactions eligible for hedge accounting,specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing
the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3)replacing retrospective effectiveness assessments with the principle of economic relationships
between the hedging instruments and the hedged items. A preliminary assessment on the Group’s
current hedging relationships indicates that they will qualify as continuing hedging relationships
upon application of IFRS 9.
2) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”
The amendment clarifies that the difference between the carrying amount of a debt instrument
measured at fair value and its tax base gives rise to a temporary difference, even though there are
unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying
amount of the debt instrument by sale or by holding it and collecting contractual cash flows.
In addition, in determining whether to recognize a deferred tax asset, the Group should assess adeductible temporary difference in combination with all of its other deductible temporary
differences, unless the tax law restricts the utilization of losses as deductions against income of a
specific type; in which case, a deductible temporary difference is assessed in combination only withother deductible temporary differences of the appropriate type. The amendment also stipulates
that, when determining whether to recognize a deferred tax asset, the estimate of probable futuretaxable profit may include some of the Group’s assets for more than their carrying amount if there issufficient evidence that it is probable that the Group will achieve this and that the estimate for futuretaxable profit should exclude tax deductions resulting from the reversal of deductible temporary
differences. In assessing deferred tax assets, the Group currently assumes it will recover the assets
at their carrying amounts when estimating probable future taxable profit; the amendment will beapplied retrospectively in 2018.
3) IFRS 15 “Revenue from Contracts with Customers” and related amendment
IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers,
and will supersede IAS 18 “Revenue” and IAS 11 “Construction Contracts”.
When applying IFRS 15, an entity shall recognize revenue by applying the following steps:






Identify the contract with the customer;
Identify 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 entity satisfies a performance obligation.

- 13 -

In identifying performance obligations, IFRS 15 and the related amendment require that a good orservice be 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 of those goods or services individually rather thanto transfer combined items). The Group has performed a preliminary assessment whereby, under
IFRS 15, the Group will allocate the transaction price to each performance obligation identified in acontract on a relative stand-alone selling price basis. Currently, the Group applies the residual
value method to allocate the amount of revenue to be recognized.
Except for the above impact, as of the date the financial statements were authorized for issue, the Groupis 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.
c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date
Announced by IASB (Note)

New IFRSs
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”
IFRS 17“Insurance Contracts”
Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”
IFRIC 23 “Uncertainty Over Income Tax Treatments”
Note:

January 1, 2019
To be determined by IASB
January 1, 2019
January 1, 2021
January 1, 2019
January 1, 2019

Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on orafter their respective effective dates.

IFRS 16 “Leases
IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related
interpretations.
Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for allleases on the consolidated balance sheets except for low-value and short-term leases. The Group may
elect to apply the accounting method similar to the accounting for operating leases under IAS 17 to the
low-value and short-term leases. On the consolidated statements of comprehensive income, the Groupshould present the depreciation expense charged on right-of-use assets separately from the interest
expense accrued on lease liabilities; interest is computed by using the effective interest method. On
the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities areclassified within financing activities; cash payments for the interest portion are classified within
operating activities.
The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as
lessor.
When IFRS 16 becomes effective, the Group may elect to apply this standard either retrospectively toeach prior reporting period presented or retrospectively with the cumulative effect of the initial
application of this standard recognized at the date of initial application.

- 14 -

4. SIGNIFICANT ACCOUNTING POLICIESExcept for the policies listed below, the accounting policies adopted for these consolidated financial
statements are the same as those for the consolidated financial statements for the year ended December 31,
2016.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” asendorsed by the FSC. Disclosure information included in these interim consolidated financial statements
is less than the disclosures required in a full set of annual consolidated financial statements.
Basis of Consolidation
These consolidated financial statements incorporate the financial statements of the Company and theentities controlled by the Company (i.e. its subsidiaries, including special purpose entities).
Control is achieved when the Company has the power to govern the financial and operating policies of anentity so as to obtain benefits from its activities.
When necessary, adjustments are made to the financial statements of subsidiaries, to ensure thatsubsidiaries’ accounting policies are consistent with the Company.
All intra-group transactions, balances, income and expenses are written of in consolidation financial
statement.
Non-controlling interests shall be presented in the consolidated balance sheets within equity and separatelyfrom the equity of the owners of the Company. The total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance. The proportion of ownership and main businesses ofsubsidiaries can be found in Note 14 and Table 6 following the notes to the consolidated financial
statements.
Retirement Benefits
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determinedpension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since thattime and for significant plan amendments, settlements, or other significant one-off events.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period
income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax
income the tax rate that would be applicable to expected total annual earnings.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
Material accounting judgments, estimates and assumptions adopted for these consolidated financial
statements are equivalent to those adopted for the consolidated financial statements for the year ended
December 31, 2016.

- 15 -

6. CASH AND CASH EQUIVALENTS

Cash on hand and revolving funds
Checking accounts and demand deposits
Cash equivalentTime deposits with original maturities of lessthan three months
Repurchase agreements collateralized by bonds

September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

408,046
9,356,923

359,106
9,266,679

438,192
7,301,543

12,037,496
4,046,028

3,698,109
10,943,303

5,667,223
8,785,126$ 25,848,493$ 24,267,197$ 22,192,084

The market rate intervals of cash in the bank and cash equivalents at the end of the reporting period were as
follows:

Bank balanceTime deposits with original maturities of less than
three months
Repurchase agreements collateralized by bonds

September 30,
2017

December 31,
2016

September 30,
2016

0%-2%

0.05%-2%0%-1.9%0.59%-3.78%
0.38%-1.66%

0.13%-12.9%
0.33%-1.40%

0.3%-4.82%
0.33%-0.95%

The amounts of time deposits with original maturities of more than three months as of September 30, 2017,
December 31, 2016 and September 30, 2016 were $684,496 thousand, $1,267,927 thousand and $1,393,713
thousand, respectively, and the respective market rate intervals were 0.16%-1.065%, 0.16%-2.45% and0.21%-2.45%, which were recognized as other current assets. (Refer to Note 19.)
The Group designated its time deposits with original maturities of less than three months and repurchaseagreements collateralized by bonds as fair value hedges to hedge exchange rate exposure on its A350-900
aircraft purchase commitment. As of September 30, 2016, the book value of the hedging instruments was$6,666,667 thousand, and the gain on fair value changes due to the fluctuations of exchange rates in theamount of $191,121 thousand was recognized in profit or loss for the nine months ended September 30,
2016 with corresponding adjustments to prepayments for aircrafts.

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
September 30,
2017

December 31,
2016

September 30,
2016

Financial assets held for trading - current
Derivative financial instruments (not under hedge
accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates- 16 -

$

-

$

1,200

$

1,010

279,822415,441

436,837$ 279,822$ 416,641$ 437,847(Continued)

September 30,
2017

December 31,
2016

September 30,
2016

Financial liabilities held for trading
Derivative financial instruments (not under hedge
accounting) - foreign exchange forward
contracts
Current
Noncurrent$$

13,360
2,634

$
$

-

$
$

5,419
(Concluded)

At the end of the reporting period, the outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Currency

Notional Amount(In Thousands)

Maturity Date

September 30, 2017
Buy forward contracts

NTD/USD2017.10.31-2019.01.31

NTD424,242/USD14,000

NTD/USD2017.1.26

NTD32,258/USD1,000

NTD/USD

2016.10.14-2017.01.26

NTD263,323/USD8,400

December 31, 2016
Buy forward contracts
September 30, 2016
Buy forward contracts

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
September 30, 2017
% ofCarrying
OwnerAmountship

December 31, 2016
% ofCarrying
OwnerAmountship

September 30, 2016
% ofCarrying
OwnerAmount
ship

$

$

$

Noncurrent
Domestic market
TransAsia Airways

-

-

-

-

14,099-On November 22, 2016, the board of the directors of TransAsia Airways (“TNA”) resolved to dissolveTNA. Therefore, the Group recognized an impairment loss on its investment related to TNA.
Furthermore, the Group recognized a full allowance for bad debts on the accounts receivable related toTNA.

- 17 -

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
September 30,
2017

December 31,
2016

September 30,
2016

Derivative financial assets under hedge
accounting
Foreign exchange forward contracts
Currency options
Fuel options

Current
Noncurrent$

18,945-$61,634
83

$

6,818
11
188

$

18,945$61,717

$

7,017

$

18,88065$

58,449
3,268

$

7,017
-

$

18,945$61,717

$

7,017

$

51,515-$

3,855
19,774-$

6,914
185,648
44,684
7$

51,515$23,629$ 237,253$

46,558
4,957$

20,8542,775$ 237,253-$

51,515$23,629$ 237,253

Derivative financial liabilities under hedge
accounting
Interest rate swaps
Foreign exchange forward contracts
Currency options
Fuel options

Current
Noncurrent

The Group determined the fair value of each derivative contract based on price quotes from financial
institutions.
Cash Flow Hedges
a. Interest rate swaps
The Group entered into interest rate swap contracts to mitigate the risk of changes in interest rates on its
cash flow exposure resulting from its outstanding floating rate debt. All interest rate swap contracts
with fixed interest rates and floating interest rates are designated as cash flow hedges.
The outstanding interest rate swap contracts at the end of the reporting period were as follows:

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

2017.3.9-2017.6.22

1.01%-1.14%

Range of Interest Rates
Received

December 31, 2016
NT$2,500,000- 18 -TAIBOR Rate(Continued)

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

2016.11.28-2017.6.22

1.01%-1.14%

Range of Interest Rates
Received

September 30, 2016
NT$3,000,000

TAIBOR Rate(Concluded)

The interest rate swaps are settled on a quarterly basis. The Group will settle the difference between
the fixed and floating interest rates on a net basis.
b. Currency options
The Group entered into currency options to minimize the risk of changes in foreign currency rates on its
cash flow exposures related to fuel payments, which will be paid in U.S. dollars.
The outstanding currency options at the end of the reporting period were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

JPY/USD
JPY/USD

2016.10.12-2016.12.19
2016.10.12-2016.12.19

JPY1,120,340/USD9,400
JPY1,091,095/USD9,400

September 30, 2016
Buy USD call option
Sell USD put optionc. Fuel options
The Group used fuel options to minimize the risk of changes in fuel prices related to operating costs.
The outstanding fuel options at the end of the reporting period were as follows:
Notional Amount(In Thousands)

Currency

Maturity Date

USD

2017.01.05-2017.02.08

NTD83

USD
USD

2016.10.31-2017.01.31
2016.10.31-2017.01.31

NTD188
NTD7

December 31, 2016
Buy fuel call option
September 30, 2016
Buy fuel call option
Sell fuel put option

Based on the Taiwan Stock Exchange’s regulation for public companies’ monthly declarations on the
trading of derivative financial instruments, the contractual amounts are shown at the absolute values of
their fair values because fuel option contracts only have notional amounts.
d. Foreign exchange forward contracts
The Group entered into foreign exchange forward contracts to minimize the risk of changes in foreign
currency rates on its cash flow exposure related to fuel payments and aircraft leases, which will be paidin U.S. dollars.

- 19 -

Currency

Maturity Date

Notional Amount(In Thousands)

NTD/USD2017.10.2-2019.06.21

NTD5,807,515/USD191,720

NTD/USD2017.1.3-2018.10.25

NTD5,381,178/USD167,078

NTD/USD

2016.10.03-2018.05.22

NTD5,933,347/USD189,180

September 30, 2017
Buy forward contracts
December 31, 2016
Buy forward contracts
September 30, 2016
Buy forward contracts

Gains and losses of hedging instruments reclassified from equity to profit or loss were included in thefollowing line items in the consolidated statements of comprehensive income:

Increase in operating costs
Increase in finance costs
Other foreign exchange gains(losses)

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$ (14,491)-$ (20,777)(2,989)$ (35,419)(2,814)$ (336,674)(6,901)(5,810)73,431(22,138)

57,35549,665$ (60,371)$ (286,220)$ (20,301)$

The amount of gains and losses on hedging instruments for the nine months ended September 30, 2017and 2016 reclassified from profit or loss to prepayments for equipment was $103,369 thousand and$110,449 thousand, respectively.
The amount of gains and losses on hedging instruments for the three months ended September 30, 2017and 2016 reclassified from profit or loss to prepayments for equipment was $12,831 thousand and$105,721 thousand, respectively.

10. FINANCIAL ASSETS CARRIED AT COST

Unlisted common stocks
Everest Investment
Holdings Ltd.
Jardine Aviation
Service
Taikoo (Xiamen)
Landing Gear Service
Co., Ltd.

September 30, 2017
% ofCarrying
OwnerAmountship

December 31, 2016
% ofCarrying
OwnerAmountship

September 30, 2016
% ofCarrying
OwnerAmount
ship

$

$

$

52,70414

52,704

14

-

-

15

56,0236-- 20 -

52,70414

15

56,02315

6-

6(Continued)

Taikoo Spirt Aerospace
Systems (Jin Jiang)
Composite Co., Ltd.
Chung Hwa Express
Co.

September 30, 2017
% ofCarrying
OwnerAmountship

December 31, 2016
% ofCarrying
OwnerAmountship

September 30, 2016
% ofCarrying
OwnerAmount
ship

$

$

$

Unlisted preferred stocks
Everest Investment
Holdings Ltd.

Classified according tofinancial asset
measurement categories
Available-for-salefinancial assets

19,708

5

20,1575

11,00083,412473

20,4035

11

11,000139,884

11

11,000140,130

11

-

473

-

473

-

$

83,885$ 140,357$ 140,603$

83,885$ 140,357$ 140,603(Concluded)

The Group recognized an impairment loss of $71,826 thousand in July 2016, because the value of Taikoo(Xiamen) Landing Gear Service Co., Ltd. permanently declined. Due to the permanent decrease in thevalue 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 and losses.
On the reporting date, the above unlisted stock investments held by the Group were measured at cost after
deducting impairment losses because their ranges of reasonable fair value estimates were significant andunable to be reasonably evaluated. Thus, the management considered their fair values unable to bemeasured.

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable

September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

444,756

525,797

485,228

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

8,074,845(222,249)
7,852,596

8,019,386(191,398)
7,827,988

6,791,152(122,025)
6,669,127$ 8,297,352$ 8,353,785$ 7,154,355

The average credit period on sales was 7 to 55 days. In determining the recoverability of accounts
receivable, the Group considered any change in the credit qualities of the accounts receivable since thedates credit was initially granted to the end of the reporting period, and the allowance for impairment loss
was based on the estimated irrecoverable amounts determined by reference to the Group’s past default
experience with the respective counterparties and analyses of their current financial positions.
- 21 -

Movement in the allowance for impairment loss recognized as notes receivable and accounts receivables
was as follow:
For the Nine Months Ended
September 30
2017
2016
Beginning balance
Impairment loss recognized on receivables
Amounts written off during current period
Amounts receivable during current period
Effects of exchange rate changes$ 191,398
38,006(7,058)(86)(11)$ 109,927
13,943(2,098)253

Ending balance$ 222,249$ 122,025

September 30,
2017

December 31,
2016

September 30,
2016$ 8,034,146
558,467
66,861
3,517$ 7,713,264
553,327
166,684
1,111$ 7,666,251
529,406
163,140
2,510$ 8,662,991$ 8,434,386$ 8,361,307

12. INVENTORIES

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersThe operating costs for the nine months ended September 30, 2017 and 2016 included losses frominventory write-downs of $325,686 thousand and $158,457 thousand, respectively. The operating costs
for the three months ended September 30, 2017 and 2016 included losses from inventory write-downs of$100,968 thousand and $53,676 thousand, respectively.

13. NONCURRENT ASSETS HELD FOR SALE
September 30,
2017

December 31,
2016

September 30,
2016$ 494,686$ 185,100$ 121,406

Aircrafts held for saleTo enhance its competitiveness, the Company plans to introduce new aircrafts and retire old aircrafts
according to a planned schedule. Such aircrafts, classified as noncurrent 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.
The Company recognized an impairment loss of $3,571,301 thousand and $138,335 thousand for the ninemonths ended September 30, 2017 and 2016, respectively. Some aircrafts completed the planned disposal
procedures, and the Company recognized respective disposal gains and losses of $147,568 thousand and$(26,429) thousand for the nine months ended September 30, 2017 and 2016, respectively.
The Company recognized an impairment loss of $0 and $138,335 thousand for the three months ended
September 30, 2017 and 2016, respectively. Some aircrafts completed the planned disposal procedures,and the Company recognized respective disposal gains of $82,544 thousand and $0 for the three months
ended September 30, 2017 and 2016, respectively.
- 22 -

The related measurement of fair value is a Level 3 measure to which the second-hand market and theconditions of the aircrafts were referred.

14. SUBSIDIARIES
Subsidiaries included in the consolidated financial statements:

Investor Company
China Airlines, Ltd.

Investee Company
Cal-Dynasty International
Cal-Asia Investment
Hwa Hsia
Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)
Mandarin Airlines

Cal-Dynasty International
Taiwan Airport Services

Note:

Taiwan Air Cargo Terminal (Note)
Dynasty Holidays
Taoyuan International Airport
Services
Taiwan Airport Services (Note)
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance And
Engineering Co., Ltd.
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)

Main Businesses and Products

Proportion of Ownership (%)
September 30,
December 31,
September 30,
2017
2016
2016

A holding company, real estate andhotel services
General investing
Cleaning of aircrafts and maintenanceof machine and equipment
Travel business
Real estate leasing and international
trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircrafts
Air cargo and storage
Travel businessAirport services

100

100

100

100
100

100
100

100
100

100
100

100
100

100
100

100
94

100
94

100
94

94

94

94

59
51
49

59
51
49

59
51
49

Airport services
Forwarding and storage of air cargo
Aircraft leasing
Aircraft leasing
Air transportation
Aircraft maintenance

48
25
100
100

48
25
100
100
90
100

48
25
100
100
90
100

Real estate management
Hotel businessAirport supporting service andinvesting

100
100
100

100
100
100

100
100
100

Proportion of ownership is considered from the Group view.

The Group liquidated Freighter Princess Ltd. and Freighter Prince Ltd., because the lease contracts related
to these subsidiaries expired.
The board of directors reached an agreement to purchase 10% of the stock of Tigerair Taiwan Co., Ltd.,
which was held by Roar Aviation III Pte. Ltd., in December 2016. The transaction was completed in
January 2017.
The Company increased its investment in Taiwan Aircraft Maintenance and Engineering Co., Ltd., with apayment of $490,000 thousand and $100,000 thousand in April 2017 and October 2016, respectively, forthe purpose of building hangars.
Each of the Company’s holdings of the issued capital stock 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 nine months ended
September 30, 2017 and 2016 of these subsidiaries was reported according to information that had not been
independently reviewed, except for that of Mandarin Airlines and Tigerair Taiwan Co., Ltd.
The Group’s holding of the issued capital stock of China Pacific Catering Services and China Pacific
Laundry Services each exceeded 50%, yet the Group did not have control over the investees. For related
information, refer to Note 15,b.

- 23 -

15. INVESTMENTS ACCOUNTED FOR BY USING THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

September 30,
2017

December 31,
2016

September 30,
2016$ 1,793,417
885,322$ 2,060,403
806,028$ 2,000,345
809,635$ 2,678,739$ 2,866,431$ 2,809,980

September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

a. Investments in associates

Unlisted companies
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.

507,323
274,504
248,904
472,183
246,760

515,051
267,371
279,176
257,928
467,041
230,888

509,095
253,363
247,795
248,254472,486
227,641

43,74342,94841,711$ 1,793,417$ 2,060,403$ 2,000,345

At the end of the reporting period, the proportion of ownership and voting rights of associates held by
the Group were as follows:

Name of Associate

Proportion of Ownership and Voting Rights
September 30,
December 31,
September 30,
2017
2016
2016

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.

- 24 -

20%
36%
25%
28%
28%

20%
36%
25%
26%
28%
28%

20%
36%
25%
26%
28%
28%

35%

35%

35%

The recognized investment income of associates accounted for by using the equity method were as
follows:

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.

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

$

$

6,314
23,554$

10,86524,48921,76960,120$40,986
60,38931,402
2,208

27,327
8,183

69,365
21,81978,434
16,413

4,889

6,713

15,265

12,690

6,507

5,615

20,79017,847

643

2,027

1,757

2,964

85,219$ 210,885$ 229,723

75,517$

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 $119,800
thousand was recognized.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
September 30,
2017

December 31,
2016

September 30,
2016$ 718,468
166,854$ 638,980
167,048$ 646,277
163,358$ 885,322$ 806,028$ 809,635

China Pacific Catering Services
China Pacific Laundry Services

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled
entities held by the Group were as follows:
Proportion of Ownership and Voting Rights
September 30,
December 31,
September 30,
2017
2016
2016
China Pacific Catering Services
China Pacific Laundry Services

51%
55%

51%
55%

51%
55%

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 sides havethe right to make major motion vetoes on the board of directors, and therefore the Group does not havecontrol.

- 25 -

Details of the investment income attributable to investments in jointly controlled entitles were as
follows:

China Pacific Catering Services
China Pacific Laundry Services

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

48,246
6,391$

48,001
5,601$ 158,251
16,626$ 152,786
14,999$54,637$53,602$ 174,877$ 167,785

The investments accounted for by using the equity method and the share of profit or loss and othercomprehensive income of those investments were based on the jointly controlled entities’ financial
statements which have not been reviewed.
For information on the major businesses and products and the locations of registration for the major
business offices of the above entities, refer to Tables 6 and 7 (names, locations, and related informationof investees on which the Company exercises significant influence and investment in mainland China)
following the notes to the consolidated financial statements.

16. PROPERTY, PLANT AND EQUIPMENT
September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

Cost
Freehold land
Buildings
Flight equipment
Equipment under finance leases
Machinery equipment
Office equipment
Leased assets
Leasehold improvements
Construction in progress

930,620
13,743,554
254,081,603
25,986,980
10,530,148
1,108,789
116,214
4,031,728
247,434

965,174
13,104,983
248,262,079
28,898,891
10,317,327
1,086,015
120,100
3,958,811
499,547

949,089
13,140,658
237,787,465
28,617,154
10,231,023
1,063,699
121,918
3,947,134
355,286$ 310,777,070$ 307,212,927$ 296,213,426

$

$

$

Accumulated depreciation and impairment
Buildings
Flight equipment
Equipment under finance leases
Machinery equipment
Office equipment
Leased assets
Leasehold improvements

Net value

6,134,770
134,042,823
13,848,198
7,238,171893,629
101,126
1,613,745

5,781,555
135,893,108
15,846,688
6,964,422
894,997
101,882
1,593,538

5,713,459
137,448,382
15,405,038
6,882,676
876,327
102,342
1,577,050$ 163,872,462$ 167,076,190$ 168,005,274$ 146,904,608$ 140,136,737$ 128,208,152- 26 -

Freehold Land

Buildings

FlightEquipment

Equipment
under FinanceLeasesOthersTotal

Cost
Balance at January 1,
2016
Additions
Disposals
Reclassification
Net exchange differences
Balance at September 30,
2016$

976,427(27,338)$

13,140,158
49,441(1,981)
406(47,366)$ 229,849,035
5,026,019(2,754,814)
5,667,225-$

28,087,404
777,700(247,950)-$

15,167,890
772,550(218,261)
2,486(5,605)$ 287,220,914
6,625,710(3,223,006)
5,670,117(80,309)$949,089$

13,140,658$ 237,787,465$

28,617,154$

15,719,060$ 296,213,426

$

-

$

(5,355,804)(380,351)
1,981
20,715$ (128,953,990)(10,502,147)
2,554,703(546,948)-$ (14,201,904)(1,548,447)
345,313-$(9,080,350)(570,983)
214,503(5,349)3,784$ (157,592,048)(13,001,928)
3,116,500(552,297)
24,499$-$(5,713,459)$ (137,448,382)$ (15,405,038)$(9,438,395)$ (168,005,274)$

965,174(34,554)$

13,104,983
705,740(5,917)(61,252)$ 248,262,079
4,431,993(2,647,394)
4,034,925-$

28,898,891
1,300,854(279,416)(3,933,349)-$

15,981,800
272,634(266,327)
52,415(6,209)$ 307,212,927
6,711,221(3,199,054)
153,991(102,015)$

930,620$

13,743,554$ 254,081,603$

25,986,980$

16,034,313$ 310,777,070

$

-

$

(5,781,555)(384,135)
3,902
27,018-$ (135,893,108)(11,353,769)
2,172,303
11,152,860(121,109)$ (15,846,688)(1,424,314)
419,255
3,003,549-$(9,554,839)(544,731)
252,816(5,199)5,282-$ (167,076,190)(13,706,949)
2,848,276
14,151,210
32,300(121,109)$-$(6,134,770)$ (134,042,823)$ (13,848,198)$(9,846,671)$ (163,872,462)

Accumulated depreciationand impairment
Balance at January 1,
2016
Depreciation expenses
Disposals
Reclassification
Net exchange differences
Balance at September 30,
2016
Cost
Balance at January 1,
2017
Additions
Disposals
Reclassification
Net exchange differences
Balance at September 30,
2017
Accumulated depreciationand impairment
Balance at January 1,
2017
Depreciation expenses
Disposals
Reclassification
Net exchange differences
Impairment
Balance at September 30,
2017

Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset:
Buildings
Main buildings
Others
Machinery equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others

45-55 years
10-25 years
25 years
3-13 years
3-15 years
5 years
3-5 years
3-5 years(Continued)- 27 -

Flight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircrafts
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

15-25 years
7-20 years
10-20 years
6-8 years
3-10 years
7-12 years
3-15 years
5-12 years(Concluded)

Regarding changes in fleet composition and the future retirement plan, the Group recognized impairment
losses on aircraft equipment for the nine months ended September 30, 2017 of $121,109 thousand based on
the difference between the recoverable amount of $320,000 thousand, which applied the fair value (Level3), and the book value. The fair value was determined based on aircraft conditions and market estimates.
Refer to Note 34 for the carrying amounts of property, plant and equipment pledged by the Group. Basedon the particularity of risk in the aviation industry, all of the Group’s assets such as aircrafts, real estate, andmovable property are adequately insured to diversify the potential risk related to operations.

17. INVESTMENT PROPERTIES

Carrying amount
Investment properties

September 30,
2017

December 31,
2016

September 30,
2016$ 2,075,693$ 2,075,903$ 2,075,972

The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to others. The buildings were depreciated on a straight-line basis over 55 years.
The fair value of the investment properties held by the Group are $2,506,230 thousand, $2,348,759
thousand and $2,348,759 thousand as of September 30, 2017, December 31, 2016 and September 30, 2016.
The above amounts were evaluated by taking into account the report of an appointed real estate appraiser
and the market transactions assessed by the Group’s management.

18. OTHER INTANGIBLE ASSETS
Computer
Software Cost

Accumulated
Amortization

Balance at January 1, 2016
Additions
Amortization expenses$ 1,623,186
231,034-$(613,508)(92,197)$ 1,009,678
231,034(92,197)

Balance at September 30, 2016

$ 1,854,220$(705,705)$ 1,148,515

Balance at January 1, 2017
Additions
Amortization expenses
Effects of exchange rate changes$ 1,898,154
83,936-$(761,039)(195,164)(79)$ 1,137,115
83,936(195,164)(79)

Balance at September 30, 2017

$ 1,982,090$(956,282)$ 1,025,808- 28 -Net Value

The above other intangible asset was depreciated on a straight-line basis over 2-12 years.

19. OTHER ASSETS
September 30,
2017

December 31,
2016

September 30,
2016$684,496441,662
1,701,622
144,053
310,555$ 1,267,927
355,0032,429,741
178,193
407,638$ 1,393,713
1,137,769
1,206,491
36,367
258,440$ 3,282,388$ 4,638,502$ 4,032,780

Current
Other financial assets
Temporary payments
Prepayments
Restricted assets
OthersThe Group designated its time deposits with original maturities of more than three months, which wereclassified as other financial instruments, as cash flow hedges in order to hedge exchange rate exposure fromthe expenditure on aircraft rentals. The losses on the effective portion of the cash flow hedges, whichwere reclassified from equity to profit or loss for the three months ended September 30, 2017 and 2016 andamounted to $0 and $1,449 thousand, respectively, were classified as operating costs in the consolidated
statements of comprehensive income. The losses on the effective portion of the cash flow hedges, whichwere reclassified from equity to profit or loss for the nine months ended September 30, 2017 and 2016 andamounted to $9,038 thousand and $1,449 thousand, respectively, were classified as operating costs in the
consolidated statements of comprehensive income.
September 30,
2017

December 31,
2016

September 30,
2016$ 14,464,620
1,584,651
1,323,913
161,394
2,845
7,175

$ 20,942,278
2,020,389
1,389,464
144,835
18,82730,289$ 26,995,647
3,731,180
1,554,189
8,536
22,297
1,259$ 17,544,598$ 24,546,082$ 32,313,108

Noncurrent
Prepayments for aircrafts
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersThe prepayments for aircrafts were the prepaid deposits and capitalized interest from the purchases ofA350-900 and ATR 72-600 aircrafts. For the related stipulations of the contracts, refer to Note 35.

- 29 -

20. BORROWINGSa. Short-term loans
September 30,
2017

December 31,
2016

September 30,
2016

33,030$ 135,000$ 208,135

1.1%

1.51%-2%

1.11%-2.83%

September 30,
2017

December 31,
2016

September 30,
2016

Bank loans - unsecured$

Interest rates
b. Short-term and bills payable

Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate$

10,000-$ 900,000
-

$

-

$

10,000$ 900,000

$

-

1.18%

0.758%-

September 30,
2017

December 31,
2016

September 30,
2016$ 28,504,833
32,849,057$ 33,993,999
18,100,914$ 30,732,418
16,290,334

28,500,000(24,966)
89,828,924(27,740,345)

37,200,000(64,186)
89,230,727(32,268,540)

34,250,000(44,686)
81,228,066(27,949,134)$ 62,088,579$ 56,962,187$ 53,278,932

c. Long-term debts

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountLess: Current portion

Secured bank loans were secured by freehold land, buildings, machinery equipment and flightequipment; refer to Note 34.
Bank loans (denominated in New Taiwan dollars and U.S. dollars) are repayable quarterly,
semiannually or in lump sum upon maturity. The related information is summarized as follows:
Currency
New Taiwan Dollars
U.S. Dollars
Original currency
September 30, 2017
December 31, 2016
September 30, 2016

$ 61,353,890
51,045,365
45,453,151- 30 -$

32,53650,070(Continued)

Currency
New Taiwan Dollars
U.S. Dollars
Translated to New Taiwan dollars
September 30, 2017
December 31, 2016
September 30, 2016

$ 61,353,890
51,045,365
45,453,151$

1,049,548
1,569,601

0.65%-1.82%
0.92%-2.27%
0.55%-1.945%

0.8539%-4.39%
0.8539%-4.39%

2016.7.11-2029.6.29
2015.3.4-2029.2.4
2014.12.16-2029.2.4

2015.1.18-2017.9.21
2014.12.10-2017.9.21(Concluded)Interest rates
September 30, 2017
December 31, 2016
September 30, 2016
Periods
September 30, 2017
December 31, 2016
September 30, 2016

The Group has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities of up until February 2021, were used by the Group to guarantee issued
commercial paper. As of September 30, 2017, December 31, 2016 and September 30, 2016, suchcommercial paper was issued at discount rates of 0.9983%-1.2897%, 1.0510%-1.4580% and1.056%-1.4563%, respectively.

21. BONDS PAYABLE

Unsecured corporate bonds first-time issued in2013
Unsecured corporate bonds first-time issued in2016
Unsecured corporate bonds second-time issued in2016
Unsecured corporate bonds first-time issued in2017
Convertible bonds issued the fifth time

September 30,
2017

December 31,
2016

September 30,
2016$

8,200,000$ 10,900,000$ 10,900,000

4,700,000

4,700,000

4,700,000

5,000,000

5,000,000

5,000,000

2,350,000
1,659,457
21,909,457

1,638,044
22,238,044

2,579,164
23,179,164(2,700,000)(2,700,000)(5,279,164)$ 19,209,457$ 19,538,044$ 17,900,000

Less: Current portion and put options ofconvertible bonds- 31 -

The related issuance conditions were as follows:
Category
Five-year private unsecured bonds - issued at par in
January 2013; repayable in January 2017 and 2018;
interest of 1.6% p.a., payable annually
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
interest of 1.6% p.a., payable annually
Five-year unsecured bonds - issued at par in May
2016; repayable in May 2020 and 2021; interest of
1.19% p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in September 2020 and2021; interest of 1.08% p.a., payable annually
Three-year private unsecured bonds - issued at par in
May 2017; repayable on due date; interest of 1.2%
p.a., payable annually
Seven-year private unsecured bonds - issued at par in
May 2017; repayable on due date; interest of 1.75%
p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum uponmaturity; discount rate of 1.8245% p.a.

PeriodConditions

Rate (%)

Principal repayable in January of2017 and 2018; indicator rate;
payable annuallyPrincipal repayable in January of2019 and 2020; indicator rate;
payable annuallyPrincipal repayable in May of2020 and 2021; interest p.a.,payable annuallyPrincipal repayable in May of2020 and 2021; interest p.a.,payable annuallyPrincipal repayable on due date;indicator rate; payable annually

1.60

2017.5.19-2024.5.19

Principal repayable on due date;indicator rate; payable annually

1.75

2013.12.26-2018.12.26

Except if converted to capital stockor bought back, principal
repayable in December of 2018-2013.1.17-2018.1.17

2013.1.17-2020.1.17

2016.5.26-2021.5.26

2016.9.27-2021.9.27

2017.5.19-2020.5.19

1.85

1.19

1.08

1.20

The Company issued its 2016 first unsecured corporate bonds of $5,000,000 thousand, and the purchasersof the bonds included Mandarin Airlines and Sabre Travel Network (Taiwan) who held a cumulative facevalue of $300,000 thousand, which was eliminated from the consolidated financial statements.
The Company issued the fifth issue of its unsecured convertible bonds, and the issuance conditions were as
follows:
a. The holders may demand a lump-sum payment for the bonds upon maturity.
b. The holders can request that the Company repurchase their bonds at 100.75% of the face value on thethird 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 theput options, and the difference between the payment amount and carrying amount recognized was a loss
on the bonds payable buy-back, for which the Company reclassified the remaining face value tononcurrent assets.
c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the ex-dividend date
and the date of dividend declaration on record), holders may convert the bonds to the Company’scommon stock. The initial conversion price was set at NT$12.24, which is subject to adjustment if
there is a capital injection by cash, a stock dividend distribution, and the proportion of cash dividends
per share at the market price exceeds 1.5%. Because the Company distributed cash dividends as ofJuly 31, 2016, the conversion price was adjusted to NT$11.64, and corporate bonds with a face value of$3,316,800 thousand were converted to 270,985 thousand shares of common stock.
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.

- 32 -

Proceeds from issuance
Equity component$ 6,000,000(518,621)

Liability component at the date of issuance$ 5,481,379

On November 5, 2017, the Company’s board of directors resolved to issue its 2017 second, five-year
unsecured convertible bonds with a face value of $6,000,000 thousand and coupon value of 100%-100.5%.

22. LEASING
a. Sale-leaseback finance leases
September 30,
2017

December 31,
2016

September 30,
2016

Within one year
Beyond one year and within five years$ 1,726,000
670,000$ 1,254,000
3,562,000$ 1,428,467
4,007,783

Present value of minimum lease payments$ 2,396,000$ 4,816,000$ 5,436,250

Interest rates

1.0617%1.1317%

1.032%1.098%

1.0672%1.63%

Minimum lease payments - flight equipment

The Group had leased A330-300 aircrafts, totaling 3 aircrafts, under sale-leaseback finance leases as of
September 30, 2017. The lease terms started from June 2006 to April 2019. During the lease terms,
the Group retained all risks and rewards attached to the aircrafts and engines and enjoyed the same
substantive rights as those prior to the transactions. The interest rates underlying all obligations underthese finance leases were floating. Therefore, the minimum lease payments under the sale-leaseback
aircraft contracts do not include interest expenses.
b. Finance leases
Taiwan Air Cargo Terminal Co. (“TACT”) entered into a terminal construction contract. Refer toNote 35 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.
September 30,
2017

December 31,
2016

September 30,
2016$

30,39857,40087,798(2,351)$30,131
85,244
115,375(2,070)$29,902
92,885
122,787(2,763)$85,447$

113,305$

120,024(Continued)

Minimum lease payments cargo terminal and other
Within one year
Beyond one year and within five years
Less: Finance costs
Present value of minimum lease payments- 33 -

September 30,
2017

December 31,
2016

September 30,
2016$

29,61555,832$30,001
83,304$29,49090,534$85,447$

113,305$

120,024

Present value of minimum lease payments cargo terminal and other
Within one year
Beyond one year and within five years

Discount rate
Total amount of present value of minimum
lease payments
Current
Noncurrent

4.756%

4.756%

4.97%$ 1,755,615
725,832$ 1,284,001
3,645,304$ 1,457,957
4,098,317$ 2,481,447$ 4,929,305$ 5,556,274(Concluded)c. Operating lease arrangements (include sale-leaseback operating leases)
The Company, Mandarin Airlines, Tigerair Taiwan Co., Ltd. and Taiwan Air Cargo Terminal rented
planes and hangars under various operating lease contracts expiring on various dates of up until May
2028. The Group does not have a bargain purchase option to acquire the leased planes and hangars at
the expiration of the lease periods.
Of the rental rates stated in the aircraft lease agreements, some are fixed and some are floating. If theagreed-upon rental rate is floating and will be revised monthly or semiannually, then subleasing is notallowed for these lease arrangements. As of September 30, 2017, the Group has rented elevenA330-300 planes, fifteen B737-800 planes, ten 777-300ER planes, six ERJ190 planes and nine
A320-200 planes under operating contracts for which the lease terms range from 6 to 12 years.
As of September 30, 2017, December 31, 2016 and September 30, 2016, the refundable deposits paidby the Group under operating lease contracts were $898,068 thousand, $982,988 thousand and$1,033,792 thousand, respectively. A part of the guarantees is secured by credit guarantees, andoutstanding credit guarantees as of September 30, 2017, December 31, 2016 and September 30, 2016
were $1,415,923 thousand, $1,459,935 thousand and $1,379,874 thousand, respectively.
The future minimum lease payments for the non-cancelable operating lease commitments were as
follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

September 30,
2017

December 31,
2016

September 30,
2016$ 11,402,423
43,053,332
31,376,924$ 10,431,969
39,692,972
33,360,179$ 10,234,381
37,017,468
36,484,496$ 85,832,679$ 83,485,120$ 83,736,345- 34 -

The lease payments recognized in profit or loss for the current period were as follows:

Minimum lease payments

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$ 2,891,306$ 8,631,115$ 7,834,871

September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

$ 2,925,994

23. OTHER PAYABLES

Fuel costs
Ground service expenses
Repair expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
Others2,800,530
1,182,311
1,058,017
197,765
2,255,736
739,944286,6422,888,039

2,664,944
902,879
968,371294,751
1,926,538
748,070
391,857
3,567,844

2,498,113
1,017,807
966,679
187,043
2,353,631
751,942
408,813
3,159,853$ 11,408,984$ 11,465,254$ 11,343,881

September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

24. DEFERRED REVENUE

Frequent flyer program
Advance ticket sales

2,425,479
14,747,421

2,427,565
14,202,198

2,375,105
12,211,502$ 17,172,900$ 16,629,763$ 14,586,607$ 15,371,818
1,801,082$ 14,820,860
1,808,903$ 12,784,380
1,802,227$ 17,172,900$ 16,629,763$ 14,586,607

September 30,
2017

December 31,
2016

September 30,
2016

Operating leases - aircrafts$ 8,624,320$ 7,490,154$ 7,132,404

Current
Noncurrent

$

$

$

Current
Noncurrent

25. PROVISIONS

64,9458,559,375$ 8,624,320- 35 -

81,925
7,408,229$ 7,490,154

35,497
7,096,907$ 7,132,404

Aircraft Lease
Contracts
Balance at January 1, 2016
Additional provisions recognized
Usage
Effects of exchange rate changes$ 6,187,481
1,908,338(936,054)(27,361)

Balance at September 30, 2016

$ 7,132,404

Balance at January 1, 2017
Additional provisions recognized
Usage
Effects of exchange rate changes$ 7,490,154
2,371,400(920,122)(317,112)

Balance at September 30, 2017

$ 8,624,320

The Group leased 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 Group had existingobligations to recognize provisions when signing a lease or during the lease term.

26. RETIREMENT BENEFIT PLANS
Employee benefits expense in respect of the Group’s defined benefit retirement plans were calculated using
the actuarially determined pension cost discount rates as of December 31, 2016 and 2015.

Operating costs
Operating expenses

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$ 188,430
87,386$ 151,143
111,237$ 565,228
226,366$ 452,338
261,034$ 275,816$ 262,380$ 791,594$ 713,372

September 30,
2017

December 31,
2016

September 30,
2016

6,000,000$ 60,000,000$ 54,709,846

6,000,000$ 60,000,000$ 54,708,901

6,000,000$ 60,000,000$ 54,708,901

27. EQUITY
a. Capital stock
Common stock

Numbers of stock authorized (in thousands)
Amount of stock authorized
Amount of stock issued- 36 -

For the nine months ended September 30, 2017, the Company issued the 5th domestic unsecured
convertible bonds and the amount of $1,100 thousand convertible bonds holders apply for conversion,and the capital shares were exchanged 95 thousand and entitled to change registration after issuing newshares.
b. Capital surplus
September 30,
2017

December 31,
2016

September 30,
2016$ 552,696$ 552,470$ 552,470

2,673
11,747955
146,589
85,3392,673
11,747
1,019
146,684
85,3392,673
11,7471,019
232,023-$ 799,999$ 799,932$ 799,932

Issuance of stock in excess of par value andconversion premium
Distribution of cash dividends to treasury
stock held by subsidiaries
Employee stock options expired
Long-term investments
Bonds payable equity component
Others

The capital surplus from stock issued in excess of par (including additional paid-in capital fromissuance of common stock and treasury stock transactions) and donations may be used to offset deficits;in addition, when the Group has no deficit, such capital surplus may be distributed as cash dividends ortransferred to capital (but limited to a certain percentage of the Group’s paid-in capital on a yearlybasis).
The capital surplus arising from long-term investments, employee stock options and the distribution of
cash dividends to treasury stock held by subsidiaries may not be used for other purposes but to offset
deficits. The capital surplus arising from stock options for employees and convertible bonds cannot be
used.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”)
amended on June 24, 2016 based on the amended Company Act, where the Company made profit in a
fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting
aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve inaccordance with the laws and regulations, 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 demands,
which should be resolved in the stockholders’ meeting for the distribution of dividends and bonuses tostockholders by cash or stock (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 for earnings 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 thecapital surplus by cash or stock with due consideration of finance, marketing and management
requirements in accordance with the laws and regulations.
The distribution of profit surplus shall be approved in the annual stockholders’ meeting held in thefollowing year and shall be accounted for in that year.

- 37 -

1) Appropriation of earnings in 2015
The appropriation of earnings for 2015 was resolved in the stockholders’ meeting on June 24, 2016.
The appropriations and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Special reserve
Cash dividends$

287,224
76,4862,508,525

Dividends Per
Share (NT$)$ 0.458522382

2) Appropriation of earnings in 2016
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.
When the Company distributes undistributed earnings for the years after 1998, except for non-ROC
residents stockholders, all stockholders can receive an imputation tax credit calculated according to
the Tax Deduction Ratio on the distribution date.
d. Others equity items
The movement of other equity items is as follows:
Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsCash Flow
Hedges

Total

1,755

$ (225,997)$ (66,283)(127,828)--(127,828)-(2,359)-(2,359)--(358,448)(358,448)

20,024-

396,032(7,236)

396,032
12,788(604)$ (195,649)$ (146,098)(Continued)

Balance on January 1, 2016
Exchange differences ontranslating foreign operations
Unrealized gain (loss) on
available-for-sale financial
assetsCumulative gain (loss) arisingon changes in fair value ofhedging instruments
Cumulative (loss) gain arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Effect of income tax$ 157,959

Balance on September 30, 2016$

50,155- 38 -$$

Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsBalance on January 1, 2017
Exchange differences ontranslating the foreign
operations
Cumulative loss on changes infair value of hedging
instruments
Cumulative gain on changes infair value of hedging
instruments reclassified to
profit or loss
Effects of income tax$

78,564

Balance on September 30, 2017

$ (20,644)

$

1,714

Cash Flow
Hedges$Total

31,986$ 112,264(118,908)--(118,908)--(244,526)(244,526)

19,700-172,714
12,209172,71431,9091,714$ (27,617)$ (46,547)(Concluded)$e. Non-controlling interests
For the Nine Months Ended
September 30
2017
2016
Beginning balance
Net income attributable to non-controlling interests
Exchange differences on translating foreign operations
Unrealized gain or loss on available-for-sale financial assets
Cumulative gain (loss) on changes in fair value of hedging
instruments
Cumulative gain on changes in fair value of hedging instruments
reclassified to profit or loss
Effects of income tax
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries$ 2,083,381
236,732(5,305)-$ 2,286,647
191,301(2,760)(6,575)

(106)

2,523

64
1,287
(46,118)(39,920)

2,086(5,130)(4,548)(201,886)

Ending balance$ 2,230,015$ 2,261,658- 39 -

f. Treasury stock
Treasury stock are the Company’s stock held by its subsidiaries as of September 30, 2017 and 2016 andare as follows:(Shares in Thousands)
Number of
Shares,Beginningof Year

Purpose of Treasury Stock

Reduction
Duringthe Year(Note)

Number of
Shares,Endof YearNine months ended September 30, 2017
Company’s stock held by its subsidiaries reclassified frominvestments in shares of stock to treasury stock

2,889

-

2,889

2,889

-

2,889

Nine months ended September 30, 2016
Company’s stock held by its subsidiaries reclassified frominvestments in shares of stock to treasury stock

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 23,443
9,200$ 23,443
9,200$ 32,643$ 32,643$ 19,294
7,572$ 19,294
7,572$ 26,866$ 26,866$ 19,398
7,612$ 19,398
7,612$ 27,010$ 27,010

September 30, 2017
Mandarin Airlines
Hwa Hsia

2,075
814

December 31, 2016
Mandarin Airlines
Hwa Hsia

2,075
814

September 30, 2016
Mandarin Airlines
Hwa Hsia

2,075
814

The above acquisitions by subsidiaries of the Company’s stock in previous years was due to investment
planning. The stock of the Company held by its subsidiaries were treated as treasury stock. The
subsidiaries can exercise stockholders’ rights on these treasury stocks, except for the rights to subscribe
for the Company’s new stock and voting rights.

- 40 -

28. NET INCOME
a. Revenue
For the Three Months Ended
September 30
2017
2016
Passenger
Cargo
OthersFor the Nine Months Ended
September 30
2017
2016

$ 26,724,874
11,179,232
2,638,597$ 25,267,766
8,775,508
2,509,597$ 76,571,150
30,129,719
7,794,913$ 72,814,244
25,035,280
7,537,336$ 40,542,703$ 36,552,871$ 114,495,782$ 105,386,860

b. Other income

Interest income
Subsidy income
Dividend income
OthersFor the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

48,7799,991
54,182
68,084$ 156,833
34,9289,057
234,385$ 193,002
110,376
59,927219,381$ 181,036$ 435,203$ 582,686

59,5158,532
3,069
60,751$$ 131,867
c. Other gains and losses

Gain (loss) on disposal ofproperty, plant andequipment
Gain (loss) on disposal of
noncurrent assets held forsale
Net gain (loss) arising on
financial assets classified asheld for trading
Gain (loss) on disposal ofinvestments
Gain (loss) on foreignexchange, net
Impairment loss recognized on
property, plant andequipment and noncurrent
assets held for sale
Loss on financial assets carriedat costOthersFor the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

$

$

(2,498)

$

2,053

215

$

11,33782,544-

147,568(26,429)787(11,537)(27,488)(30,580)

119,800(358)

119,739(358)

33,825(203,421)(84,770)(655,487)-(138,335)(3,692,410)(138,335)(182,868)(71,826)
4,510(56,023)(351,767)(71,826)(631,639)(418,914)$ (3,944,936)$ (1,543,317)

51,590- 41 -$

d. Finance costs

Interest expense
Bonds payable
Bank loans
Interest on obligations underfinancial leases
Loss on derivatives
designated as hedging
instruments in cash flow
hedge accounting
relationships reclassified
from equity to profit orloss
OthersFor the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

$

80,320252,626$$

73,557
209,386

233,427735,276$

212,798
700,832

12,64817,91742,263

57,955

-

2,989
72

2,814
-

6,901
72

303,921$ 1,013,780

345,594$$

978,558

Information of interest capitalization was as follows:
For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

Capitalization interest$

46,301$ 109,360$ 175,217$ 329,434

Capitalization rate

1.31%-1.37%

1.53%-1.62%

1.31%-1.41%

1.53%-1.73%

e. Depreciation and amortization expenses

Property, plant, equipment
Investment properties
Intangible assets
Depreciation and amortization
expenses
An analysis of depreciation byfunction
Operating costs
Operating expenses

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

4,552,496
70
66,706$

4,389,12570
44,189$ 13,706,949
210
195,164$ 13,001,928
210
92,197$4,619,272$

4,433,384$ 13,902,323$ 13,094,335$

4,382,636
169,930$

4,216,759
172,436$ 13,202,026
505,133$ 12,486,891
515,247$

4,552,566$

4,389,195$ 13,707,159$ 13,002,138(Continued)- 42 -

An analysis of amortization byfunction
Operating costs
Operating expenses

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

141
66,565$454
43,735$

141
195,023$486
91,711$

66,706$44,189$195,164$

92,197f. Employment benefits expense

Post-employment benefits
Defined contribution plans
Defined benefit plans

Other employee benefits
Salary expenses
Personnel service expenses

An analysis of employee
benefits expense by function
Operating costs
Operating expenses

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

123,268
275,816$

108,722
262,380$

358,836
791,594$

316,061
713,372$

399,084$

371,102$1,150,430$

1,029,433$

5,208,110
1,364,674$

4,902,196
1,310,920$ 14,877,120
4,065,845$ 14,323,300
3,810,497$

6,572,784$

6,213,116$ 18,942,965$ 18,133,797$

5,825,101
1,146,767$

5,410,357
1,173,861$ 16,694,579
3,398,816$ 15,610,016
3,553,214$

6,971,868$

6,584,218$ 20,093,395$ 19,163,230

The Company distributes employees’ compensation at rates of no less than 3% of net profit before
income tax and employees’ compensation. For the nine months ended September 30, 2017 and 2016,
the employees’ compensation was $50,030 thousand and $681,690 thousand, respectively, representing
a certain percentage of the base net profit.
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 compensation and remuneration are recognized. If there is a change inthe proposed amounts after the annual consolidated financial statements are authorized for issue, thedifferences are recorded as a change in the accounting estimate.
Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2016 and 2015 are available on the Market Observation Post
System website of the Taiwan Stock Exchange.

- 43 -

29. INCOME TAX
a. Income tax expense recognized in profit or loss
The major components of tax expense (benefit) were as follows:

Current tax
Current year
Prior year adjustments
Deferred tax
Current year
Income tax expense recognizedin profit or loss

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

57,455-$ 141,173
1,617$ 163,947(116)

562,689378,282

665,599

713,137$ 619,282$ 435,737$ 808,389$ 876,968

57,840(1,247)$b. Income tax recognized in other comprehensive income
For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

$

Deferred tax
Recognized in othercomprehensive income
Translation of foreign
operations
Fair value revaluation ofhedging instruments forcash flow hedging
Total income tax benefit(expense) recognized in othercomprehensive income

(646)

$

(5,060)

$

8,829

1,739

(5,706)$

10,56820,980$12,216$33,19615,758(8,100)$7,658

c. Integrated income tax
September 30,
2017

December 31,
2016

September 30,
2016$ 195,252$ 102,527$ 128,967

Imputation credit accounts

The actual creditable tax ratio of the distribution of earnings for the year ended December 31, 2015 was
20.22%. The Company accumulated a deficit to be compensated for the year ended December 31,
2016, and therefore there was no tax deduction ratio resulting from its earnings distribution.
Under the Income Tax Law, for the distributions of earnings generated after January 1, 1998, theimputation credits allocated to ROC resident shareholders of the Company were calculated based on thecreditable ratio as of the dates of each dividend distribution.

- 44 -

d. Income tax assessments
Except for the matters mentioned below, the income tax returns through the year 2014 of the Company
and its subsidiaries have been examined by the tax authorities.
The income tax return of TACT for 2001 was assessed by the tax authorities. After a reinvestigation,an administrative appeal and administrative proceedings, the case was settled, and the amount ofpenalty assigned on June 8, 2017 was $59,501 thousand. TACT had recognized a sufficient provision
for the fine, and the payment is expected to be made on schedule.

30. EARNINGS PER SHARE
For the Three Months Ended
September 30
2017
2016
Basic earnings per share
Diluted earnings per share

Earnings used in the computationof basic earnings per share
Effects of potentially dilutive
common stock:
Interest on convertible bonds(after tax)
Earnings used in the computationof diluted earnings per share

$
$

0.54
0.53

$
$

0.09
0.09

Weighted average number ofcommon stock used in thecomputation of diluted earnings
per share

$
$

0.17
0.17

$
$

0.33
0.32

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$ 2,951,880

$

$

6,257

$ 2,958,137

513,429

11,573$525,002

For the Three Months Ended
September 30
2017
2016
Weighted average number ofcommon stock in computation ofbasic earnings (losses) per share
Effects of potentially dilutive
common stock:
Convertible bonds
Employees’ compensation orbonuses issued to employees

For the Nine Months Ended
September 30
2017
2016

$

952,467$ 1,807,768

18,48534,718970,952$ 1,842,486

For the Nine Months Ended
September 30
2017
2016

5,468,018

5,468,002

5,468,007

5,468,002

145,775

230,610

145,786

230,610

4,427

1,587

6,833

81,234

5,618,220

5,700,199

5,620,626

5,779,846- 45 -

If the Group offers to settle compensation or bonuses paid to employees in cash or stock, the Groupassumes the entire amount of the compensation or bonuses would be settled in stock and the resulting
potential stock were included in the weighted average number of stock outstanding used in the computationof diluted earnings per share, if the effect is dilutive. Such dilutive effects of the potential stock was
included in the computation of diluted earnings per share until the number of stock to be distributed to
employees is resolved in the following year.

31. CAPITAL MANAGEMENT
The goals, policies and procedures as well as the composition of the Group’s capital management are thesame as those stated in Note 31 in the Group’s consolidated financial statements for the year ended
December 31, 2016.

32. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments
1) Financial instruments net evaluated at fair value
Except as detailed in the following table, the Group’s management considers the carrying amountsof financial assets and financial liabilities recognized in these consolidated financial statements asapproximating their fair values.
September 30, 2017
Carrying
AmountFair Value

December 31, 2016
Carrying
AmountFair Value

September 30, 2016
Carrying
AmountFair Value

Financial liabilities
Bonds payable
Loans and debts$ 21,909,457
89,828,924$ 22,313,019
93,842,980$ 22,238,044
89,230,727$ 22,580,069
91,315,640$ 23,179,164
81,228,066$ 23,507,176
81,279,447

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying amounts are their fair values. As of September 30, 2017, December 31, 2016 and
September 30, 2016, the fair values of long-term debts and private bonds with fixed interest rates
were estimated at the present value of expected cash flows discounted at rates of 1.566%, 1.191%
and 0.935%, respectively, prevailing in the market for long-term debts (Level 2). Fair values ofbonds payable were the same as identical liabilities trading on the over-the-counter exchange andwere based on quoted market prices (Level 1).
2) Financial instruments evaluated at fair value
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:a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;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); andc) 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 (i.e. unobservable inputs).

- 46 -

September 30, 2017
Level 1

Level 2

Level 3

Total

Financial assets at FVTPL
Domestic money market
funds

$

279,822

$

-

$

-

$

279,822

Financial liabilities at
FVTPL
Derivative instruments

$

-

$

15,994$-$

15,994

Derivative financial assets
for hedging

$

-

$

18,945$-$

18,945Derivative financial
liabilities for hedging

$

-

$

51,515$-$51,515

December 31, 2016
Level 1
Financial assets at FVTPL
Derivative instruments
Domestic money market
funds

Level 2$-$

Level 3

1,200

415,441

Total

$

-

-

$

-

1,200
415,441$

415,441

$

1,200

$

-

$

416,641

Derivative financial assets
for hedging

$

-

$

61,634$83$

61,717

Derivative financial
liabilities for hedging

$

-

$

23,629$-$23,629September 30, 2016
Level 1
Financial assets at FVTPL
Derivative instruments
Domestic money market
funds

$

Level 2-$436,837

Level 3

1,010

$

-

Total

-

$

1,010

-

436,837$ 436,837

$

1,010

$

-

$ 437,847

Financial liabilities at
FVTPL
Derivative instruments

$

-

$

5,419

$

-

$

Available-for-sale financial
assetsDomestic listed securities$

14,099$-$-$ 14,099(Continued)- 47 -

5,419

Level 1

Level 2

Level 3

Derivative financial assets
for hedging

$

-

$

6,818

$

199

Derivative financial
liabilities for hedging$-$ 192,562$

44,691

Total

$

7,017

$ 237,253(Concluded)

There were no transfers between Levels 1 and 2 in the current period.
d) Valuation techniques and inputs applied for Level 2 fair value measurement
Financial Instruments
Derivatives

Valuation Techniques and Inputs
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 Group
used to determine the fair values are identical to those usedin the pricing of financial instruments for market
participants.

e) Valuation techniques and inputs applied for Level 3 fair value measurement
The fair values of foreign exchange forward contracts and fuel options are determined using
option pricing models where the significant unobservable inputs are implied fluctuations.
Changes in the implied fluctuations used in isolation would result in an increase or decrease in
the fair values of the foreign exchange forward contracts and fuel options.
Because the individual fair values of some financial instruments and non-financial instruments
need not be disclosed, the total fair value disclosed is not the total value of the Group’s financial
and non-financial instruments.
c. Categories of financial instruments
September 30,
2017

December 31,
2016

September 30,
2016

$

$

$

Financial assets
Financial assets at FVTPL
Available-for-sale financial assets (Note 3)
Derivative financial assets for hedging
Loans and receivables (Note 1)

279,82283,885
18,94536,939,970

416,641
140,357
61,71736,576,111

437,847
154,702
7,017
33,402,758

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

15,99451,515
136,774,434

23,629136,575,661

5,419
237,253
123,293,645

Note 1: The balance 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.
- 48 -

Note 2: The balance of financial liabilities measured at amortized cost comprised short-term loans,short-term notes payable, notes and accounts payable, accounts payable - related parties, otherpayables, bonds payable and long-term loans, capital lease obligations, provisions, parts ofother current liabilities, parts of other noncurrent liabilities and guarantee deposits.
Note 3: The balance of available-for-sale financial assets comprised financial assets measured at cost.
d. Financial risk management objectives and policies
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,
exchange rates and in fuel prices, the Group has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by the Group’s
stockholders 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.
In addition, the Group has a risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentages. This committee informs
the Group of global economic and financial conditions, controls the Group’s 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 for effective risk
management.
1) Market 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
to foreign currency risk and interest rate risk.
The Group enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated with the fair values of hedged items
and evaluates the hedging effectiveness of these instruments periodically.
a) Foreign currency risk
The Group enters into currency options to hedge against the risks of changes in the 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.
Sensitivity analysis
The Group was mainly exposed to the U.S. dollar.
The following details the Group’s sensitivity to a one dollar increase and decrease in the New
Taiwan dollar (i.e. the functional currency) against the U.S. dollar. The sensitivity 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.

- 49 -

When the New Taiwan dollar increases one dollar against the U.S. dollar and all other variables
are held constant, there would be a decrease in pre-tax profit at the end of September 30, 2017of $35,020 thousand and a decrease in pre-tax profit at the end of September 30, 2016 of$140,444 thousand.
b) Interest rate risk
The Group enters into interest rate swap contracts to hedge against the risks of changes ininterest rates on the net liability portions of borrowings. The risk is managed by the Groupthrough maintaining an appropriate mix of fixed and floating rate borrowings, and using interest
rate swap contracts and forward interest rate contracts.
The carrying amounts of the Group’s financial liabilities with exposure to interest rates at theend of the reporting period were as follows.

Fair value interest rate risk
Financial liabilities
Cash flow interest rate risk
Financial liabilities

September 30,
2017

December 31,
2016

September 30,
2016$ 23,952,487$ 26,093,421$ 23,725,660

90,310,371

91,339,655

86,445,979

Sensitivity analysis
The sensitivity analyses below were determined based on the Group’s exposure to interest rates
for both derivative and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liabilities
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.
Had interest rates been one yard (25 basis points) higher and had all other variables been held
constant, the Group’s pre-tax profit for the nine months ended September 30, 2017 would havedecreased by $169,332 thousand. Had interest rates increased one yard (25 basis points) andhad all other variables been held constant, the Group’s pre-tax profit for the nine months ended
September 30, 2016 would have decreased by $162,086 thousand.
c) Other price risk
The Group was exposed to fuel price risk on its purchases of aviation fuel. The Group enters
into fuel options to hedge against adverse risks from fuel price changes.

- 50 -

Sensitivity analysis
The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.
For the Nine Months Ended September 30
2017
2016
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increases 5%
Fuel price decreases 5%

$

-

$

-

$

-

$

180
(180)

2) Credit risk
The goal, policies and procedure of credit risk management are same as those disclosed in the
consolidated financial statement for the year ended December 31, 2016, with the related illustration
found in Note 32.
3) Liquidity risk
The goal, policies and procedures of liquidity risk management are the same as those disclosed in
the consolidated financial statement for the year ended December 31, 2016, with the related
illustration found in Note 32.

33. RELATED-PARTY TRANSACTIONS
The balances and transactions between the Company and its subsidiaries, including remaining accountbalances, revenue and expense, have been eliminated upon consolidation and are not disclosed in this note.
Unless otherwise stated, the transactions between the Group and other related parties are as follows:a. Related parties’ names and relationships
Name

Relationship with the Company

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
China Aviation Development Foundation
Others- 51 -

Associate
Associate (disposal in August 2017)
Associate
Associate
Associate
Associate
Associate
Joint venture investment
Joint venture investment
Director of the Company and major
stockholder
Director, key management personnel,
chairman, general manager of the Group,
spouse and second-degree relatives

b. Operating income

Account
Items

For the Three Months Ended
September 30
Related Party Type
2017
2016

Other income Major stockholder of
the Company
Associate
Joint venture
investment$

For the Nine Months Ended
September 30
2017
2016

9,373

$

6,203

$ 25,142$ 23,182$386$ 10,444

$
$

439
3,634

$ 1,621$ 35,455$ 1,743$ 10,447

c. Purchases

Related Party Type
Major stockholder of theCompany
Associate
Joint venture investment

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$
$
$

$
56,695$ 529,058$ 1,405,931$
51,669$ 489,490$ 1,190,934

December 31,
2016

September 30,
2016

21,405
203,646477,352$$$

14,027
159,276
405,836d. Accounts receivable - related parties (generated by operations)

Related Party Type

September 30,
2017

Major stockholder of the Company
Associate
Joint venture investment

$

3,041
196
5,683

$

1,512
501
1,549

$

2,138
2
1,815

$

8,920

$

3,562

$

3,955

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, andthere are no overdue payments.
e. Accounts payable - related parties (generated by operations)

Related Party Type

September 30,
2017

Major stockholder of the Company
Associate
Joint venture investment
China Pacific Catering Services
Others$

6,765
143,435

December 31,
2016
$

3,503
120,824

September 30,
2016
$

4,604
100,354

520,139
21,101

411,698
19,804393,224
19,219$ 691,440$ 555,829$ 517,401

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.

- 52 -

f. Leases of properties (operating leases)
Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots, and the Company paid the rental based on
usage hours. As of September 30, 2017 and 2016, the Company paid rentals of $56,695 thousand and$51,669 thousand, respectively; for the three months ended September 30, 2017 and 2016, theCompany’s paid rentals amounted to $21,405 thousand and $14,027 thousand.
g. Endorsements and guarantees
September 30, 2017
Authorized
AmountAmountUsed

December 31, 2016
Authorized
AmountAmountUsed

September 30, 2016
Authorized
AmountAmountUsed$ 3,850,000
1,080,000
180,000
1,068,500$ 3,850,000
1,080,000
180,000
919,742$ 3,850,000
1,080,000
180,000
893,793

The Company
Cal Park
Taiwan Air Cargo Terminal
Cal Hotel Co., Ltd.
Tigerair Taiwan Co., Ltd.

$ 2,750,000
338,249
412,150$ 2,783,000
436,418
438,740$ 2,780,000
456,056
1,586
426,362h. Compensation of key management personnel

Short-term employee benefits
Post-employment benefits

For the Three Months Ended
September 30
2017
2016

For the Nine Months Ended
September 30
2017
2016

$

10,118946$

11,677
9,944$

34,1102,897$

38,608
11,467$

11,064$

21,621$37,007$50,075

The remuneration of directors and key executives was determined by the remuneration committee withregard to the performance of individuals and market trends.

34. PLEDGED ASSETS
The following assets were pledged or mortgaged as collateral for long-term bank loans, lease obligations
and business transactions:

Property, plant and equipment
Restricted assets

September 30,
2017

December 31,
2016

September 30,
2016$ 82,269,516
305,447$ 77,847,771
323,028$ 86,827,242
44,903$ 82,574,963$ 78,170,799$ 86,872,145- 53 -

35. COMMITMENTS AND CONTINGENT LIABILITIESThe Group had commitments and contingent liabilities (except for those mentioned in other notes) as
follows:
a. In January 2008, the Company entered into a contract to buy fourteen A350-900 aircrafts from Airbus,
with the option to buy six more A350-900 aircrafts, with aggregate purchase prices of US$3,933,235
thousand and US$1,802,645 thousand, respectively. The expected period of delivery of the aircrafts
was from 2016 to 2018. As of September 30, 2017, eight of the aircrafts had been handed over to theCompany, and the total list price of the remaining six aircrafts was US$1,713,782 thousand, which has
been paid in the amount of US$414,058 thousand (recognized as prepayments for aircrafts).
b. For operation needs, the board of directors of Mandarin Airlines resolved to enter into a contract to buy
six ATR72-600 aircrafts, and the total list price of the six aircrafts was $120,000 thousand. The
expected delivery period ranges from June 2018 to June 2020. Additionally, Mandarin Airlines signed
a lease contract for three ATR72-600 aircrafts, which are expected to be delivered on November 2017,and has been paid in the amount of US$1,800 thousand (recognized as prepayments for aircrafts).
c. Tigerair Taiwan Co., Ltd. entered into four lease contracts for a total of four A320-200 aircrafts, eachwith a 10-year lease term, on July, November and December 2015. Three of the four aircrafts weredelivered in January and June 2016. The expected delivery date of the remaining aircrafts will be in
December 2017.
d. 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 the CAA to TACT. 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 approval from the Taoyuan
Airport Corporation and the CAA in July 2013 and July 2015, respectively.
The total expenditure of the main construction project mentioned above was $6,840,000 thousand. As
of September 30, 2017, TACT had signed the following construction contracts with non-related parties:

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan

Cargo Terminal Expansion Construction Consultant
Contract

Contract
Amount (VAT
Included)$ 552,285

As of September 30, 2017, the accumulated consulting services expense and construction equipment
amounted to $464,642 thousand and $5,028,095 thousand, respectively. Upon completion of the
projects, the amounts of $460,273 thousand and $5,021,711 thousand (VAT included) were reclassified
to property, plant, and equipment. The remaining cumulative payments were recognized underconstruction in progress.
Assets acquired from cargo terminal improvements, equipment acquisitions and subsequent equipment
acquisitions and replacements will be transferred to the government without any compensation when
the chartered operating license expires.
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 nonoperating
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 is6%.
- 54 -

e. 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
to this contract. The contract is effective for 50 years (consisting of the development stage andoperation period) from the contract date. Three years before the contract expiry date, CAL Park is thefirst with the option to renew the contract once with a 20-year extension.
CAL Park’s business scope includes providing business- and other operating-space related to civil airtransport, hotels, aviation services and related industries adhering to the base and essential services laws
and approved by the Taoyuan Airport Corporation.
CAL Park shall pay land rental on the date of the registration of surface rights. The rental rates for thedevelopment stage differ from those for the operation period. The rental rates shall 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 shall include theland value added tax plus the necessary maintenance fees; in the operation period, rental is 60% of theamount based on the National Building Land Rental Standard plus land value tax, value-added tax andthe necessary maintenance fees.
During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park shall 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 shall pay additional royalties at 10% of this excess.
CAL Park shall 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 asset transfer
contract no later than three years before the expiry date of the chartered period. If CAA decides not tokeep the building and equipment on the base area, CAL Park shall remove all related buildings andequipment within three months after the expiry date.
f. Taiwan Aircraft Maintenance Company contracted out Ronggong Engineering Co., Ltd. for aconstruction repair project. The contract expiration date is June 15, 2018, and the estimated total costof the project is $1.906 billion. As of September 30, 2017, $165,865 thousand was paid (recognized
as construction in progress).
g. The Group 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 U.S. Northern District Court ofCalifornia by a group of passengers who alleged that there was an antitrust violation in December 2007.
The Company has duly answered the complaint and will explore favorable solutions.

- 55 -

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe 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:
September 30, 2017
Foreign
Currencies

Exchange Rate

Carrying
Amount396,180
14,374257,365
5,482,202
576,21430.303035.71433.87900.26894.5393$ 12,005,435
513,353
987,104
1,474,154
2,615,605

326,989
5,489
94,824
4,849,975
143,832

30.303035.71433.87900.26894.53939,908,749
196,024
366,9141,304,153
652,896

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB
December 31, 2016
Foreign
Currencies

Exchange Rate

Carrying
Amount310,384
15,665
273,060
5,138,687
483,54832.258134.0136
4.15800.27704.6425$ 10,012,403
532,807
1,135,385
1,423,417
2,244,088

259,1456,512
94,831
4,442,045
137,773

32.258134.0136
4.15800.27704.64258,359,536
221,486
394,306
1,230,446
639,614

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB

- 56 -

September 30, 2016
Foreign
Currencies

Exchange Rate

Carrying
Amount434,535
13,559202,420
2,893,598
632,39631.3480
35.2113
4.04200.30994.6992$ 13,621,811
477,431
818,185896,729
2,979,025

83,408
1,535
27,097250,087
59,87231.3480
35.2113
4.04200.30994.69922,616,827
54,030110,01477,438282,913

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB

For the three months ended September 30, 2017 and 2016, net foreign exchange gain (losses) were $33,825
thousand and $(203,421) thousand, respectively; and for the nine months ended September 30, 2017 and2016, net foreign exchange losses were $84,770 thousand and $655,487 thousand, respectively. It isimpractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to thevariety of the foreign currency transactions and functional currencies of the group entities.

37. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided:

None2) Endorsements/guarantees provided: Table 1 (attached)
3) Marketable securities held: Table 2 (attached)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)5) Acquisitions of individual real estate at costs or prices of at least NT$100 million or 20% of thepaid-in capital: None
6) Disposals of individual real estate at costs or prices of at least NT$100 million or 20% of the paid-in
capital: None
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)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 5 (attached)- 57 -

9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 6 (attached)10) Derivative financial transactions (Notes 7 and 9)
b. Investments in mainland China: Table 7 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 8 (attached)

38. SEGMENT INFORMATION
Segment Information
The Group mainly engages in air transportation services for passengers, cargo and others. Its major
revenue-generating asset is its aircraft fleet, which is used jointly for passenger and cargo services. Thus,
the Group’s sole reportable segment is its flight segment. For operating segment reporting in the
consolidated financial statements, the reportable segment of the Group and its subsidiaries comprises theflight and the non-flight business departments. The accounting policies applied for reportable segments
are consistent with the policies aforementioned in Note 4.
For the Nine Months Ended September 30, 2017
Air
Adjustments
Transportation
Othersand Write-offs
Total
Operating revenue$ 113,397,815$

5,861,685$(4,763,718)

Operating profit and loss
Interest revenue
Investment income accounted for byusing the equity method
Revenue
Finance costs
Expenses$$732,649$-

5,402,690$

6,135,339
156,833
385,762
463,344(1,013,780)(4,129,910)

Profit before income tax
Identifiable assets
Investments accounted for by using theequity method
Assets$ 114,495,782$$ 140,095,339$

8,884,962$-

1,997,588$ 148,980,301
2,678,739
71,615,762

Total assets$ 223,274,802- 58 -

For the Nine Months Ended September 30, 2016
Air
Adjustments
Transportation
Othersand Write-offs
Total
Operating revenue$ 104,254,198$

5,883,493$(4,750,831)

Operating profit and loss
Interest revenue
Investment income accounted for byusing the equity method
Revenue
Finance costs
Expenses$$871,633$-

3,546,085$

4,417,718
193,002397,508
332,601(978,558)(1,486,234)

Profit before income tax
Identifiable assets
Investments accounted for by using theequity method
Assets$ 105,386,860$$ 121,298,921$

8,985,203$-

2,876,037$ 130,284,124
2,809,980
83,477,376

Total assets$ 216,571,480- 59 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENTS/GUARANTEES PROVIDEDFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counterparty
Endorsement/
Guarantee
Provider

No.

0

Name

China Airlines, Ltd. Cal Park
(the “Company”) Taiwan Air Cargo Terminal
Cal Hotel Co., Ltd.
Tigerair Taiwan Co., Ltd.

Nature of Relationship100% owned subsidiary
54% owned subsidiary
100% owned subsidiary
100% owned subsidiary by
way of direct andindirect holdings

Limits on EachCounterparty’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmounts(Note 1)

ActualBorrowingAmount$ 11,315,243
11,315,243
11,315,243
11,315,243$ 2,750,000
338,249
412,150$ 3,850,000
1,080,000
180,000
1,079,101$ 3,850,000
1,080,000
180,000
1,068,500

Note 1:

Based on the Group’s guidelines, the maximum amount of guarantee provided to an individual counterparty is 20% of the Group’s stockholders’ equity.

Note 2:

Based on the Group’s guidelines, the allowable aggregate amount of collateral guarantee is 50% of the Group’s stockholders’ equity.

- 60 -

Ratio ofAccumulated
Value ofAmount of
Property, Plant,
Collateral toor Equipment
Net Equity ofPledged as
the Latest
Collateral
Financial
Statement (%)
-

6.80
1.91
0.32
1.89

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

$ 28,288,108
28,288,108
28,288,108
28,288,108

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

Y
Y
Y
Y

N
N
N
N

N
N
N
N

TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDSEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name

Marketable Securities Type and Issuer/Name

China Airlines, Ltd.
(the “Company”)

Stock
Everest Investment Holdings Ltd. - common stockEverest Investment Holdings Ltd. - preferred stock
Chung Hua Express Co.
Jardine Air Terminal Services

Mandarin Airlines

Stock
China Airlines, Ltd.

Cal-Asia Investment

Sabre Travel Network (Taiwan)

Taiwan Airport Services

Hwa Hsia

Relationshipwith theHoldingCompany-

Financial Statement AccountShares/Units

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

1,359,368
135,937
1,100,000
12,000,000

Parent company Available-for-sale financial assets - current

September 30, 2017
Percentage Market Value
Carryingofor Net Asset
AmountOwnership
Value
(%)

$

52,704473
11,000
-

13.59
11.00
15.00

2,074,628

23,4431,000,000$

Note

60,23022,304(1,949)Note 1
Note 1--

23,443-30,406-30,406--

19,7085.83
5.45(49,321)
24,530--51,362
61,08332,00050,000---Beneficial certificates
Barclays America Bonds Fund-

Financial assets at fair value through profit or loss - current

Stock
Taikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang) Composite-

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

Beneficial certificatesFranklin Templeton SinoAm Money Market FundFSITC Taiwan Money Market FundFSITC Money Market Fund
Allianz Global Investors Money Market Fund-

Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current

5,005,106
4,021,023
180,589
4,018,291

51,362
61,08332,00050,000

Stock
TransAsia Airways-

Available-for-sale financial assets - noncurrent

2,277,786-

Beneficial certificatesFuh Hwa Emerging Market Short-term Income Fund-

Financial assets at fair value through profit or loss - current

4,568,824

50,276-50,276-814,152

9,200

-

9,200

-

349,523

4,695

-

4,695

-

Stock
China Airlines, Ltd.
Beneficial certificates
Taishin 1699 Money Market Fund

Parent company Available-for-sale financial assets - current-

Financial assets at fair value through profit or loss - current

Note 1: The subsidiary’s net asset value was $60,230 thousand, which included common stocks and preferred stocks as of and for the year ended December 31, 2016.

- 61 -

0.40

TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

China Airlines, Ltd.

Type and Name ofMarketable
Securities (Note 1)

Financial Statement
Account

Counterparty(Note 2)Stock
Science Park Logistics Investments accounted HCT Logistics Co.,for by using theLtd.
equity method
Taiwan Aircraft
Investments accounted Taiwan Aircraft
Maintenance andfor by using theMaintenance andEngineering Co.,equity method
Engineering Co.,
Ltd.
Ltd.

Relationship(Note 2)Beginning Balance
Number ofAmountShares

Non-related party-

Subsidiary-$

Acquisition (Note 3)
Number ofAmountShares

-

-

-

-

$

Disposal (Note 3)
Carrying
AmountAmountNumber of
Shares

-

-

-

-

$

-

-

$

Gain (Loss) on
Disposal--$Ending Balance
Number ofAmountShares

-

-

-

-

$

-

-

Note 1:

The marketable securities in this table refer to stocks, bonds, beneficial certificates and the securities derived from the above items.

Note 2:Marketable securities which are recognized as investments accounts for by using the equity method are required to be filled in the second column.

Note 3The 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.

Note 4Paid-in capital refers to paid-in capital of the indicated parent company. If the stocks 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.

- 62 -TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESTOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

Nature of Relationship

Purchase/
Sale

Taiwan Air Cargo Terminal
Hwa Hsia
Taiwan Airport Service
Cal Park
Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan Co., Ltd.
China Pacific Catering Services
Kaohsiung Catering Services
Taoyuan International Airport Service
China Aircraft Services
Cal Hotel Co., Ltd.

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Equity-method investee
Subsidiary
Equity-method investee
Subsidiary

Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase

Tigerair Taiwan Co., Ltd. Taoyuan International Airport Service

Same parent company

Purchase

Note:$

Amount% of
Total

345,903250,924
277,355
171,120(1,885,476)
106,957(235,752)
1,316,288
255,965
880,780
151,850
111,687

0.38
0.28
0.31
0.19
(1.84)
0.12(0.23)
1.46
0.28
0.98
0.17
0.12

30 days
2 months
40 days
2 months
2 months
2 months
1 month90 days
60 days
40 days
30 days
1 month110,264

2.59

30 daysIntercompany transactions were written off in the consolidated financial statements.

- 63 -

Note/Account Payable or
Receivable% ofPayment Terms Ending Balance
Total

Abnormal Transaction
Payment Terms

Unit Price
$

-

-

-

-

$

Note

(42,351)(59,512)(64,961)(54,302)575,810(282,344)
25,186(520,139)(78,511)(188,998)(52,392)(9,241)(2.38)(3.35)(3.65)(3.05)
6.56(15.87)0.29(29.24)(4.41)(10.63)(2.95)(0.50)-(14,877)(0.36)-TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALSEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 575,810

Note

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines, Ltd.

Parent company

282,344

China Pacific Catering Services

China Airlines, Ltd.

Parent company

Taoyuan International Airport Service

China Airlines, Ltd.

Parent company

Amount$Action Taken

Amounts Received
in Subsequent
PeriodAllowance for
Bad Debts--$ 302,192

Note

-

-

260,017-

520,139

3.77

-

-

152,715-

188,998

4.58

-

-

183,175-

Note: Accounts receivable and revenue were not directly correlated because of the particular industry characteristics, and therefore the turnover rate was not applicable.

- 64 -$-TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investment Amount
Investor Company

China Airlines, Ltd.

Investee Company

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
Asian Compressor Technology Services
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
Science Park Logistics
China Pacific Laundry Services
Hwa Hsia
Yestrip
Dynasty Holidays
Global Sky Express
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.

Location

Main Businesses and Products

Taoyuan, Taiwan
Real estate leasing and international trade
Taipei, Taiwan
Air transportation and maintenance of aircrafts
Taoyuan, Taiwan
Air cargo and storage
Los Angeles, California, U.S.A.
A holding company, real estate and hotel services
Taoyuan, Taiwan
In-flight catering
Taoyuan, Taiwan
Airport services
Territory of the British Virgin Islands General investing
Taipei, Taiwan
Sale and maintenance of hardware and software
Hong Kong
Airport services
Taoyuan, Taiwan
Research, manufacture and maintenance of engines
Taipei, Taiwan
Airport services
Kaohsiung, Taiwan
In-flight catering
Taoyuan, Taiwan
Hotel business
Tainan, Taiwan
Storage and customs of services
Taoyuan, Taiwan
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Taoyuan, Taiwan
Cleaning of aircraft and maintenance of machine andequipment
Taipei, Taiwan
Travel businessTokyo, Japan
Travel business
Taipei, Taiwan
Forwarding and storage of air cargo
Taipei, Taiwan
Air transportation and maintenance of aircrafts
Taoyuan, Taiwan
Aircraft maintenance

September 30,
2017

December 31,
2016

$

$

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322
12,289140,240
465,000
137,500

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
77,322
12,289140,240
465,000
214,745
137,500

150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
7,732,200
20,626,644
14,329,759
46,500,000
13,750,000

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50
47.35
35.78
100.000.00
55.00

77,27077,270100.0082,11326,265
20,4002,500
1,600,000
160,000

1,600,000
408
250,000
180,000,000
65,000,000

100.00
51.00
25.00
90.00
100.00200,000
11,65820,000,000
469,755

77,270JPY

26,265
20,4002,500
1,648,387
650,000

Balance as of September 30, 2017
Percentage of
Number ofCarrying
Ownership
SharesAmount(%)

JPY

1,519,234
1,336,490
1,327,691
1,196,919
718,468
741,837
460,070
408,116
507,323
248,904
267,579
274,504
419,834
166,854

Investment
Income (Loss)

$

$

6,555
225,605
121,847
28,351
310,296234,506
19,559138,750
108,845
283,12282,836
168,027
32,45983,91930,230Note

6,555
212,046
65,79828,351
158,251
114,908
19,559130,336
21,76969,36539,22360,12032,45921,81916,626Note 1
Note 2-

10,578

10,578Note 1

26,166
26,5377,019
850,195
558,030

702(4,450)5,205
496,931(42,099)702(2,269)1,301
446,478(42,099)

Note 410.00
1.08

94,466
6,086

496,931
82,836

49,693892--

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation and maintenance of aircrafts
Airport services

Cal-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

HK$

3,329

1,050,000

35.00

43,743

5,020

1,757

-

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investing

US$

5,877

US$

5,877

-

100.00359,229

17,551

17,551

Note 3Note 1:

The treasury stock method was adopted in recognizing investment income or loss.

Note 2:The consolidated financial information of the foreign holding company is disclosed in accordance with local regulations.

Note 3:

The Company does not issue stocks because it is a limited company.

Note 4:

Taiwan Aircraft Maintenance and Engineering Co., Ltd. invested capital in the amount of $490,000 thousand in April 2017.

- 65 -

200,000
11,658$Net Income(Loss) of theInvesteeTABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars/Renminbi/U.S. Dollars, Unless Stated Otherwise)

China Airlines, Ltd.

Investee Company Name

Main Businesses andProducts

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof
January 1, 2017

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Forwarding and storage $ 1,018,974
of air cargo(RMB 224,480)

Indirect(Note 1)

Airport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storage
63,550of air cargo(RMB 14,000)

Indirect(Note 1)

Taikoo (Xiamen) Landing
Gear Services

Landing gear
1,117,879
maintenance services (US$ 36,890)

Indirect(Note 1)

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

353,424(US$ 11,663)

Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance(US$

Shanghai Eastern UnitedInternational

Forwarding of air cargo
and ocean freight(US$$126,848 $(US$4,186)

Investment Flows

Outflow

Accumulated
Outflow ofInvestment
from Taiwan asof
September 30,
2017

Inflow--(US$59,013
1,947)

65,1882,151)-(US$

Indirect(Note 1)-

(US$

19,273636)

93,9393,100)

Indirect(Note 2)

7,515
248)

-

(US$

30,3031,000)

Indirect(Note 3)

-

(US$

5,197
172)

$

14.00

$
(RMB

7,842 $
236,960 $
1,762) (RMB 52,202) (US$84,9012,802)(Note 4)

-

14.00

(US$

59,013
76,101
1,947) (RMB 16,955)

10,682
123,542(RMB 2,374) (RMB 27,216) (US$26,525875)(Note 4)65,1882,151)

-

5.83

-

-

-

(US$

-

5.45

-

19,708(RMB 4,342)

-

(US$

19,273
636)
7,515
248)

-

8.00

-

-

-

(US$

-

-

-

-

-

(US$

5,197
172)

-

-

Limit on Investment$283,034 (US$9,340)$656,590 (Note 5)$35,283,739 (Note 6)

Investment
Gain (Loss)

Accumulated
InwardRemittance ofEarnings as of
September 30,
2017$
126,848 $56,488(US$
4,186) (RMB 12,585)-

Investment Amounts
Authorized by Investment Commission,
MOEA

Net Income(Loss) of
the Investee

Carrying
Amountas of
September 30,
2017

-

-

Accumulated Investment in Mainland
China as of September 30, 2017

% Ownershipof Direct orIndirect
Investment(Continued)- 66 -

Taiwan Airport Services

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2017

Airport Air Cargo Terminal(Xiamen) Co., Ltd.

Forwarding and storage $ 1,018,974
of air cargo(RMB 224,480)

Indirect(Note 7)$
124,485 $(US$4,108)

Airport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storage
63,550of air cargo(RMB 14,000)

Indirect(Note 7)

(US$

Remittance of Funds

Outward58,394
1,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof
September 30,
2017

Inward

-

$

-

-

14.00

58,394
76,101
1,927) (RMB 16,955)

14.00

(US$

Investment Amounts Authorized by
Investment Commission, MOEA

Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

$182,879 (US$6,035)$182,879 (US$6,035)$339,065 (Note 6)% Ownershipof Direct orIndirect
Investment$
124,485 $
56,488(US$
4,108) (RMB 12,585)-

Accumulated Outward
Remittance for Investment in
Mainland China as of September 30,
2017

Net Income(Loss) of theInvestee

Investment
Income (Loss)

Accumulated
Carrying
Repatriation ofAmount as ofInvestment
September 30, Income as of2017
September 30,
2017

$
(RMB

7,423 $
235,223 $
115,333
1,762) (RMB 51,820) (US$3,806)(RMB

10,108123,218
2,374) (RMB 27,145) (US$42,636
1,407)

Note 1: The Company invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.
Note 2: The Company invested in China Aircraft Services, which, in turn, invested in a company located in mainland China.
Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which, in turn, invested in a company located in mainland China. The investee company was disposed of, and the Company is preparing for its
declaration to the Investment Commission.
Note 4: The inward remittance of earnings as of September 30, 2017 amounted to NT$2,801,749 and US$875,330.
Note 5: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.
Note 6: The limit stated in the Investment Commission’s regulation, “The Review Principle of Investment or Technical Cooperation in Mainland China,” is the larger of the Company’s net asset value or 60% of the Group’s consolidated net asset
value.
Note 7: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which, in return, invested in a company located in mainland China.
Note 8: The RMB and U.S. dollar amounts of assets are translated at year-end rates, and those of gains and losses are translated at the average of the period-end rates for each reporting period.
(Concluded)- 67 -TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIESFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

Company Name

Related Party

Natural of Relationship(Note 1)

Financial Statement Account0

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan Co., Ltd.
Taoyuan International Airport Services
Taiwan Airport Service
Hwa Hsia
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal Park
Cal Hotel Co., Ltd.
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Services
Mandarin Airlines

a
a
a
a
a
a
a
a
a
a
a
a
a
a

Passenger revenue
Other operating revenue
Other operating revenue
Airport service cost
Airport service cost
Airport service cost
Passenger cost
Other operating costs
Other operating costs
Other operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties
Bonds payable1

Taiwan Air Cargo Terminal

China Airlines, Ltd.

b

Sales revenue

2

Mandarin Airlines
Mandarin Airlines
Mandarin Airlines
Mandarin Airlines
Mandarin Airlines
Mandarin Airlines

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b
b
b

3

Taoyuan International Airport Services
Taoyuan International Airport Services
Taoyuan International Airport Services

Tigerair Taiwan Co., Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

4

Taiwan Airport Service

5

Amount% of Total
Consolidated Total
Revenue or Assets

1,643,957
241,519
235,752
880,780
277,355
250,924
106,957
345,903
171,120
111,687
575,810282,344
188,998
250,000

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

1.44
0.21
0.21
0.77
0.24
0.22
0.09
0.30
0.15
0.10
0.26
0.13
0.08
0.11

345,903

The same as ordinary transactions

0.30

Passenger revenue
Passenger cost
Operating expenses
Accounts receivable - related parties
Held-to-maturity financial assets
Notes payable - related parties

106,957
1,643,957
241,519282,344
250,000
575,810The 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

0.09
1.44
0.21
0.13
0.11
0.26

c
b
b

Airport service revenue
Airport service revenue
Accounts receivable - related parties

110,264
880,780
188,998

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.10
0.77
0.08

China Airlines, Ltd.

b

Operating revenue

277,355

The same as ordinary transactions

0.24

Hwa Hsia

China Airlines, Ltd.

b

Operating revenue

250,924

The same as ordinary transactions

0.22

6

Cal Park

China Airlines, Ltd.

b

Operating revenue

171,120

The same as ordinary transactions

0.15

7

Cal Hotel Co., Ltd.

China Airlines, Ltd.

b

Operating revenue

111,687

The same as ordinary transactions

0.10

8

Tigerair Taiwan Co., Ltd.
Tigerair Taiwan Co., Ltd.

China Airlines, Ltd.
Taoyuan International Airport ServicesbcOperating expenses
Airport service cost

235,752
110,264

The same as ordinary transactions
The same as ordinary transactions

0.21
0.10

Note 1:

The three directional types for transactions by business relationship between China Airlines, Ltd. and its subsidiaries are as follows:
a.
b.
c.

Parent to subsidiaries.
Subsidiaries to parent.
Subsidiaries to subsidiaries.

Note 2:

Intercompany transactions were written off in the consolidated financial statements.

Note 3:

The Company only discloses transaction amounts or balances of more than $100,000 thousand.

- 68 -$

Transaction Criteria