China Airlines, Ltd.
Financial Statements for theYears Ended December 31, 2021 and 2020 and
Independent Auditors’ ReportINDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
China Airlines, Ltd.
OpinionWe have audited the accompanying financial statements of China Airlines, Ltd. (the “Company”),
which comprise the balance sheets as of December 31, 2021 and 2020, and the statements ofcomprehensive income, changes in equity and cash flows for the years then ended, and notes to thefinancial statements, including a summary of significant accounting policies (collectively referred
to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as of December 31, 2021 and 2020, and its financial
performance and its cash flows for the years then ended in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and Attestationof Financial Statements by Certified Public Accountants and auditing standards generally acceptedin the Republic of China. Our responsibilities under those standards are further described in the
Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the Company in accordance with The Norm of Professional Ethics for Certified
Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the year ended December 31, 2021. These matters wereaddressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter in the audit of the Company’s financial statements is stated below:
Recognition of Cargo Revenue
In accordance with IFRS 15 “Revenue from Contracts with Customers”, cargo sales are accounted
for as cargo revenue after relevant transportation services have been provided. For the year ended
December 31, 2021, cargo revenue amounted to NT$124,249,632 thousand. Refer to Notes 4 and
25 to the accompanying financial statements for detailed information.

-1-

Cargo rates are highly affected by the supply and demand of the market and sales can only berecognized after relevant transportation services are provided, The input, processing andmaintenance of freight information on the airway bills involve manual operations. Therefore, we
identified the recognition of cargo revenue as a key audit matter.
Our main audit procedures performed included the following:1.

We understood the internal controls related to the recognition of cargo revenue, including
manual and automatic controls.

2.

We understood and tested the effectiveness of the information system related to the recognitionof cargo revenue.

3.

We sampled the airway bills, confirmed that cargo rates were consistent with those stated in
airway bills, and verified the amount of cargo revenue.

Other Matter - Audited by Other Independent Auditors
The financial statements of some investments accounted for using the equity method in Note 12
were audited by other independent auditors, and our audit opinion is based solely on the reports ofother auditors. As of December 31, 2021 and 2020, the aforementioned investments accounted forusing the equity method amounted to NT$2,955,909 thousand and NT$2,304,113 thousand,representing 1.09% and 0.88% of the total assets, respectively. For the years ended December 31,
2021 and 2020, the combined share of profit (loss) and other comprehensive income (loss) of
subsidiaries, associates and joint ventures accounted for using the equity method amounted to
NT$(1,739,024) thousand and NT$(952,289) thousand, representing (18.44%) and (98.48%) of thetotal comprehensive income, respectively.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate theCompany or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including the audit committee, are responsible for overseeing theCompany’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with the auditing standards generally accepted in the
Republic of China will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of thesefinancial statements.
-2-

As part of an audit in accordance with the auditing standards generally accepted in the Republic ofChina, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:1.

Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

2.

Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.

3.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

4.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditors’ report to the related disclosures in the financial statements or,if such disclosures are inadequate, to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditors’ report. However, future events orconditions may cause the Company to cease to continue as a going concern.

5.

Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

6.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Company to express an opinion on the financial statements.
We are responsible for the direction, supervision and performance of the audit. We remainsolely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those mattersthat were of most significance in the audit of the financial statements for the year ended December
31, 2021 and are therefore the key audit matters. We describe these matters in our auditors’ report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

-3-

The engagement partners on the audits resulting in this independent auditors’ report are Jui-Chan
Huang and Shiuh-Ran Cheng.

Deloitte & Touche
Taipei, Taiwan
Republic of China
March 15, 2022

Notice to Readers
The accompanying financial statements are intended only to present the financial position,
financial performance and cash flows in accordance with accounting principles and practices
generally accepted in the Republic of China and not those of any other jurisdictions. The standards,
procedures and practices to audit such financial statements are those generally applied in the
Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying financial
statements have been translated into English from the original Chinese version prepared and usedin the Republic of China. If there is any conflict between the English version and the original
Chinese version or any difference in the interpretation of the two versions, the Chinese-language
independent auditors’ report and financial statements shall prevail.

-4-CHINA AIRLINES, LTD.
BALANCE SHEETSDECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars)

2021
Amount%2020
Amount%$ 35,913,117
11,923,194
3,563,319
12,990,399
54,474
543,768
52,2828,380,327
36,719389,191

13
5
1
5
3
-

$ 19,959,820
5,863,137
7,613,636
9,198,055
101,424
427,72260,1298,093,152
89,296452,414

8
2
3
4
3
-

73,846,790

27

51,858,785

20

55,458
12,830,025
115,174,548
50,965,378
2,047,448
754,349
5,234,304
9,742,416

5
42
19
1
2
4

147,161
12,321,157
126,414,462
54,555,761
2,047,448
867,453
4,981,859
7,715,679

5
48
21
1
2
3

196,803,926

73

209,050,980

80$ 270,650,716

100$ 260,909,765

100

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 29)
Financial assets at amortized cost - current (Notes 8 and 29)
Financial assets for hedging - current (Notes 4, 6 and 29)
Notes and accounts receivable, net (Notes 4, 10 and 29)
Notes and accounts receivable - related parties (Note 30)
Other receivables
Current tax assets (Notes 4 and 26)
Inventories (Notes 4 and 10)
Non-current assets held for sale (Notes 4 and 11)
Other current assets (Note 16)
Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4, 7 and 29)
Investments accounted for using the equity method (Notes 4 and 12)
Property, plant and equipment (Notes 4, 13 and 31)
Right-of-use assets (Notes 4, 19 and 31)
Investment properties (Notes 4 and 14)
Other intangible assets (Notes 4 and 15)
Deferred tax assets (Notes 4 and 26)
Other non-current assets (Notes 16, 19 and 29)
Total non-current assets
TOTAL

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term bills payable (Notes 17 and 29)
Financial liabilities for hedging - current (Notes 4, 19 and 29)
Notes and accounts payable (Note 29)
Notes and accounts payable - related parties (Note 30)
Other payables (Notes 20 and 25)
Current tax liabilities
Lease liabilities - current (Notes 4 and 19)
Contract liabilities current (Notes 4 and 21)
Provisions - current (Notes 4 and 22)
Current portion of bonds payable and put option of convertible bonds (Notes 4, 18, 29 and 30)
Current portion of long-term borrowings (Notes 17, 29 and 31)
Other current liabilities

8,088,882
8,126,239
1,128,517
588,234
7,128,080
2
842,592
3,218,846
12,132,859
14,798,442
687,317

3
3
1
3
1
5
6
-

17

56,740,010

22

27,839,847
11,125,026
76,804,516
635,633
15,229,888
822,368
9,677,756
8,359,189
446,216

10
4
29
6
4
3
-

32,455,333
10,300,000
68,815,395
1,761,104
13,741,244
875,388
10,055,776
8,217,395
388,637

13
4
26
1
5
4
3
-

Total non-current liabilities

150,940,439

56

146,610,272

56

Total liabilities

196,607,143

73

203,350,282

78

59,412,243
2,694,529

22
1

54,209,846
1,187,327

21-

9,253,848
9,253,848
2,713,828(30,875)33
1-(350,581)(350,581)
2,543,766(30,875)1-

74,043,573

27

57,559,483

22$ 270,650,716

100$ 260,909,765

100

Total current liabilities
NON-CURRENT LIABILITIESFinancial liabilities for hedging - non-current (Notes 4, 19 and 29)
Bonds payable (Notes 4, 18, 29 and 30)
Long-term borrowings (Notes 17, 29 and 31)
Contract liabilities - non-current (Notes 4 and 21)
Provisions - non-current (Notes 4 and 22)
Deferred tax liabilities (Notes 4 and 26)
Lease liabilities - non-current (Notes 4 and 19)
Net defined benefit liabilities - non-current (Notes 5 and 23)
Other non-current liabilities

EQUITY (Notes 18 and 24)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficit)
Total retained earnings (accumulated deficit)
Other equity
Treasury shares
Total equity
TOTAL

The accompanying notes are an integral part of the financial statements.

-5-$8,437,648
826,989
733,837
12,865,006
2,880,785
882,538
3,416,733
2,578,812
2,525,000
8,351,129
2,168,227

3
5
1
1
1
1
1
3
1

45,666,704$

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2021
Amount%2020
Amount%OPERATING REVENUE (Notes 4, 25 and 30)$ 132,140,248

100$ 106,327,123

100

OPERATING COSTS (Notes 4, 10, 25 and 30)

106,229,554

80

95,190,179

89

GROSS PROFIT

25,910,694

20

11,136,944

11

OPERATING EXPENSES (Notes 4, 25 and 30)

6,590,298

5

6,252,089

6

PROFIT FROM OPERATIONS

19,320,396

15

4,884,855

5

374,625(1,971,900)(2,164,174)

(1)
(2)

440,761(523,827)(2,780,363)(3)(3,585,007)(3)(1,850,331)(2)(7,346,456)(6)(4,713,760)(5)

PROFIT BEFORE INCOME TAX

11,973,940

9

171,095-

INCOME TAX EXPENSE (Notes 4 and 26)

2,594,035

2

31,095-NET INCOME FOR THE YEAR

9,379,905

7

140,000-(75,214)-(474,202)-(91,703)-39,305-(35,512)-(494,218)

(1)

2,831

-

NON-OPERATING INCOME AND EXPENSES
Other income (Note 25)
Other gains and losses (Notes 11, 12, 13 and 25)
Finance costs (Notes 25 and 30)
Share of profit or loss of subsidiaries, associates andjoint ventures (Note 12)
Total non-operating income and expenses

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Gain (loss) on hedging instruments subject tobasis adjustment (Notes 4, 24 and 29)
Unrealized gain (loss) on investments in equity
instruments at fair value through othercomprehensive income (Notes 4 and 24)
Remeasurement of defined benefit plans (Notes 4
and 23)
Share of the other comprehensive income (loss) of
subsidiaries, associates and joint ventures
accounted for using the equity method (Notes 4
and 24)-6-(9,095)(Continued)

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2021
AmountIncome tax related to items that will not bereclassified subsequently to profit or loss
(Note 26)
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translation of thefinancial statements of foreign operations(Notes 4 and 24)
Share of the other comprehensive income (loss) of
subsidiaries, associates and joint ventures
accounted for using the equity method (Notes 4
and 24)Gain on hedging instruments not subject to basis
adjustment (Notes 4, 24 and 29)
Income tax related to items that may bereclassified subsequently to profit or loss
(Note 26)$$

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 27)
Basic
Diluted21,236-

17,597-(101,142)

-

2,087

-

4,205

-

264,168-

2,098,393

2(56,353)-(399,450)-

49,137-

826,9681

9,429,042

7

966,968

1

1.67
1.54

The accompanying notes are an integral part of the financial statements.

$

%

-

$
$

-7-

%

163,172

Other comprehensive income for the year, netof income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

2020
Amount

$

$
$

0.03
0.03

(Concluded)

CHINA AIRLINES, LTD.
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars)

Retained Earnings

Share Capital

Capital Surplus

Legal Reserve

Special Reserve$ 54,209,846$ 2,488,907$$

Issuance of employee share options by subsidiaries-

172

Changes in percentage of ownership interests in subsidiaries-

Basis adjustment to gain (loss) on hedging instruments

BALANCE AT JANUARY 1, 2020

12,967$ (1,777,225)

-

-

-

-

-

-

-

-

-

Appropriation of 2019 earnings
Legal reserve
Special reserve
Capital surplus used to cover accumulated deficit-(1,297,843)

Net profit for the year ended December 31, 2020-

Other comprehensive income (loss) for the year ended
December 31, 2020, net of income tax$ 1,143,678

-

-

-

-

172

(169,272)

-

-

-

-

(169,272)

-

-

-

-

200,989-

200,989(466,416)-(12,967)-

466,416
12,967
1,297,843

-

-

-

-

-

-

-

-

140,000

-

-

-

-

140,000

-

-

-

-

(319,576)(79,545)(35,903)

1,261,992-

826,968

Total comprehensive income (loss) for the year ended
December 31, 2020

-

-

-

-

(179,576)(79,545)(35,903)

1,261,992-

966,968

Disposal of treasury shares-(3,909)--(1,734)---

12,497

6,854

54,209,846

1,187,327--(350,581)(134,252)

71,3592,606,659(30,875)

57,559,483

Basis adjustment to gain (loss) on hedging instruments

-

-

-

-

-

-

-

99,507-99,507

Appropriation of 2020 earnings
Capital surplus used to cover accumulated deficit-(350,581)--

350,581

-

-

-

-

-

Issuance of employee share options by subsidiaries

-

540

-

-

-

-

-

-

-

540

Changes in percentage of ownership interests in subsidiaries

-

-

-

-

(104,639)

-

-

-

-

(104,639)

Net profit for the year ended December 31, 2021

-

-

-

-

9,379,905

-

-

-

-

9,379,905

Other comprehensive income (loss) for the year ended
December 31, 2021, net of income tax

-

-

-

-

(21,418)

14,173(76,871)

133,253-

49,137

Total comprehensive income (loss) for the year ended
December 31, 2021

-

-

-

-

9,358,487

14,173(76,871)

133,253-

9,429,042

Equity component of convertible bonds issued by the Company-

188,862

-

-

-

-

-

-

-

188,8625,202,397

1,668,381

-

-

-

-

-

-

-

6,870,778$ 59,412,243$ 2,694,529-$ 9,253,848(5,512)$ 2,839,419(30,875)$ 74,043,573

$

-

$

The accompanying notes are an integral part of the financial statements.

-8-$(120,079)$$$

Total Equity$ 56,553,772

BALANCE AT DECEMBER 31, 2021

(54,707)

Treasury Shares
Held by
Subsidiaries(43,372)

Convertible bonds converted to ordinary shares$

Gain (Loss) on
Hedging
Instruments

107,262

BALANCE AT DECEMBER 31, 2020

466,416

UnappropriatedEarnings(Accumulated
Deficit)

Exchange
Differences on
Translation of the
Financial
Statements ofForeign Operations

Other Equity
Unrealized
Valuation Gain
(Loss) on Financial
Assets at
Fair Value
Through Other
Comprehensive
Income$CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars)

2021
CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments for:
Depreciation expense
Amortization expense
Expected credit loss recognized on trade receivables
Net gain on fair value changes of financial assets and liabilities atfair value through profit or loss
Interest income
Dividend income
Share of loss (profit) of subsidiaries, associates and joint ventures
Loss (gain) on disposal of property, plant and equipment
Loss on disposal of investments
Impairment loss recognized on property, plant and equipment
Loss on inventory and property, plant and equipment
Net gain on foreign currency exchange
Impairment loss recognized on investments accounted for using theequity method
Finance costs
Recognition of provisions
Loss on sale and leaseback transactions
OthersChanges in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities at fair value through profit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Defined benefit liabilities
Cash generated from operations
Interest received
Dividends received
Interest paid
Income tax paid
Net cash generated from operating activities-9-$ 11,973,940

2020

$

171,095

26,503,214
179,11138,47428,018,746
169,158
3,000(132,220)(8,355)
3,585,007
932,718
540
1,391,279(895,534)(3,596)(208,081)(8,720)1,850,331(8,005)424,573471,518(1,048,369)

136,672
2,164,174
5,796,335
342,080(3,625)46,7572,780,363
5,580,416
1,876(3,875,256)
46,950(117,036)(1,009,933)
70,928(278,147)
145,6035,815,179(927,584)(1,476,769)
1,474,423
106,282
51,978,450
129,028
213,017(2,140,081)(45,987)

4,030(11,749)(1,467,229)
130,962
107,524(70,344)
1,701,803(59,328)(881,200)(3,724,692)(15,840,648)(705,117)(1,915,678)
134,432
15,643,828
228,141
842,919(2,966,777)(23,308)

50,134,427

13,724,803(Continued)

CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars)

2021

2020

$ (11,956,286)
5,863,137(7,126,515)
11,110,497$ (5,896,451)
1,460,450(10,269,055)
2,363,897(4,527,062)(1,702,245)
586,395(79,357)
104,584(12,182,071)(66,007)
9,730(1,837,845)(859,654)
23,385(18,214)
34,599(9,966,342)(95,217)-(19,965,200)(25,060,447)(8,088,882)
4,500,000(6,300,000)
40,224,874(38,683,066)(8,769,985)
273,890(200,415)
2,810,098

8,088,882(10,000,000)
40,200,000(18,912,651)(8,909,975)
166,697(146,566)-(14,233,486)

10,486,387

17,556

183,063

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

15,953,297(666,194)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

19,959,820

20,626,014

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 35,913,117$ 19,959,820

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at amortized cost
Proceeds from sale of financial assets at amortized cost
Purchase of financial assets for hedging
Proceeds from sale of financial assets for hedging
Acquisition of investments and joint ventures accounted for using theequity method
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software costs
Net cash inflow on disposal of subsidiary
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES(Decrease) increase in short-term bill payable
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds from long-term borrowings
Repayments of long-term borrowings
Repayments of the principal portion of lease liabilities
Proceeds of guarantee deposits received
Refund of guarantee deposits received
Proceeds from sale and leaseback transactions
Net cash (used in) generated from financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESThe accompanying notes are an integral part of the financial statements.

- 10 -(Concluded)

CHINA AIRLINES, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its shares have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company 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, equipment and the entire aircraft; and (f) leasing of aircraft.
The major shareholders of the Company are China Aviation Development Foundation (CADF) andNational Development Fund (NDF), Executive Yuan. As of December 31, 2021 and 2020, CADF and NDF
jointly held 40.17% and 44.03%, respectively of the Company’s shares. For the years ended December 31,
2021 and 2020, the average number of employees of the Company was 11,078 and 11,534, respectively.

2. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Company’s board of directors on March 15, 2022.

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 and the International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC)(collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission(FSC)
The application of the IFRSs endorsed and issued into effect by the FSC did not have any material
impact on the Company’s accounting policies.
b. The IFRSs endorsed by the FSC for application starting from 2022
Effective Date
Announced by IASBNew IFRSs“Annual Improvements to IFRS Standards 2018-2020”
Amendments to IFRS 3 “Reference to the Conceptual Framework”
Amendments to IAS 16 “Property, Plant and Equipment - Proceeds
before Intended Use”
Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling aContract”

January 1, 2022 (Note 1)
January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
January 1, 2022 (Note 4)

Note 1: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges offinancial liabilities that occur on or after the annual reporting periods beginning on or afterJanuary 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively tothe fair value measurements on or after the annual reporting periods beginning on or afterJanuary 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied
retrospectively for annual reporting periods beginning on or after January 1, 2022.

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Note 2: The amendments are applicable to business combinations for which the acquisition date is on
or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 3: The amendments are applicable to property, plant and equipment that are brought to thelocation and condition necessary for them to be capable of operating in the manner intended
by management on or after January 1, 2021.
Note 4: The amendments are applicable to contracts for which the entity has not yet fulfilled all its
obligations on January 1, 2022.
The application of new IFRSs endorsed by the FSC for application starting from 2022 would not haveany material impact on the Company’s accounting policies. As of the date the financial statements wereauthorized for issue, the Company has assessed that the application of other standards andinterpretations will not have a material impact on the Company’s financial position and financial
performance.
c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date
Announced by IASB (Note 1)

New IFRSs
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between An Investor and Its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IFRS 17
Amendments to IFRS 17 “Initial Application of IFRS 9 and IFRS 17 Comparative Information”
Amendments to IAS 1 “Classification of Liabilities as Current or
Non-current”
Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Definition of Accounting Estimates”
Amendments to IAS 12 “Deferred Tax related to Assets andLiabilities arising from a Single Transaction”

To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 2)
January 1, 2023 (Note 3)
January 1, 2023 (Note 4)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods
beginning on or after their respective effective dates.
Note 2: The amendments will be applied prospectively for annual reporting periods beginning on orafter January 1, 2023.
Note 3: The amendments are applicable to changes in accounting estimates and changes in accounting
policies that occur on or after the beginning of the annual reporting period beginning on orafter January 1, 2023.
Note 4: Except for deferred taxes that will be recognized on January 1, 2022 for temporary differences
associated with leases and decommissioning obligations, the amendments will be applied
prospectively to transactions that occur on or after January 1, 2022.
As of the date the financial statements were authorized for issue, the Company is continuously
assessing the possible impact that the application of other standards and interpretations will have on the
Company’s financial position and financial performance and will disclose the relevant impact when theassessment is completed.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESStatement of Compliance
The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers and other regulations.
Basis of Preparation
The financial statements have been prepared on the historical cost basis except for financial instruments
which are measured at fair value.
The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fairvalue measurement inputs are observable and based on the significance of the inputs to the fair value
measurement in its entirety, are described as follows:a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); andc. Level 3 inputs are unobservable inputs for an asset or liability.
When preparing these parent company only financial statements, the Company used the equity method toaccount for its investments in subsidiaries, associates and joint ventures. In order for the amounts of the net
profit for the year, other comprehensive income for the year and total equity in the parent company only
financial statements to be the same with the amounts attributable to the owners of the Company in its
consolidated financial statements, adjustments arising from the differences in accounting treatments
between the parent company only basis and the consolidated basis were made to investments accounted forusing the equity method, the share of profit or loss of subsidiaries, associates and joint ventures, the shareof other comprehensive income of subsidiaries, associates and joint ventures and the related equity items, as
appropriate, in these parent company only financial statements.
Current and Non-current Assets and Liabilities
Current assets include:a. Assets held primarily for the purpose of trading;b. Assets expected to be realized within 12 months after the reporting period; andc. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period.
Current liabilities include:a. Liabilities held primarily for the purpose of trading;b. Liabilities due to be settled within 12 months after the reporting period; andc. Liabilities for which the Company does not have an unconditional right to defer settlement for at least
12 months after the reporting period.
Assets and liabilities that are not classified as current are classified as non-current.

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Foreign Currencies
In preparing the Company’s financial statements, transactions in currencies other than the Company’sfunctional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of
the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items measured at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value wasdetermined. Non-monetary items denominated in a foreign currency measured at historical cost are notretranslated.
Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for exchange differences on:a. Foreign currency borrowings relating to assets under construction for future productive use, which areincluded in the cost of those assets when they are regarded as an adjustment to interest costs on thoseforeign currency borrowings; andb. Transactions entered into in order to hedge certain foreign currency risks.
Exchange differences arising from the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.
For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign
operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period. The
resulting currency translation differences are recognized in other comprehensive income (attributed to theowners of the Company and non-controlling interests as appropriate).
On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.
Inventories
Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sale and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.
Non-current Assets Held for Sale
Non-current assets are classified as held-for-sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the Non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.
Non-current assets classified as held-for-sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.
Investments Accounted for Using the Equity Method
The Company uses the equity method to account for its investments in subsidiaries, associates and joint
ventures.

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a. Investment in subsidiaries
Subsidiaries (including special purpose entities) are the entities controlled by the Company.
Under the equity method, the investment is initially recognized at cost and adjusted therefore torecognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary.
Besides, the Company also recognizes the change in Company’s share of the other equity of thesubsidiary.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing
control of the subsidiaries are accounted for as equity transactions. The Company recognizes directly inequity any difference between the carrying amounts of the investment and the fair value of theconsideration paid or received.
When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary(which includes any carrying amount of the investment in subsidiary accounted for using the equity
method and long-term interests that, in substance, form part of the Company’s net investment in thesubsidiary), the Company continues recognizing its share of further losses.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets and liabilities of a subsidiary that constitutes a business at the date of acquisition is recognized as
goodwill, which is included within the carrying amount of the investment and is not amortized. Any
excess of the Company’s share of the net fair value of the identifiable assets and liabilities of a
subsidiary that constitutes a business over the cost of acquisition is recognized immediately in profit orloss.
When the Company loses control of a subsidiary, it recognizes the investment retained in the former
subsidiary at its fair value at the date when control is lost. The difference between the fair value of theretained investment plus any consideration received and the carrying amount of the previous investment
at the date when control is lost is recognized as a gain or loss in profit or loss. Besides this, theCompany accounts for all amounts previously recognized in other comprehensive income in relation tothat subsidiary on the same basis as would be required had the Company directly disposed of the related
assets or liabilities.
Profit or loss resulting from downstream transactions is eliminated in full only in the parent company
only financial statements. Profit and loss resulting from upstream transactions and transactions between
subsidiaries is recognized only in the parent company only financial statements and only to the extent ofinterests in the subsidiaries that are not related to the Company.
b. Investments in associates and joint ventures
An associate is an entity over which the Company has significant influence and which is neither asubsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby theCompany and other parties that have joint control of the arrangement and the rights to the net assets of
the arrangement.
The Company uses the equity method to account for its investments in associates and joint ventures.
Under the equity method, investments in an associate and a joint venture is initially recognized at costand adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive
income of the associate and joint venture. The Company also recognizes the changes in the Company’s
share of equity of associates and joint ventures attributable to the Company.
When the Company subscribes for additional new shares of an associate and joint ventures at apercentage different from its existing ownership percentage, the resulting carrying amount of theinvestment differs from the amount of the Company’s proportionate interest in the associate and joint
venture. The Company records such a difference as an adjustment to investments with the- 15 -

corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is
reduced due to the subscription of additional new shares of the associate and joint venture, theproportionate amount of the gains or losses previously recognized in other comprehensive income inrelation to that associate and joint venture is reclassified to profit or loss on the same basis as would be
required had the investee directly disposed of the related assets or liabilities. When the adjustment
should be debited to capital surplus, but the capital surplus recognized from investments accounted forusing the equity method is insufficient, the shortage is debited to retained earnings.
When the Company’s share of losses of an associate and a joint venture equals or exceeds its interest inthat associate and joint venture which includes any carrying amount of the investment accounted forusing the equity method and long-term interests that, in substance, form part of the Company’s net
investment in the associate and joint venture, the Company discontinues recognizing its share of further
loss. Additional losses and liabilities are recognized only to the extent that the Company has incurred
legal obligations, or constructive obligations, or made payments on behalf of that associate and joint
venture.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets and liabilities of an associate and a joint venture recognized at the date of acquisition isrecognized as goodwill, which is included within the carrying amount of the investment and is notamortized. Any excess of the Company’s share of the net fair value of the identifiable assets andliabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single
asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is
not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment.
Any reversal of that impairment loss is recognized to the extent that the recoverable amount of theinvestment subsequently increases.
The Company discontinues the use of the equity method from the date on which its investment ceases
be an associate and a joint venture. Any retained investment is measured at fair value at that date andthe fair value is regarded as its fair value on initial recognition as a financial asset. The difference
between the previous carrying amount of the associate and joint venture attributable to the retainedinterest and its fair value is included in the determination of the gain or loss on disposal of the associate
and joint venture. The Company accounts for all amounts previously recognized in othercomprehensive income in relation to that associate and joint venture on the same basis as would be
required had that associate directly disposed of the related assets or liabilities.
When the Company transacts with its associate and joint venture, profits and losses resulting from thetransactions with the associate and joint venture are recognized in the Company’s financial statements
only to the extent of interests in the associate and the joint venture that are not related to the Company.
Property, Plant and Equipment
Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes and are expected to be used for more than
one period. The cost of an item of property, plant and equipment shall be recognized as an asset if, and only
if, it is probable that future economic benefits associated with the item will flow to the Company; and thecost of the item can be measured reliably. Property, plant and equipment are stated at cost less recognizedaccumulated depreciation and recognized accumulated impairment loss.
Freehold land is not depreciated.
Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation methods are reviewed at the end of eachreporting period. The impact of any changes in accounting estimates is accounted for on a prospective basis
under IAS 8,“Accounting Policies, Changes in Accounting Estimates and Errors”.
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Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. Assets are depreciated over the shorter of the lease term and their useful lives using the straight-line
method.
An item of property, plant and equipment will be derecognized upon its disposal, or when no future benefits
can be expected from its use or disposal. On derecognition of an item of property, plant and equipment, thedifference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.
Investment Properties
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment
properties also include land held for a currently undetermined future use.
Investment properties are initially measured at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.
An investment property will be derecognized upon its disposal, or when no future benefits can be expectedfrom its use or disposal. On derecognition of an investment property, the difference between the net
disposal proceeds and the carrying amount of the asset is included in profit or loss.
Intangible Assets
Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, andamortization methods are reviewed at the end of each reporting period. The residual value of an intangible
asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of theintangible asset before the end of its economic life. The impact of any changes in accounting estimates isaccounted for on a prospective basis under IAS 8 “Accounting Policies, Changes in Accounting Estimatesand Errors”.
Impairment of Tangible and Intangible Assets Other Than Goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its tangible andintangible assets, excluding goodwill, to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimatedin order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit towhich the asset belongs. Corporate assets are allocated to the individual cash-generating units on areasonable and consistent basis; otherwise, corporate assets are allocated to the smallest group of
cash-generating units on a reasonable and consistent allocation basis.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the Company uses the estimated cash flows discounted by the future pre-tax discount rate, and thediscount rate reflects the current market time value of money and the specific risks to the asset for estimatedfuture cash flows not yet adjusting to the market.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

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When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit
is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amountthat would have been determined had no impairment loss been recognized for the asset or cash-generating
unit in prior years. A reversal of an impairment loss is recognized in profit or loss.
Financial Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to thecontractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issuance of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of thefinancial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized
immediately in profit or loss.
a. Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade datebasis. All regular way purchases or sales of financial assets are buy or sell of financial assets in the
period set by regulation or market convention.
1) Measurement categories
Financial assets are classified into the following categories: Financial assets at FVTPL, financial
assets at amortized cost, and investments in equity instruments at FVTOCI.
a) Financial assets at FVTPL
Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified
or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include
investments in equity instruments which are not designated as at FVTOCI.
Financial assets at FVTPL are subsequently measured at fair value, and any remeasurement
gains or losses on such financial assets are recognized in profit or loss. Fair value is determinedin the manner described in Note 29.
b) Financial assets at amortized cost
Financial assets that meet the following conditions are subsequently measured at amortized
cost:
i. The financial assets are held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; andii. The contractual terms of the financial assets give rise on specified dates to cash flows thatare solely payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, financial assets at amortized cost, including cash and cash
equivalents, trade receivables, other receivables and other financial assets, are measured atamortized cost, which equals the gross carrying amount determined using the effective interest
method less any impairment loss. Exchange differences are recognized in profit or loss.

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Interest income is calculated by applying the effective interest rate to the gross carrying amountof a financial asset.
Cash equivalents include time deposits with original maturities within 3 months from the date ofacquisition, which are highly liquid, readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. These cash equivalents are held for the
purpose of meeting short-term cash commitments.
c) Investments in equity instruments at FVTOCI
On initial recognition, the Company may make an irrevocable election to designate investmentsin equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if an equity
investment is held for trading or if it is contingent consideration recognized by an acquirer in abusiness combination.
Investments in equity instruments at FVTOCI are subsequently measured at fair value withgains and losses arising from changes in fair value recognized in other comprehensive income
and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit orloss on disposal of the equity investments; instead, they will be transferred to retained earnings.
Dividends on these investments in equity instruments are recognized in profit or loss when the
Company’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of an investment.
2) Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on financial assets at
amortized cost (including trade receivables), as well as contract assets.
The Company always recognizes lifetime expected credit losses (ECLs) for trade receivables andother receivables. For all other financial instruments, the Company recognizes lifetime ECLs when
there has been a significant increase in credit risk since initial recognition. If, on the other hand, thecredit risk on a financial instrument has not increased significantly since initial recognition, theCompany measures the loss allowance for that financial instrument at an amount equal to 12-month
ECLs.
Expected credit losses reflect the weighted average of credit losses with the respective risks of a
default occurring as the weights. Lifetime ECLs represents the expected credit losses that will result
from all possible default events over the expected life of a financial instrument. In contrast,
12-month ECLs represents the portion of lifetime ECLs that is expected to result from default
events on a financial instrument that are possible within 12 months after the reporting date.
The impairment loss of all financial assets is recognized in profit or loss by a reduction in theircarrying amounts through a loss allowance account, except for investments in debt instruments thatare measured at FVTOCI, for which the loss allowance is recognized in other comprehensive
income and the carrying amounts of such financial assets are not reduced.
3) Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.

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On derecognition of a financial asset at amortized cost in its entirety, the difference between theasset’s carrying amount and the sum of the consideration received and receivable is recognized in
profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference
between the asset’s carrying amount and the sum of the consideration received and receivable andthe cumulative gain or loss which had been recognized in other comprehensive income isrecognized in profit or loss. However, on derecognition of an investment in an equity instrument at
FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable is recognized in profit or loss, and the cumulative gain or loss which had
been recognized in other comprehensive income is transferred directly to retained earnings, without
recycling through profit or loss.
b. Equity instruments
Equity instruments issued by the Company are classified as equity in accordance with the substance ofthe contractual arrangements and the definitions of an equity instrument.
Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue
costs.
The repurchase of the Company’s own equity instruments is recognized in and deducted directly fromequity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.
c. Financial liabilities
1) Subsequent measurement
Except for derivative financial instruments, all financial liabilities are measured at amortized costusing the effective interest method.
2) Derecognition of financial liabilities
The difference between the carrying amount of a financial liability derecognized and theconsideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in
profit or loss.
d. Convertible bonds
The component parts of compound instruments (i.e. convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.
On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized and includedin equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which case,the balance recognized in equity will be transferred to capital surplus - share premiums. When theconversion option remains unexercised at maturity, the balance recognized in equity will be transferred
to capital surplus - share premiums.

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Transaction costs that relate to the issuance of the convertible notes are allocated to the liability andequity components in proportion to the allocation of the gross proceeds. Transaction costs relating to
the equity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.
e. Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options and fuel options.
Derivatives are initially recognized at fair value at the date on which the derivative contracts are enteredinto and are subsequently remeasured to their fair value at the end of each reporting period. The
resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated andeffective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends
on the nature of the hedging relationship. When the fair value of a derivative financial instrument is
positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial
instrument is negative, the derivative is recognized as a financial liability.
Derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of
IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid
contract. Derivatives embedded in non-derivative host contracts that are not financial assets within thescope of IFRS 9 (e.g., financial liabilities) are treated as separate derivatives when they meet thedefinition of a derivative, their risks and characteristics are not closely related to those of the hostcontracts, and the host contracts are not measured at FVTPL.
Hedge Accounting
The Company designates certain hedging instruments, which include derivatives and non-derivatives inrespect of foreign currency risk, as cash flow hedges. When entering into hedging transactions, theCompany has prepared official documents that describe the hedging relationship between hedging
instruments and items which have been hedged, the objective of risk management, the hedging strategy, andthe way to evaluate the effectiveness of the hedging instrument.
The effective portion of gains and losses on derivatives that are designated and qualify as cash flow hedges
is recognized in other comprehensive income. The gains or losses relating to the ineffective portion arerecognized immediately in profit or loss.
The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as reclassification adjustments in the line items relating to the hedged item in thesame period in which the hedged item affects profit or loss. If a hedge of a forecasted transaction
subsequently results in the recognition of a non-financial asset or a non-financial liability, the associatedgains and losses that were recognized in other comprehensive income are removed from equity andincluded in the initial cost of the non-financial asset or non-financial liability.
Starting from 2018, the Company discontinues hedge accounting only when the hedging relationship ceases
to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or
exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized inother comprehensive income from the period (in which the hedge was effective) remains separately inequity until the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur,
the gains or losses accumulated in equity are recognized immediately in profit or loss.

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Provisions
The Company recognizes provisions when the Company has a present obligation (legal or constructive
obligation) arising from past events, the payment for the obligation is probable, and the expenditure forsettling the obligation can be reliably estimated.
The amount recognized as a provision is measured at the best estimate of the expenditure required to settle
the present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured at the estimate of the cash flows to settle thepresent obligation, its carrying amount is the present value of those cash flows. When the aircraft lease
contracts of the Company expire and will be returned to lessor, the Company will assess if there are existingobligations and if a provision is required to be recognized when signing the lease contract.
Revenue Recognition
The Company recognizes revenue by applying the following steps:






Identifying the contract with the customer;
Identifying the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; andRecognize revenue when the Company satisfies a performance obligation.

Shipping service revenue
Passenger and cargo revenue are recognized as revenue when the passengers and goods are actually carried.
When the tickets are sold, due to the fact that the fulfillment of performance obligations of the shipment
have not been met, the relevant amount of revenue is initially recorded as contract liabilities until
passengers actually board.
Leasing
At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.
The Company as lessee
The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date ofa lease, except for short-term leases and low-value asset leases accounted for applying a recognition
exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.
Right-of-use assets are initially measured at cost, which comprises the initial measurement of leaseliabilities adjusted for lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives
received. Right-of-use assets are subsequently measured at cost less accumulated depreciation andimpairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets arepresented on a separate line in the balance sheets.
Right-of-use assets are depreciated using the straight-line method from the commencement dates to theearlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. However, if
leases transfer ownership of the underlying assets to the Company by the end of the lease terms or if thecosts of right-of-use assets reflect that the Company will exercise a purchase option, the Company
depreciates the right-of-use assets from the commencement dates to the end of the useful lives of theunderlying assets.

- 22 -

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed
payments, in-substance fixed payments, variable lease payments which depend on an index or a rate,
residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option, and payments of penalties for terminating a lease if the lease term reflects suchtermination, less any lease incentives payable. The lease payments are discounted using the interest rate
implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, thelessee’s incremental borrowing rate will be used.
Subsequently, lease liabilities are measured at amortized cost using the effective interest method, withinterest expense recognized over the lease terms. When there is a change in a lease term, a change in theamounts expected to be payable under a residual value guarantee, a change in the assessment of an option topurchase an underlying asset, or a change in future lease payments resulting from a change in an index or arate used to determine those payments, the Company remeasures the lease liabilities with a corresponding
adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced
to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities arepresented on a separate line in the balance sheets.
Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods
in which they are incurred.
For sale and leaseback transactions, if the transfer of an asset satisfies the requirements of IFRS 15 to beaccounted for as a sale, the Company recognizes only the amount of any gain or loss which relates to therights transferred to the buyer-lessor, and adjusts the off-market terms to measure the sale proceeds at fairvalue. If the transfer does not satisfy the requirements of IFRS 15 to be accounted for as a sale, it isaccounted for as a financing transaction.
Employee Benefits
a. Short-term employee benefits
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related services.
b. Retirement benefits
Payments to the defined contribution retirement benefit plan are recognized as expenses whenemployees have rendered services entitling them to the contributions.
Defined benefit costs (including service cost, net interest and remeasurement) under defined retirement
benefit plan are determined using the projected unit credit method. Service cost (including current
service cost and past service cost) and net interest on the net defined benefit liabilities (assets) arerecognized as employee benefits expense in the period in which they occur. Remeasurement,
comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized inother comprehensive income in the period in which it occurs. Remeasurement recognized in othercomprehensive income is reflected immediately in retained earnings and will not be reclassified to
profit or loss.
Net defined benefit liabilities represent the actual deficit in the Company’s defined benefit plans.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets which are substantially ready for their intended use or sale through a fairly long period) are added tothe cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

- 23 -

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period
in which they are incurred.
Government Grants
Government grants are not recognized until there is reasonable assurance that the Company will comply
with the conditions attached to them and that the grants will be received.
Government grants related to income are recognized in profit or loss on a systematic basis over the periods
in which the Company recognizes as expenses the related costs that the grants intend to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Company with no future related costs are recognizedin profit or loss in the period in which they are received.
The benefit of a government loan received at a below-market rate of interest is treated as a government
grant measured as the difference between the proceeds received and the fair value of the loan based onprevailing market interest rates.
Frequent Flyer Programs
The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member rewards.
A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
Company recognizes this deferred revenue as revenue only when the Company has fulfilled its obligations
on the granting of rewards or when the period for converting the mileage to rewards has expired.
Share-based Payment Arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Company’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the granted share options are vested immediately.
Taxation
Income tax expense represents the sum of the current tax and deferred tax.
a. Current tax
The current tax liabilities are based on current taxable profit. Since part of the income and expenses aretaxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the statements of comprehensive
income. The Company’s current tax liabilities are calculated by the tax rate was legislated or
substantially legislated at the balance sheet date.
According to the Income Tax Law in the ROC, an additional tax on unappropriated earnings is provided
for in the year the shareholders approve the retain earnings.
- 24 -

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
b. Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred
tax assets are generally recognized for all deductible temporary differences, unused loss carryforwards
and unused tax credits for purchases of machinery, equipment and technology, research anddevelopment expenditures, and personnel training expenditures to the extent that it is probable thattaxable profit will be available against which those deductible temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates and interests in joint ventures, except where the Company is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reversein the foreseeable future. Deferred tax assets arising from deductible temporary differences associatedwith such investments and interests are only recognized to the extent that it is probable that there will be
sufficient taxable profit against which to utilize the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period inwhich the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that havebeen enacted or substantively enacted by the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which theCompany expects, at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.
c. Current and deferred taxes for the year
Current and deferred taxes are recognized in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity, in which case, the current and deferredtaxes are also recognized in other comprehensive income or directly in equity, respectively.
Maintenance and Overhaul Costs
Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.
The overhaul costs of an owned or leased aircraft that meet the criteria for fixed asset capitalization are
capitalized as replacements for aircraft and engines and are depreciated on a straight line basis over the
expected annual overhaul cycle.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
In the application of the Company’s accounting policies as disclosed in Note 4, management is required tomake judgments, estimations and assumptions on the carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered relevant. Actual results may differ from these estimates.
- 25 -

The Company considers the possible impact of the COVID-19 in economic when making its criticalaccounting estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimates are revised if therevisions affect only that period or in the period of the revisions and future periods if the revisions affectboth current and future periods.
Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year are discussed below.
Defined Benefit Obligations
The present value of defined benefit obligations at the end of the reporting period is calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgments and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may have amaterial impact on the amount of defined benefit obligations.
Useful Lives of Property, Plant and Equipment - Flight Equipment
Flight equipment are measured at cost less residual value and are depreciated on a straight-line basis overtheir estimated useful lives. The estimated useful lives and residual values are evaluated based on the
Company’s historical experience and current usage condition in the aviation industry. Because of thechange in fleet planning, the Company's board of directors resolved to modify the estimated useful lives offourteen B747-400F freighters from 25 years to 24 years and the estimated useful lives of three A330-300
aircraft from 20 years to 18 years, effective on January 1, 2022, in order to match the economic benefits
with the useful lives. It is estimated that the depreciation expense in 2022 will increase by $720 million.

6. CASH AND CASH EQUIVALENTS
December 31
2021
Cash on hand and revolving funds
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds

$

2020

36,90522,579,423$

65,987
12,864,010

9,279,778
4,017,011

5,880,682
1,149,141$ 35,913,117$ 19,959,820

The market rate intervals of cash in banks and cash equivalents at the end of the reporting period were as
follows:
December 31

Bank balanceTime deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds- 26 -

2021

2020

0.00%-1.90%
0.17%-0.39%
0.35%-0.45%

0.00%-1.90%
0.30%-0.55%
0.41%-0.49%

The Company designated some deposits denominated in USD and repurchase agreements collateralized bybonds as hedging instruments to avoid exchange rate fluctuations on final payments of aircraft orders andprepayments for equipment, and applied cash flow hedge accounting to hedge its foreign exchange
exposure. The contract information is as follows:

Maturity Date
December 31, 2021
December 31, 20202022.2.7-2022.2.14
2021.1.4-2021.11.1

Carrying
Value

Subject
Financial assets for hedging - current
Financial assets for hedging - current$ 3,545,706
7,613,636

Impact on comprehensive income (loss)
Recognized in
Other
Comprehensive
Income (Loss)
For the year ended December 31, 2021
For the year ended December 31, 2020

$ (75,214)(372,632)

For the years ended December 31, 2021 and 2020, the amount of hedging instrument settlements
recognized as prepayments for equipment was $99,507 thousand and $81,111 thousand, respectively.

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Investments in Equity Instruments
December 31
2021

2020

Non-current
Foreign investments
Unlisted shares
Domestic investments
Unlisted shares$$

26,654$ 117,457

28,80429,70455,458$ 147,161

These investments in equity instruments are not held for trading. Instead, they are held for medium- tolong-term strategic purposes and are expected to profit through long-term investments. Accordingly, themanagement elected to designate these investments in equity instruments as at FVTOCI as they believe thatrecognizing short-term fluctuations in these investments’ fair values in profit or loss would not be
consistent with the Company’s strategy of holding these investments for long-term purposes.

8. FINANCIAL ASSETS AT AMORTIZED COST
December 31
2021

2020

Current
Time deposits with original maturities of more than 3 months- 27 -$ 11,923,194$

5,863,137

The range of interest rates for time deposits with original maturities of more than 3 months wasapproximately 0.37%-0.53% and 0.40%-0.53% per annum as of December 31, 2021 and 2020, respectively.

9. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE
December 31
2021
Notes receivable

$

2020
968

$

-

Accounts receivable
At amortized cost
Gross carrying amountLess: Allowance for impairment loss

13,193,912(204,481)
12,989,431$ 12,990,399

9,363,777(165,722)
9,198,055$

9,198,055

The average credit period was 7 to 55 days. In determining the recoverability of a accounts receivable, theCompany considered any change in the credit quality of the receivable since the date credit was initiallygranted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Company’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position. The Company adopted apolicy of only dealing with entities that are rated the equivalent of investment grade or higher and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Credit rating information is obtained from independent rating agencies where available or, if not available,
the Company uses other publicly available financial information or its own trading records to rate its major
customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored
and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit
exposure is controlled by counterparty limits that are reviewed and approved by the risk management
committee annually.
The Company applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit
losses on accounts receivable are estimated using a provision matrix by reference to past default experience
with the debtors and an analysis of the debtors’ current financial position, adjusted for general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as theforecasted direction of economic conditions at the reporting date. As the Company’s historical credit loss
experience does not show significantly different loss patterns for different customer segments, the loss
allowance based on the past due status is not further distinguished according to the different segments of theCompany’s customer base.
The Company writes off accounts receivable when there is information indicating that the debtor isexperiencing severe financial difficulty and there is no realistic prospect of recovery. For accounts
receivable that have been written off, the Company continues to engage in enforcement activity to attempt
to recover the past due receivables. Where recoveries are made, these are recognized in profit or loss.

- 28 -

The following table details the loss allowance of trade receivables based on the Company’s provision
matrix.
December 31, 2021
Not Past Due

1 to 30 Days
Past Due

31 to 60 Days
Past Due61 to 90 Days
Past DueOver 90 Days
Past Due

0.55%

4.21%

50.17%

100%

100%

Expected credit loss rate

Total

Gross carrying amount
Loss allowance (lifetime ECLs)$ 13,047,164(72,047)$

12,970
(546)

$

3,794
(1,904)$2,486(2,486)$

127,498(127,498)$ 13,193,912(204,481)

Amortized cost

$ 12,975,117$

12,424

$

1,890

$

-

$

-

$ 12,989,431

Not Past Due

1 to 30 Days
Past Due

31 to 60 Days
Past Due61 to 90 Days
Past DueOver 90 Days
Past Due

Total

-

1.04%

47.77%

100%

100%

-

December 31, 2020

Expected credit loss rate
Gross carrying amount
Loss allowance (lifetime ECLs)$

9,167,202(59)$

29,463
(309)

$

3,366
(1,608)$2,887(2,887)$

160,859(160,859)$

9,363,777(165,722)

Amortized cost$

9,167,143$

29,154

$

1,758

$

-

$

-

$

9,198,055

The movements of the loss allowance of accounts receivables were as follows:
For the Year Ended December 31
2021
2020
Balance at January 1
Add: Net remeasurement of loss allowance
Add: Amounts recovered
Less: Amounts written off$ 165,722
38,474565(280)$ 180,104
3,000(17,382)

Balance at December 31$ 204,481$ 165,722

10. INVENTORIES
December 31

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services

2021

2020

$ 7,230,203
616,051
534,073$ 7,251,353
627,437
214,362$ 8,380,327$ 8,093,152

The operating costs for the years ended December 31, 2021 and 2020 included losses from inventory
write-downs of $731,317 thousand and $190,548 thousand, respectively.

- 29 -

11. NON-CURRENT ASSETS HELD FOR SALE
December 31

Aircraft held for sale

2021

2020

$ 36,719$ 89,296

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft
according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original
carrying amount which was higher than the expected sale price and which was recognized as an impairment
loss, and would be continuously assessed whether there are further impairments in subsequent periods.
However, the actual loss shall be identified by the actual sale price.
The fair value measurement is classified as Level 3 and the fair value was determined according to similartransactions of the related market and the proposed sale prices were based on the current status of theaircraft.

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
December 31

Investments in subsidiaries
Investments in associates
Investments in joint ventures

2021

2020

$ 12,147,062
682,963$ 11,155,607
282,471883,079$ 12,830,025$ 12,321,157

a. Investment in subsidiaries
December 31
2021

2020

Unlisted companies
Tigerair Taiwan Co., Ltd.
CAL Park
Mandarin Airlines
CAL-Dynasty International
Taiwan Air Cargo Terminal
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
CAL Hotel
Taiwan Airport Services
Dynasty Aerotech International Corp.
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
Yestrip
Global Sky Express
Kaohsiung Catering Services$

2,955,909
1,656,167
1,787,355
1,169,505
1,691,853
613,697
514,959
190,694335,242
137,378
147,608
557,917
7,630
381,148$ 12,147,062- 30 -$

2,304,113
1,605,033
1,223,259
1,188,110
1,556,133
602,688469,979
232,883
405,353
200,794
136,630
699,793
10,2707,643
512,926$ 11,155,607

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by
the Company were as follows:
December 31

Tigerair Taiwan Co., Ltd.
Taiwan Air Cargo Terminal
CAL Park
Mandarin Airlines
CAL-Dynasty International
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
Taiwan Airport Services
CAL Hotel
Dynasty Aerotech International Corp.
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
Yestrip
Global Sky Express
Kaohsiung Catering Services

2021

2020

78%
54%
100%
97%
100%
49%
100%
94%
47%
100%
100%
100%
25%
54%

76%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%
100%
25%
54%

The Company has control over Taoyuan International Airport Service, Taiwan Airport Service andGlobal Sky Express despite its ownership of less than 50%. Therefore, they were listed as subsidiaries.
To strengthen the capital structure of Tigerair Taiwan Co., Ltd., the board of directors of the Company
approved the plan to issue ordinary shares for cash at $25 per share on August 6, 2020. The Company
subscribed for 47,228 thousand shares in October 2020 and 26,286 thousand shares in November 2020.
The proportion of ownership of the Group increased to 76%. Because the shares were subscribed at apercentage different from its existing ownership percentage, the Company’s retained earnings decreased
by $169,272 thousand.
Tigerair Taiwan Co., Ltd. planned to issue ordinary shares for cash to meet the needs for funds. The
board of directors of the Company approved the plan to issue ordinary shares for cash at $25 per share
on August 5, 2021. The Company subscribed for 101,212 thousand shares in September 2021. The
proportion of ownership of the Group increased to 82%. Because the shares were subscribed at apercentage different from its existing ownership percentage, the Company’s retained earnings decreased
by $54,449 thousand.
To strengthen the capital structure of Mandarin Airlines, the board of directors of the Company
approved the plan to issue ordinary shares for cash at $10 per share on August 26, 2021. The Company
subscribed for 199,677 thousand shares in September 2021. The proportion of ownership of the Group
increased to 97%. Because the shares were subscribed at a percentage different from its existingownership percentage, the Company’s retained earnings decreased by $50,190 thousand.
The liquidation of Yestrip Co., Ltd. was completed on April 22, 2021, and the Company recognized aliquidation loss of $540 thousand.
The share of profit or loss of subsidiaries recognized under the equity method was as follows:

Share of profit (loss)- 31 -

2021

2020$ (3,103,103)$ (1,590,853)

b. Investments in associates
December 31
2021

2020

Unlisted companies
China Aircraft Services
Dynasty Holidays$-$ 277,234
5,237

$

-

$ 282,471

At the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Company were as follows:
December 31

China Aircraft Services
Dynasty Holidays (Note)

2021

2020

20%
20%

20%
20%

The investment (loss) gain recognized for associates accounted for using the equity method was asfollows:

China Aircraft Services
Dynasty Holidays

2021

2020

$ (269,573)(1,436)$ (102,758)(4,740)$ (271,009)$ (107,498)

c. Investments in joint ventures
The investments in joint ventures were as follows:
December 31

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2021

2020

$ 533,251
120,876
28,836$ 695,959
149,353
37,767$ 682,963$ 883,079

At the end of the reporting period, the proportion of ownership and voting rights in joint ventures heldby the Company was as follows:
December 31

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

- 32 -

2021

2020

51%
55%
49%

51%
55%
49%

The Company entered into a joint venture agreement with Taikoo Company to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both sides have theright to make major motion vetoes on the board of directors, and therefore, the Company does not havecontrol.
The investment (loss) gain recognized for joint ventures accounted for using the equity method was asfollows:
December 31

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2021

2020

$ (172,546)(29,418)(8,931)$ (136,459)(15,475)(46)$ (210,895)$ (151,980)

The Company’s shares of other comprehensive income of subsidiaries, associates and joint ventures
were $4,918 thousand and $(4,890) thousand in 2021 and 2020, respectively.
The investments accounted for using the equity method and the share of profit or loss and othercomprehensive income of subsidiaries, associates, and joint ventures were based on these investees’
financial statements which have been audited, except for China Aircraft services. However, themanagement determined that there would have been no significant adjustments had this investee’s
financial statements been independently audited.
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 7 and 8 (names, locations, and related informationof investees on which the Company exercises significant influence and investment in mainland China)
following the notes to the financial statements.

13. PROPERTY, PLANT AND EQUIPMENT
Freehold Land

Buildings

FlightEquipment

OthersTotal

Cost
Balance at January 1, 2020
Additions
Disposals
Reclassification$

193,013(11,420)-$

7,383,758
19,464(369,651)-$ 266,907,914
621,587(3,718,075)
11,792,738$

6,509,647
218,603(171,769)
8,269$ 280,994,332
859,654(4,270,915)
11,801,007

Balance at December 31, 2020$

181,593$

7,033,571$ 275,604,164$

6,564,750$ 289,384,078

Balance at January 1, 2020
Depreciation expense
Disposals
Impairment losses
Reclassification

$

-

$

(4,056,383)(180,609)
369,651-$ (140,336,300)(17,588,803)
3,446,678(424,573)
1,489,158$(5,571,763 )(293,613)
171,378
5,563$ (149,964,446)(18,063,025)
3,987,707(424,573)
1,494,721

Balance at December 31, 2020

$

-

$

(3,867,341)$ (153,413,840)$(5,688,435 )$ (162,969,616)

Balance at December 31, 2020, net value$

181,593$

3,166,230$ 122,190,324$

876,315$ 126,414,462

Accumulated depreciationand impairment(Continued)- 33 -

Freehold Land

Buildings

FlightEquipment

OthersTotal

Cost
Balance at January 1, 2021
Additions
Disposals
Reclassification$

181,593-$

7,033,571
47,818
181,818$ 275,604,164
1,185,464(46,086,944)
10,347,647$

6,564,750
468,963(71,274)(166,717)$ 289,384,078
1,702,245(46,158,218)
10,362,748

Balance at December 31, 2021$

181,593$

7,263,207$ 241,050,331$

6,795,722$ 255,290,853

Balance at January 1, 2021
Depreciation expense
Disposals
Reclassification

$

-

$

(3,867,341)(181,641)-$ (153,413,840)(15,776,982)
39,169,370(136,004)$(5,688,435 )(291,085)
69,765(112)$ (162,969,616)(16,249,708)
39,239,135(136,116)

Balance at December 31, 2021

$

-

$

(4,048,982)$ (130,157,456)$(5,909,867)$ (140,116,305)

Balance at December 31, 2021, net value$

181,593$3,214,225$ 110,892,875$

885,855$ 115,174,548

Accumulated depreciationand impairment(Concluded)
Reclassification is mainly resulted from the transfer of prepayments for equipment.
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset as follows:
Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersFlight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

45-55 years
10-25 years
25 years
3-13 years
3-15 years
5 years
3-5 years
18-25 years
10-20 years
12-20 years
6-8 years
3-10 years
8-12 years
3-15 years
5-12 years

Regarding changes in fleet composition and the retirement schedule, the Company measured therecoverable amount of some flight equipment by deducting the transaction costs from fair value (level 3).
The Company recognized an impairment loss on a part of aircraft equipment of $424,573 thousand in 2020.
The fair value is determined by reference to factors such as the condition of the flight equipment andpossible market estimates.
Refer to Note 31 for the carrying amounts of aircraft equipment and right-of-use assets pledged by theCompany.
Based on the particularity of risk in the aviation industry, all of the Company’s assets such as aircraft, realestate, and movable property are adequately insured to diversify the potential risk related to operations.
- 34 -

The Company disposed of a portion of flight equipment and recognized a loss of $950,980 thousand for thethree months ended June 30, 2021.

14. INVESTMENT PROPERTIES
December 31

Carrying amount
Investment properties

2021

2020

$ 2,047,448$ 2,047,448

The investment properties held by the Company were land located in Nankan, which were leased to others.
The fair value of the investment properties held by the Company were both $2,456,472 thousand as ofDecember 31, 2021 and 2020, respectively. The fair value valuation was performed by independent
qualified professional valuers, and the future income evaluated by management was based on market
transactions. All of the Company’s investment properties were held under freehold interest.

15. OTHER INTANGIBLE ASSETS
Computer
Software Costs

Accumulated
Amortization

Balance at January 1, 2020
Additions
Amortization expense
Reclassification$ 2,218,356
95,217(765,786)$ (1,247,058)(169,158)
735,882$

971,298
95,217(169,158)(29,904)

Balance at December 31, 2020

$ 1,547,787$(680,334)$

867,453

Balance at January 1, 2021
Additions
Amortization expense$ 1,547,787
66,007-$(680,334)(179,111)$

867,453
66,007(179,111)

Balance at December 31, 2021

$ 1,613,794$(859,445)$

754,349

Net Value

The above items of other intangible assets are amortized on a straight-line basis over 2-10 years.

16. OTHER ASSETS
December 31
2021

2020

Current
Temporary payments
Prepayments
Others- 35 -$

24,846
175,433
188,912$

19,111
134,055
299,248$

389,191$

452,414(Continued)

December 31
2021

2020

$ 8,058,743
1,116,502
548,674
18,497$ 5,069,541
2,042,609
585,451
18,078$ 9,742,416$ 7,715,679(Concluded)

Non-current
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Other financial assets

The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A321neo and B777F aircraft. For details on the A321neo and B777F aircraft purchase contracts, refer toNote 32.

17. BORROWINGSa. Short-term bills payable
December 31
2021
Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate

2020

$

-

$ 8,100,000
11,118$-$ 8,088,882-

0.99%-1.00%

b. Long-term borrowings
December 31

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issuance
Less: Unamortized discounts

2021

2020

$ 30,850,000
29,232,563$ 21,650,000
32,885,883

25,100,000
26,91885,155,645
8,351,129

29,100,000
22,046
83,613,837
14,798,442$ 76,804,516$ 68,815,395

0.81%-1.22%

0.81%-1.22%

Less: Current portion

Interest rates

Secured bank loans are secured by flight equipment, refer to Note 31.

- 36 -

Bank loans (denominated in New Taiwan dollars) are repayable quarterly, semiannually or in lump sum
upon maturity. The related information is summarized as follows:
December 31

Periods

2021

2020

2016/6/272032/6/30

2016/6/272032/6/30

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until September 2026, were used by the Company to guarantee commercial
paper issued. As of December 31, 2021 and 2020, such commercial papers were issued at discount rates
of 0.985%-1.0907% and 1.0263%-1.1167%, respectively.
In accordance with the “Regulations on Relief and Revitalization Measures for Industries andEnterprises Affected by Severe Pneumonia with Novel Pathogens” endorsed by the Ministry ofTransportation and Communications and the “Operational Guides on Relief Loan Guarantees for Ailing
Aviation Industry Affected by Severe Pneumonia with Novel Pathogens”, the Company applied for a
special loan project to maintain its operation, and the fund along with subsidized interest rates were
provided by the government. The total amount of the loans is $29,350 million, which shall be repaid
within 2 years and 4 years from the date of initial drawdown. As of December 31, 2021, the Company
had made a drawdown in the amount of $29,350 million.

18. BONDS PAYABLE
December 31
2021
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Unsecured corporate bonds first-time issued in 2017
Unsecured corporate bonds second-time issued in 2017
Unsecured corporate bonds first-time issued in 2018
Unsecured corporate bonds first-time issued in 2019
Convertible bonds sixth-time issued
Convertible bonds seventh-time issued
Less: Current portion and put option of convertible bonds$

1,000,000
1,300,000
4,500,000
3,500,000
379,284
2,970,742
13,650,026
2,525,000$ 11,125,026- 37 -

2020$

2,500,000
2,500,000
1,000,000
2,600,000
4,500,000
3,500,000
5,832,859
22,432,859
12,132,859$ 10,300,000Related issuance conditions were as follows:
Rate
(%)

Category

PeriodConditions

Five-year unsecured bonds - issued at par in
May 2016; repayable in May 2020 and2021; 1.19% interest p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in
September 2020 and 2021; 1.08% interestp.a., payable annually
Three-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.2% p.a., payable annually
Seven-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.75% p.a., payable annually
Three-year private unsecured bonds - issued at
par in October 2017; repayable on due date;interest of 1.14% p.a., payable annually
Five-year private unsecured bonds - issued at
par in October 2017; repayable in October
2021 and 2022; 1.45% interest p.a., payableannually
Five-year private unsecured bonds - issued at
par in November 2018; repayable inNovember 2022 and 2023; 1.32% interestp.a., payable annually
Seven-year private unsecured bonds - issued at
par in November 2018; repayable inNovember 2024 and 2025; 1.45% interestp.a., payable annually
Five-year private unsecured bonds - issued at
par in June 2019; repayable in June 2023
and 2024; 1.10% interest p.a., payableannually
Seven-year private unsecured bonds - issued at
par in June 2019; repayable in June 2025
and 2026; 1.32% interest p.a., payableannually
Five-year convertible bonds - issued at
discount in January 2018; repayable in lumpsum upon maturity; 1.3821% discount ratep.a.

2016.05.262021.05.26

Principal repayable in May of2020 and 2021; indicatorrate; payable annuallyPrincipal repayable in
September of 2020 and2021; indicator rate;
payable annuallyPrincipal repayable on due
date; indicator rate;
payable annuallyPrincipal repayable on due
date; indicator rate;
payable annuallyPrincipal repayable on due
date; indicator rate;
payable annuallyPrincipal repayable in
October of 2021 and 2022;
indicator rate; payableannually
Principal repayable inNovember of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable inNovember of 2024 and2025; indicator rate;
payable annuallyPrincipal repayable in June of2023 and 2024; indicatorrate; payable annually

1.19

2019.06.212026.06.21

Principal repayable in June of2025 and 2026; indicatorrate; payable annually

1.32

2018.01.302023.01.30-

Five-year convertible bonds - issued at
discount in April 2021; repayable in lumpsum upon maturity; 0.8612% discount ratep.a.

2021.04.282026.04.28

Unless bonds are converted toshare capital or redeemed,principal repayable in
January of 2023; 1.3821%
discount rate p.a.
Unless bonds are converted toshare capital or redeemed,principal repayable in Aprilof 2026; 0.8612% discountrate p.a.

2016.09.272021.09.27

2017.05.192020.05.19
2017.05.192024.05.19
2017.10.122020.10.12
2017.10.122022.10.12

2018.11.302023.11.30

2018.11.302025.11.30

2019.06.212024.06.21- 38 -

1.08

1.20

1.75

1.14

1.45

1.32

1.45

1.10

-

The Company issued the sixth 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 face value on the third anniversaryof the offering date. The holders can exercise the right to sell on January 30, 2021.
c. The Company may redeem the bonds at face value between April 30, 2018 and December 20, 2022
under certain conditions. The Company resolved to exercise the right of redemption on January 14,2022. The reference date of redemption of the bonds is March 9, 2022 and the expected face value ofredemption is $200 thousand.
d. Between April 30, 2018 and January 30, 2023 (except for the period between the former dividend date
and the date of the dividend declaration on record), holders may convert their bonds into the Company’s
ordinary shares. The initial conversion price was set at NT$13.2, which is subject to adjustment if there
is a capital injection by cash, share dividend distribution, and the proportion of cash dividends per sharein market price exceeding 1.5%. Because the Company distributed cash dividends on July 29, 2019, theconversion price was adjusted to NT$12.6. As of December 31, 2021, a total face value of
NT$5,615,200 thousand of convertible bonds was converted into 445,650 thousand ordinary shares of
the Company.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,012,000(409,978)Liability component at the date of issuance$ 5,602,022

The Company issued the seventh issue of its unsecured convertible bonds, and the issuance conditions wereas 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 face value on the third anniversaryof the offering date. The holders can exercise the right to sell on April 28, 2024.
c. The Company may redeem the bonds at face value between July 28, 2021 and March 18, 2026 undercertain conditions.
d. Between July 28, 2021 and April 28, 2026 (except for the period between the former dividend date andthe date of the dividend declaration on record), holders may convert their bonds into the Company’s
ordinary shares. The initial conversion price was set at NT$19 per share, which is subject to adjustment
if there is a capital injection by cash or share dividend distribution. As of December 31, 2021, a total
face value of NT$1,417,200 thousand of convertible bonds was converted into 74,589 thousand
ordinary shares of the Company.
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 0.8612% per annum on initial recognition.

- 39 -

Proceeds from issuance
Equity component$ 4,500,000(188,862)

Liability component at the date of issuance$ 4,311,138

19. LEASE AGREEMENTS
a. Right-of-use assets
December 31
2021
Carrying amounts
Land
Buildings
Flight equipment
Other equipment

$

2020

3,428,611
6,584,950
40,951,799
18$ 50,965,378$

3,367,875
6,986,866
44,201,020-$ 54,555,761

For the Year Ended December 31
2021
2020
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment$

7,274,961$

2,084,799$

181,729
309,471
9,762,276
30$

172,757
383,898
9,399,066-$ 10,253,506$

9,955,721

b. Lease liabilities
December 31
2021
Carrying amounts
Current
Non-current

$
$

2020

882,538
9,677,756$
842,592$ 10,055,776

Range of discount rate for lease liabilities (including leases denominated in USD designated as hedging
instruments):
December 31

Land
Buildings
Flight equipment
Other equipment- 40 -

2021

2020

0.81%-1.65%
0%-2.98%
0.68%-3.16%
0%1.09%-1.65%
0%-3.56%
0.68%-3.16%-

c. Financial liabilities under hedge accounting
The Company specifies a part of aircraft leases denominated in USD as hedging instruments to avoid
exchange rate fluctuations in passenger revenue and applies the accounting treatment of cash flow
hedging. The lease information is as follows:
Maturity Date
December 31, 2021

December 31, 2020

Subject

Carrying Value

2022.2.9-2033.12.12 Financial liabilities for hedging current
Financial liabilities for hedging non-current
2022.2.9-2028.5.15 Financial liabilities for hedging current
Financial liabilities for hedging non-current$

8,434,893
27,839,847
8,120,445
32,455,333

Influence of comprehensive income
Recognized in
Other
Comprehensive
IncomeFor the year ended December 31, 2021
For the year ended December 31, 2020$

252,250
2,099,550

Reclassified toIncome$679,554352,674

d. Material leasing activities and terms
China Airlines leased ten 777-300ER planes, twenty A330-300 planes, fifteen 737-800 planes and two
A321neo planes for operation, lease period are 3 to 16 years from February 2006 to December 2033.
The rental pricing method is partly a fixed amount of funds, and some of them are floating rents,
floating rents are according to benchmark ratio, the rent is revised every half year. When the lease
expires, the lease agreements have no purchase rights.
The information of refundable deposits and opening of credit letter due to rental of planes:
December 31
2021
Refundable deposits
Credit guarantees$

414,720
1,295,594

2020$

438,1171,330,772

e. Lease agreement signed but not yet delivered
In September 2019, the Company signed a rental contract for six A321neo with Air Lease Corporation,
which is expected to be introduced between 2021 and 2022. As of December 31, 2021, two A321neo
have been delivered.
In October 2019, the Company signed a rental contract for eight A321neo with CALC Lease
Corporation, which is expected to be delivered in 2024.
The Company also signed related aircraft purchase agreement, please refer to Note 32 for details.

- 41 -

f. Sale and leaseback transactions
In order to revitalize assets and strengthen financial structure, the Company signed a sale and leaseback
agreement for five A330-300 with CALC Lease Corporation in June 2021 and September 2021. Thoseaircraft were sold for $2,810,098 thousand and the Company recognized a loss of $342,080 thousand.
The lease term is 4 years without renewal option or right of first refusal and the annual lease payments
for each aircraft are US$4,200 thousand to US$4,823 thousand.
g. Aircraft leases
In order to revitalize assets, the Company signed a lease agreement for two 747-400F with US Cargo
Company in August 2021 and September 2021.
h. Other lease information
The Company uses operating lease agreement for investment properties, refer to Note 14.
For the Year Ended December 31
2021
2020
Short-term leases and low-value asset leases
Total cash outflow for leases$
17,347$ (10,064,135)$
16,450$ (10,528,143)

The Company chooses to waive the recognition of the contract provisions for the short-term leases andlow-value asset leases, and does not recognize the related right-of-use assets and lease liabilities forsuch lease.

20. OTHER PAYABLES
December 31
2021$

Short-term employee benefits
Fuel costs
Repair expenses
Ground service expenses
Terminal surcharges
Commission expenses
Interest expenses
Others- 42 -

2020

5,513,432
3,005,174
1,467,390
763,012716,531
149,296
82,063
1,168,108$

1,592,141
1,718,503
285,146
956,831
346,952
184,363
116,168
1,927,976$ 12,865,006$

7,128,080

21. CONTRACT LIABILITIES
December 31

Frequent flyer programs
Advance ticket sales

Current
Non-current

2021

2020

$ 2,797,038
1,255,328$ 2,657,942
2,322,008$ 4,052,366$ 4,979,950$ 3,416,733
635,633$ 3,218,846
1,761,104$ 4,052,366$ 4,979,950

22. PROVISIONS
December 31
2021

2020

Operating leases - aircraft$ 17,808,700$ 13,741,244

Current
Non-current$$

2,578,812
15,229,888$ 17,808,700

13,741,244$ 13,741,244

The Company leased flight equipment under operating lease agreements. Under the contracts, when theleases expire and the equipment is returned to the lessor, the flight equipment has to be repaired according
to the expected years of use, number of flight hours, flight cycles and the number of engine revolution. The
Company had existing obligations to recognize provisions when signing a lease or during the lease term.
Aircraft Lease
Contracts
Balance at January 1, 2020
Additional provisions recognized
Usage
Effect of foreign currency exchange differences$

Balance at December 31, 2020

$ 13,741,244

Balance at January 1, 2021
Additional provisions recognized
Usage
Effect of foreign currency exchange differences$ 13,741,244
5,796,335(1,476,769)(252,110)

Balance at December 31, 2021

$ 17,808,700- 43 -

9,431,736
5,580,416(705,117)(565,791)

23. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Company adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed
defined contribution plan. Under the LPA, the Company makes monthly contributions to employees’
individual pension accounts at 6% of monthly salaries and wages.
b. Defined benefit plans
The defined benefit plans adopted by the Company in accordance with the Labor Standards Law isoperated by the government of the ROC. Pension benefits are calculated on the basis of the length ofservice and average monthly salaries of the 6 months before retirement. The Company contributeamounts equal to 15% of total monthly salaries and wages to a pension fund administered by thepension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in thecommittee’s name.
Before the end of each year, the Company assesses the balance in the pension fund. If the amount of thebalance in the pension fund is inadequate to pay retirement benefits for employees who conform toretirement requirements in the next year, the Company is required to fund the difference in one
appropriation that should be made before the end of March of the next year. The pension fund ismanaged by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Company has no right toinfluence the investment policy and strategy.
The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as
follows:
December 31
2021

2020

Present value of defined benefit obligation
Fair value of plan assets$ 14,958,292(6,599,103)$ 14,458,016(6,240,621)

Net defined benefit liabilities$$

8,359,189

8,217,395

Movements in net defined benefit liabilities were as follows:

Balance at January 1, 2020
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income

Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets

Net Defined
BenefitLiabilities(Assets)$ 13,932,511$ (6,343,766)$

1,186,945
96,0381,282,983(43,803)(43,803)1,186,945
52,235
1,239,180-(213,741)(213,741)

498,254
209,705
707,959(213,741)

498,254
209,705494,218(Continued)- 44 -

7,588,745

Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets

Net Defined
BenefitLiabilities(Assets)

Contributions from the employer
Benefits paid
Direct payment to employees
Exchange differences on foreign plans
Balance at December 31, 2020
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in demographic
assumptions
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Direct payment to employees
Exchange differences on foreign plans

$

$

$

Balance at December 31, 2021

(1,294,147)(154,058)(17,232)
14,458,016(933,458)
1,294,147(6,240,621)(933,458)(154,058)(17,232)
8,217,395

1,169,022
47,178
1,216,200(20,267)(20,267)

1,169,022
26,911
1,195,933-(92,874)(92,874)

379,091-

379,091(452,370)
201,665
128,386(706,427)(123,638)(14,245)(92,874)(951,768)
706,427-(452,370)
201,665
35,512(951,768)(123,638)(14,245)$ 14,958,292$ (6,599,103)$

8,359,189(Concluded)

Through the defined benefit plans under the Labor Standards Act, the Company is exposed to thefollowing risks:
1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the
mandated management. However, in accordance with relevant regulations, the return generated byplan assets should not be below the interest rate for a two-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated using the future salariesof plan participants. As such, an increase in the salaries of the plan participants will increase thepresent value of the defined benefit obligation.

- 45 -

The actuarial valuations of the present value of the defined benefit obligation were carried out by
qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations are as
follows:
December 31

Discount rate
Expected rate of salary increase

2021

2020

0.68%
1.00%

0.34%
1.00%

If possible reasonable changes in each of the significant actuarial assumptions will occur and all otherassumptions will remain constant, the present value of the defined benefit obligation will increase(decrease) as follows:
December 31

Discount rate
0.25% increase
0.25% decrease
Expected rate of salary increase
0.5% increase
0.5% decrease

2021

2020

$ (317,393)$ 331,820$ (318,904)$ 332,769$ 634,785$ (605,931)$ 651,673$ (610,077)

The above sensitivity analysis may not be representative of the actual changes in the present value ofthe defined benefit obligation as it is unlikely that changes in assumptions will occur in isolation of one
another as some of the assumptions may be correlated.
December 31
2021

2020

Expected contributions to the plan for the next year

$ 766,706$ 740,777

Average duration of the defined benefit obligation

9 years

9.5 years

24. EQUITY
a. Share capital
Ordinary shares
December 31

Number of shares authorized (in thousands of shares)
Amount of shares authorized
Amount of shares issued

2021

2020

7,000,000$ 70,000,000$ 59,412,243

7,000,000$ 70,000,000$ 54,209,846

The Company issued the 6th and the 7th domestic unsecured convertible bonds, and the holders of theconvertible bonds applied for conversion in the amount of $7,032,400 thousand from April 1, 2021 to
December 31, 2021. The number of ordinary shares exchanged was 520,329 thousand and entitled toregistration change after the issuance of new shares.

- 46 -

b. Capital surplus
December 31
2021
Issuance of shares in excess of par value and conversion
premium
Retirement of treasury shares
Expired employee share options
Long-term investments
Equity component of convertible bonds
Others2020$ 1,668,381
540
155,676
869,932$

146,351
33,513
11,747
119,134
409,978
466,604$ 2,694,529$ 1,187,327

The capital surplus from shares issued in excess of par (including additional paid-in capital from theconerted convertible bonds) and the difference in sale price of share of subsidiaries and book value may
be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be
distributed as cash dividends or transferred to capital (but limited to a certain percentage of theCompany’s paid-in capital on a yearly basis).
The capital surplus arising from long-term investments, expired employee share options, dividends
distributed to subsidiaries and retirement of treasury shares may not be used for any purpose, except foroffsetting a deficit. The capital surplus arising from the conversion of convertible bonds may not be
used for any purpose.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”),
where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes,
offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting
aside or reversing a special reserve in accordance with the laws 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, which is to distribute dividends and bonus noless than 50% of the remaining profit and undistributed retained earnings. The dividends and bonus
mentioned above can be distributed in the form of new shares or cash, and the cash dividends should be
no less than 30% of the total dividends.
Under the Company Act, if surplus earnings are distributed in the form of new shares, the distributionof shares shall be approved in the meeting of the board of directors; if such earnings are distributed in
the form of cash, the cash distribution shall be authorized after a resolution has been adopted by amajority vote at a meeting of the board of directors attended by two-thirds of the total number of
directors; and in addition, a report of such distribution shall be submitted to the shareholders’ meeting.
If the Company has no loss, according to laws and regulations, the Company can distribute its capitalreserve, in whole or in part, by issuing new shares or cash based on financial, business and management
considerations. If such surplus earnings is distributed in the form of new shares, it shall be approved bya meeting of the board of directors; if such surplus earning is distributed in the form of cash, it shall beauthorized after a resolution has been adopted by a majority vote at a meeting of the board of directors
attended by two-thirds of the total number of directors; and in addition thereto a report of such
distribution shall be submitted to the shareholders’ meeting.

- 47 -

Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”) basedon the amended Company Act, where the Company made profit in a fiscal year, the profit shall be firstutilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of theremaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations,and then any remaining profit together with any undistributed retained earnings shall be used by theCompany’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 shareholders’meeting for the distribution of dividends and bonuses to shareholders by cash or shares (cash dividends
cannot be less than 30% of total dividends distributed). However, if the Company’s profit before tax ina 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.
The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.
1) Offsetting deficit in 2020
On August 12, 2021, the offsetting of deficit in 2020 was resolved and recognized in theshareholders’ meeting. The deficit included a net income of $140,000 thousand and negative
adjustment of other retained earnings of $490,581 thousand; thus, the remaining amount ofaccumulated deficit was $350,581 thousand. The deficit was offset by the capital reserve of$350,581 thousand.
2) Appropriation of earnings in 2021
On March 15, 2022, the appropriation of earnings in 2021 which was resolved in the meeting of theCompany’s board of directors, was as follows:

Legal reserve
Cash dividends

Appropriationof Earnings

Dividends Per
Share (NT$)$$0.83636529

925,385
5,000,000

The appropriation of earnings in 2021 is subject to the resolution of the shareholders in their
meetings on May 26, 2022.
d. Other equity items
The movement of other equity items were as follows:
Exchange
Differences on
the Translationof the Financial
Statements ofForeign
Operations
Balance at January 1, 2020
Exchange differences on thetranslation of the financial
statements of foreign operations
Gain on hedging instruments$(54,707)(101,142)-

Unrealized Gain
(Loss) on
Financial Assets
at FVTOCI$

Gain (Loss) on
Hedging
Instruments

Total

107,262$ 1,143,678$ 1,196,233-

1,907,401(101,142)
1,907,401(Continued)- 48 -

Exchange
Differences on
the Translationof the Financial
Statements ofForeign
Operations
Cumulative loss on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets
at FVTOCI
Share of other comprehensive
income (loss) from associates
and joint ventures accounted forusing equity method
Effects of income tax
Other comprehensive income(loss) recognized in the period
Transferred to hedged items$

Unrealized Gain
(Loss) on
Financial Assets
at FVTOCI-$-

Gain (Loss) on
Hedging
Instruments$(283,210)

Total

$

(283,210)-

39,305-39,305

1,368
20,229(84,893)
9,685

2,837
(365,036)(80,688)(335,122)(79,545)-(35,903)-

1,261,992
200,989

1,146,544
200,989

Balance at December 31, 2020$

(134,252)$

71,359$ 2,606,659$ 2,543,766

Balance at January 1, 2021
Exchange differences on thetranslation of the financial
statements of foreign operations
Gain on hedging instruments
Cumulative loss on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets
at FVTOCI
Share of other comprehensive
income (loss) from associates
and joint ventures accounted forusing equity method
Effects of income tax
Other comprehensive income(loss) recognized in the period
Transferred to hedged items$(134,252)$

71,359$ 2,606,659$ 2,543,766

17,597--861,256

17,597861,256--(672,302)(672,302)-(91,703)-(91,703)95(3,519)(4,161)
18,993

1,992(57,693)(2,074)(42,219)

14,173-(76,871)-

133,253
99,50770,55599,507

Balance at December 31, 2021$

(5,512)$ 2,839,419$ 2,713,828(120,079)$(Concluded)e. Treasury shares
Treasury shares are the Company’s shares held by its subsidiaries, as of December 31, 2021 and 2020
were as follows:(In Thousands of Shares)

Period of Treasury Shares

Number of
Shares,Beginning ofYear

For the year ended December 31, 2021
For the year ended December 31, 2020

2,075
2,889
- 49 -

Reduction
During the
Year
(814)

Number of
Shares, End of
Year
2,075
2,075

Subsidiary

Shares Held by
Subsidiaries(In Thousandsof Shares)

Carrying
AmountMarket Value

2,075$ 57,156$ 57,156

2,075$ 24,999$ 24,999

December 31, 2021
Mandarin Airlines
December 31, 2020
Mandarin Airlines

The above acquisitions by subsidiaries of the Company’s shares in previous years was due toinvestment planning. The shares of the Company held by its subsidiaries were treated as treasury shares.
The subsidiaries can exercise shareholders’ right on these treasury shares, except for the right tosubscribe for the Company’s new shares and voting rights.
Dynasty Aerotech International Corp. sold a total of 814 thousand shares of the Company in 2020 andthe disposal price was $6,854 thousand.

25. NET INCOME
a. Revenue
For the Year Ended December 31
2021
2020
$

Passenger
Cargo
Others3,433,751
124,249,632
4,456,865$ 20,508,133
81,692,574
4,126,416$ 132,140,248$ 106,327,123

b. Other income
For the Year Ended December 31
2021
2020
Interest income
Dividend income
Others- 50 -$ 132,2208,355
234,050$ 208,081
8,720
223,960$ 374,625$ 440,761

c. Other gains and losses
For the Year Ended December 31
2021
2020
(Loss) gain on disposal property, plant and equipment
Gain on financial assets mandatorily classified as at FVTPL
Net foreign exchange (losses) gains
Impairment loss recognized on investments accounted for using
equity method
Impairment loss recognized on property, plant and equipment
Loss on disposal of investments
Loss on sale and leaseback transactions
Others$(932,718)(123,671)$(136,672)(540)(342,080)(436,219)$ (1,971,900)

8,005
3,596
259,796(46,757)(424,573)(323,894)$(523,827)

d. Finance costs
For the Year Ended December 31
2021
2020
Interest expense
Bonds payable
Bank loans
Interest on lease liabilities$

Capitalization interest
Capitalization rate

262,951
624,420
1,276,803$

344,034
834,6111,601,718$ 2,164,174$ 2,780,363$
42,4400.55%-1.11%$
75,701
0.71%-1.45%

e. Depreciation and amortization expenses
For the Year Ended December 31
2021
2020
Property, plant and equipment
Right-of-use assets
Intangible assets

An analysis of depreciation by function
Operating costs
Operating expenses$ 16,249,708
10,253,506
179,111$ 18,063,025
9,955,721
169,158$ 26,682,325$ 28,187,904$ 25,933,079
570,135$ 27,360,911
657,835$ 26,503,214$ 28,018,746$$

An analysis of amortization by function
Operating expenses- 51 -

179,111

169,158

f. Employee benefits expense
For the Year Ended December 31
2021
2020
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$

330,826
1,195,933$

347,320
1,239,180$

1,526,759$

1,586,500$ 16,170,192
4,880,662$ 12,892,488
4,452,116$ 21,050,854$ 17,344,604$ 17,960,614
4,616,999$ 14,918,454
4,012,650$ 22,577,613$ 18,931,104

According to the Company’s articles, the Company accrues compensation of employees at rates of noless than 3% of the net profit before income tax and compensation of employees. When the Company
has an accumulated deficit, the Company shall set aside some amounts to offset the deficit in advance.
For the year ended December 31, 2021, the estimated amount of compensation of employees was$366,429 thousand, and for the year ended December 31, 2020, the compensation of employees was not
estimated since the Company had an accumulated deficit.
Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date that the annual financial statements are authorized for issue are adjusted
in the year that the compensation and remuneration are recognized. If there is a change in the proposed
amounts after the annual financial statements are authorized for issue, the differences are recorded as achange in the accounting estimate.
Information on the compensation of employees resolved by the Company’s board of directors isavailable at the Market Observation Post System website of the Taiwan Stock Exchange.

26. INCOME TAX
a. Income tax recognized in profit or loss
Major components of income tax expense were as follows:
For the Year Ended December 31
2021
2020
Current tax
Current year
Adjustments for prior year
Deferred tax
Current year
Adjustments for prior year

$ 2,926,770
7,846

$

(331,894)(8,687)

Income tax expense recognized in profit or loss
- 52 -$ 2,594,035

15,676
280(67,746)
82,885$31,095

A reconciliation of accounting profit and income tax expense was as follows:
For the Year Ended December 31
2021
2020
Profit before tax from continuing operations$ 11,973,940$

171,095

Income tax expense calculated at the statutory rate
Effects of adjustments to income tax
Nondeductible expenses in determining taxable income
Tax-exempt income
Overseas income tax expense
Unrecognized loss carryforwards and investment tax credits
Adjustments for prior years’ tax
Adjustments for prior years’ deferred tax$$

34,219

Income tax expense recognized in profit or loss$

2,394,788
695,244(541,481)
33,815
12,5107,846(8,687)2,594,035

369,518(334,324)
15,676(137,159)
280
82,885$31,095b. Income tax recognized in other comprehensive income
For the Year Ended December 31
2021
2020
Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Fair value changes of hedging instruments for cash flow
hedgesRemeasurement of defined benefit plans
Fair value changes of financial assets at FVTOCI
Total income tax recognized in other comprehensive income- 53 -$(3,519)$20,229(57,693)
7,102
18,993(365,036)
98,8449,685$ (35,117)$ (236,278)

c. Deferred tax assets and liabilities
For the year ended December 31, 2021

Opening
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$$Closing
Balance

Deferred tax assets
Temporary differences
Defined benefit obligations
Frequent flyer programs
Maintenance reserve
Allowance for impairment
loss of inventories
Others$ 1,656,388
547,877
2,359,334
253,209
165,051

34,65135,395(71,261)
26,922
230,398

7,102-$ 1,698,141
583,272
2,288,073(10,762)

280,131384,687$ 4,981,859$

256,105$(3,660)$ 5,234,304$

143,100
732,288$(84,477)-$

31,457$58,623
763,745$875,388$(84,477)$

31,457$

822,368

Deferred tax liabilities
Temporary differences
Unrealized foreign exchange
gains
OthersFor the year ended December 31, 2020

Opening
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$$Closing
Balance

Deferred tax assets
Temporary differences
Defined benefit obligations
Frequent flyer programs
Maintenance reserve
Allowance for impairment
loss of inventories
Others$ 1,527,211
590,694
2,063,485
294,799
280,953$ 4,757,142- 54 -

30,333(42,817)295,849(41,590)(195,593)$

46,182$

98,844-$ 1,656,388
547,877
2,359,334

79,691

253,209
165,051

178,535$ 4,981,859(Continued)

Opening
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
IncomeClosing
Balance

Deferred tax liabilities
Temporary differences
Unrealized foreign exchange
gains
Others$81,778317,475$

61,322-$414,813$

143,100
732,288$399,253$

61,322$414,813$875,388(Concluded)

Deductible temporary differences, unused loss carryforwards and unused investment credits for which
no deferred tax assets have been recognized in the balance sheets were as follows:
December 31
2021
Loss carryforwards
Expiry in 2028
Expiry in 2029

$

2020
-

$

$ 6,476,757

Others$495,779
1,439,287$ 1,935,066$ 4,479,141

d. As of December 31, 2021, the Company has no unused loss carryforwards.
e. Income tax assessments
The income tax returns of the Company through 2018 have been examined by the tax authorities.

27. EARNINGS PER SHARE
For the Year Ended December 31
2021
2020
Basic earnings per share (NT$ per share)
Diluted earnings per share (NT$ per share)

$
$

1.67
1.54

$
$

0.03
0.03

For the Year Ended December 31
2021
2020

Net Profit for The Year

Earnings used in the computation of basic earnings per share
Effect of potentially dilutive ordinary shares:
Interest on convertible bonds (after tax)

$ 9,379,905

Earnings used in the computation of diluted earnings per share$ 9,452,543- 55 -$

72,638140,000-$

140,000

The weighted average number of ordinary shares outstanding (in thousands of shares) was as follows:

For the Year Ended December 31
2021
2020
Weighted average number of ordinary shares used in computation ofbasic earnings per share
Effect of potentially dilutive ordinary shares:
Compensation of employees
Convertible bonds
Weighted average number of ordinary shares used in thecomputation of diluted earnings per share

5,615,684

5,418,776

13,300512,144-

6,141,128

5,418,776

If the Company offered to settle compensation or bonuses paid to employees in cash or shares, theCompany assumed the entire amount of the compensation or bonuses would be settled in shares, and theresulting potential shares were included in the weighted average number of shares outstanding used in thecomputation of diluted earnings (loss) per share, if the effect is dilutive. Such dilutive effect of the potential
shares was included in the computation of diluted earnings (loss) per share until the number of shares to be
distributed to employees is resolved in the following year.

28. CAPITAL MANAGEMENTThe Company manages its capital to ensure that it will be able to continue as a going concern while
maximizing the return to shareholders through the optimization of the debt and equity balance. The capital
structure of the Company consists of net debt (borrowings offset by cash and cash equivalents) and equityof the Company (comprising issued capital, reserves, retained earnings and other equity items).
To support operating activities and purchase of aircraft, the Company needs to maintain sufficient capital.
Therefore, the goal of capital management is to ensure that financial resources and operating plan is able tosupport the future working capital, capital expenditures, debt repayment, dividend payments and otherneeds in the next 12 months.

29. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments not measured at fair value
December 31
2021
Carrying
Amount$ 13,650,026

2020
Fair Value

Carrying
AmountFair Value$ 14,557,830$ 22,432,859$ 22,609,683

Financial liabilities
Bonds payable

Lease liabilities and long-term debts are floating-rate financial liabilities, so their carrying amounts are
their fair values. Fair values of bond payable trading in OTC are based on quoted market prices(included in the Level 1 categories).

- 56 -

b. Fair value of financial instruments measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value
measurement inputs are observable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly(i.e. derived from prices); and3) Level 3 fair value measurements are those derived from valuation techniques that include inputs foran asset or liability that are not based on observable market data (unobservable inputs).
December 31, 2021
Level 1
Financial assets at FVTOCI
Investments in equity instruments
Unlisted shares - domestic
Unlisted shares - foreign

Financial liabilities at FVTPL
Financial assets for hedging
Financial liabilities for hedging

Level 2

Level 3

Total

$

-

$

-

$

28,80426,654$28,80426,654

$

-

$

-

$

55,458$55,458$ 3,545,706

$

-

$

17,613$ 3,563,319$ 36,274,740

$

-

$

2,755

$ 36,277,495

December 31, 2020
Level 1
Financial assets at FVTOCI
Investments in equity instruments
Unlisted shares - domestic
Unlisted shares - foreign

Financial liabilities at FVTPL
Financial assets for hedging
Financial liabilities for hedging

Level 2

Level 3

Total

$

-

$

-

$

29,704
117,457$

29,704
117,457

$

-

$

-

$

147,161$

147,161$ 7,613,636

$

-

$

-

$ 7,613,636$ 40,575,778

$

5,794

$

-

$ 40,581,572

There were no transfers between Level 2 and 3 in the current period.

- 57 -

4) Valuation techniques and inputs applied for Level 2 fair value measurement
Financial Instruments
Derivative instruments

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 Company
used to determine the fair values are identical to those used in
the pricing of financial instruments for market participants.

5) Valuation techniques and inputs applied for Level 3 fair value measurement
The fair values of fuel options are determined using option pricing models where the significant
unobservable inputs are implied fluctuation. Changes in the implied fluctuation used in isolation
would result in an increase or decrease in the fair value of the fuel options.
The domestic and foreign unlisted equity investments are based on the comparative company
valuation to estimate the fair value. The main assumptions are based on the multiplier of the market
price of the comparable listed company and the net value per share, which have considered theliquidity discount. The higher the multiplier or the lower the liquidity discount, the higher the fairvalue of the relevant financial instruments.
The movements of financial instruments based on Level 3 fair value measurement are as follows:

Multiplier

Liquidity
Discount

0.74-14.31
0.79-16.32

80%
80%

Derivative
Instruments

EquityInstruments

Balance at January 1, 2021
Recognized in other comprehensive income

$

6,124

$ 147,161(91,703)

Balance at December 31, 2021

$

6,124

$

December 31, 2021
December 31, 2020

55,458Derivative
Instruments

EquityInstruments

Balance at January 1, 2020
Recognized in other comprehensive income

$

5,524
(5,524)$ 107,856
39,305

Balance at December 31, 2020$-

$ 147,161

Because some financial instruments and nonfinancial instruments may not have their fair values
disclosed, the total fair value disclosed herein is not the total value of the Company’s collective
instruments.

- 58 -

c. Categories of financial instruments
December 31
2021

2020

Financial assets
Financial assets for hedging
Financial assets at amortized cost (Note 1)
Financial assets at FVTOCI - investments in equity instruments$

3,563,319
50,292,213
55,458$

7,613,636
36,153,687
147,161

Financial liabilities
Financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)

36,277,495
142,057,713

40,581,572
148,012,657

Note 1: The balances include financial assets measured at amortized cost, which comprise cash andcash equivalents, time deposits with original maturities of more than 3 months, notes andaccounts receivable, accounts receivable - related parties, other receivables, refundable
deposits and other restricted financial assets.
Note 2: The balance include financial liabilities measured at amortized cost, which compriseshort-term notes payable, notes and accounts payable, accounts payable - related parties, otherpayables, bonds payable and long-term loans, lease liabilities, provisions, parts of othercurrent liabilities, parts of other noncurrent liabilities and guarantee deposits.
d. Financial risk management objectives and policies
The Company 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 Company has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by the Company’s
shareholders to reduce the impact of market price on earnings. These risks include market risk(including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
In addition, the Company has a risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentage. This committee informs theCompany of global economic and financial conditions, controls the entire financial risk resulting fromchanges in the financial environment and fuel prices, and develops the strategy and response to avoid
financial risk with the assistance of financial risk experts to effect risk management.
1) Market risk
The Company is primarily exposed to the financial risks of changes in foreign currency exchange
rates and interest rates. The Company entered into derivative financial instruments to manage its
exposure to foreign currency risk and interest rate risk.
The Company enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated to the fair values of hedged items andevaluates the hedging effectiveness of these instruments periodically.

- 59 -

a) Foreign currency risk
The Company enters into foreign currency option to hedge against the risks of changes inrelated exchange rates, and enters into foreign exchange forward contracts to hedge against therisks on changes in foreign-currency assets, liabilities and commitments in the related exchange
rates.
Sensitivity analysis
The Company was mainly exposed to the U.S. dollar.
An increase/decrease in U.S. dollars against New Taiwan dollars when reporting foreign
currency risk internally to key management personnel represents management’s assessment of
the reasonably possible change in foreign exchange rates. The sensitivity analysis included only
outstanding foreign currency denominated monetary items, and adjusts their translation at theend of the reporting period for U.S. dollars increase/decrease by one dollar against New Taiwan
dollars in foreign currency rates. When New Taiwan dollars increased by one dollar against U.S.
dollars and all other variables were held constant, there would be a decrease in pre-tax profit of$401,972 thousand and an increase in pre-tax other comprehensive income of $1,181,518
thousand for the year ended December 31, 2021; there would be an increase in pre-tax profit of$126,947 thousand and an increase in pre-tax other comprehensive income of $1,155,267
thousand for the year ended December 31, 2020.
The Company’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the future. Those transactions aredesignated as cash flow hedges. When forecasted purchases actually take place, basis
adjustments are made to the initial carrying amounts of hedged items.
For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Company performs a qualitative assessment of
the effectiveness, and it is expected that the value of the foreign exchange forward contracts andthe value of the corresponding hedged items will systematically change in the opposite direction
in response to movements in the underlying exchange rates.
The following table summarizes the information relating to the hedges of foreign currency risk.
Please refer to Note 19 for aircraft rental contracts for hedging.
December 31, 2021
Hedging Instruments

Currency

Notional
AmountCash flow hedge
Aviation fuel - forward
exchange contracts

NTD/USD$-

Maturity

Forward Rate--Line Item in
Balance Sheet

Financial assets for hedging current/liabilities forhedging - current

Carrying AmountAsset
Liability

$

-

$

-

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (aviation fuel in U.S. dollars) was $0.

- 60 -

For the year ended December 31, 2021
AmountReclassified toProfit and Lossand theAdjusted Line
Item

Hedging Gains
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aviation fuel

$

5,794

$ (6,844)

December 31, 2020
Hedging Instruments

Currency

Cash flow hedge
Aviation fuel - forward
exchange contracts

NTD/USD

Notional
AmountMaturity

Forward Rate

NTD142,045/
USD5,000

2021.1.292021.5.28

29.4-29.8

Line Item in
Balance Sheet

Financial assets for hedging current/liabilities forhedging - current

Carrying AmountAsset
Liability

$

-

$

5,794

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (aviation fuel in U.S. dollars) was $(5,794) thousand.
For the year ended December 31, 2020

Hedging Gains
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aviation fuelAircraft prepayments
Maintenance costs$

AmountReclassified toProfit and Lossand theAdjusted Line
Item

4,367
(101,570)-$ (16,616)
5$ (97,203)$ (16,611)

For the year ended December 31, 2020, the amount of hedging instruments reclassified toprepayments for equipment was $119,878 thousand.
b) Interest rate risk
The Company enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.
The risk is managed by the Company through maintaining an appropriate mix of fixed andfloating rate borrowings, and using interest rate swap contracts and forward interest rate
contracts.

- 61 -

The carrying amount of the Company’s financial liabilities with exposure to interest rates at theend of the reporting period were as follows.
December 31

Fair value interest rate risk
Cash flow interest rate risk

2021

2020

$ 49,924,766
95,715,939$ 63,008,637
102,601,087

Sensitivity analysis
The sensitivity analysis below was determined based on the Company’s exposure to interest
rates for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A one yard
(25 basis points) 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 increased by one yard (25 basis points) and all other variables been held
constant, the Company’s pre-tax profit for the year ended December 31, 2021 would havedecreased by $239,290 thousand.
Had interest rates increased by one yard (25 basis points) and all other variables been held
constant, the Company’s pre-tax profit for the year ended December 31, 2020 would havedecreased by $256,503 thousand.
c) Other price risk
The Company was exposed to fuel price risk on its purchase of aviation fuel. The Company
enters into fuel options contracts to hedge against adverse risks on fuel price changes.
December 31, 2021
Hedging Instrument
Cash flow hedges
Aviation fuel - fueloptions

Currency

Notional
AmountUSD

NTD 6,124Maturity

Forward Rate

2022.1.312022.09.30

USD 62USD121.75

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets for hedging current/liabilities forhedging - current$ 17,613$

2,755

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (fuel payments in U.S. dollars) was $6,124 thousand.
For the year ended December 31, 2021
Hedging Gains(Losses)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Fuel options
Note:

$

Increase in operating costs.

- 62 -

6,124

AmountReclassified toProfit and Lossand theAdjusted Line
Item

$

(408)

(Note)

December 31, 2020
Hedging Instrument
Cash flow hedges
Aviation fuel - fueloptions

Currency

Notional
AmountMaturity

Forward Rate

USD

-

-

-

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets for hedging current/liabilities forhedging - current

$

-

$

-

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (fuel payments in U.S. dollars) was $0.
For the year ended December 31, 2020

Comprehensive Income
Cash flow hedge
Fuel options
Note:

Hedging Gains(Losses)
Recognized in
Other
Comprehensive
IncomeAmountReclassified toProfit and Lossand theAdjusted LineItem

$ (5,524)$ (52,853)(Note)

Increase in operating costs.

Sensitivity analysis
The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.
For the Year Ended December 31
2021
2020
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%

$

-

$

306
(306)

$

1,479
(1,479)$-2) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in a financial loss to the Company. The Company’s credit risk primarily comes from accounts
receivable generated from operating activities, bank deposits generated from investing activities,
fixed income investments and other financial instruments. Operation related credit risk and financial
credit risk are managed separately.
Operation - related credit risk
The Company has established procedures to manage operation related credit risk to maintain thequality of accounts receivable.

- 63 -

To assess the risk of individual customers, the Company consider into the financial condition of thecustomers, the credit rating agency rating, the Company’s internal credit rating, transaction history
and current economic conditions and many other factors that may affect the repayment. Sometimes,
the Company uses certain credit enhancement tools to reduce the credit risk of specific customers.
Since the customers of the aviation industry are dispersed and non-related, the credit risk
concentration is not critical.
Financial credit risk
Credit risk on bank deposits, fixed income investments and other financial instruments aremeasured and monitored by the Company’s finance department. The Company’s counterparties andother parties are well-performing banks and financial institutions, corporations, and government
agencies, and so the risk of counterparties failing to discharge an obligation is low; therefore, there
is no significant credit risk.
Endorsements given by the Company on behalf of its subsidiaries can be found in Note 30(g).
3) Liquidity risk
The objective of the Company’s management of liquidity is to maintain cash and cash equivalents
sufficient for operating purposes, marketable securities with high liquidity and loan commitmentsthat are sufficient to ensure that the Company has adequate financial flexibility.
Liquidity and interest risk rate table
The following table shows the remaining contractual maturity analysis of the Company’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Company may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.
Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Company’s liquidity analysis for its derivative financial
instruments is also shown in the following table. The table was based on the undiscounted
contractual net cash inflows and outflows on derivative instruments that settle on a net basis, andthe undiscounted gross cash inflows and outflows on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined byreference to the projected interest rates as illustrated by yield curves at the end of the reporting
period.

- 64 -

December 31, 2021
The Weighted
Average
Effective
Interest Rate(%)
Lease liabilities
Floating interest rate
liabilities
Hedging instruments
Bonds payable

Less than 1Year1.6254$0.87192.9022
1.4686892,433

1 to 5 Years

Over 5 Years$$

2,397,555

9,732,481

9,093,638
9,375,841
2,740,146

66,508,245
28,118,375
12,303,091

11,061,580
1,532,555-$ 22,102,058$ 109,327,266$ 22,326,616

Less than 1Year

1 to 5 Years

Over 5 Years$$

December 31, 2020
The Weighted
Average
Effective
Interest Rate(%)
Lease liabilities
Floating interest rate
liabilities
Hedging instruments
Bonds payable

1.6265$0.91023.04921.2311

915,897

2,778,984

9,929,842

15,559,492
9,249,609
12,685,204

54,822,466
32,978,809
9,303,608

14,752,347
1,815,449
1,280,779$ 38,410,202$ 99,883,867$ 27,778,417

Loan commitments
December 31

Undrawn bank loan commitments (unsecured)

2021

2020

$ 24,164,000$ 21,559,000

30. TRANSACTIONS WITH RELATED PARTIES
Besides information disclosed elsewhere in the other notes, details of transactions between the Company
and other related parties are disclosed below:
a. Related party name and relationship
Related Party Name

Relationship with the Company

Taiwan Aircargo Terminal Company
Taoyuan International Airport Service Co., Ltd.
Sabre Travel Network (Taiwan), Ltd.
Taiwan Airport Service Co., Ltd.
Taiwan Airport Service (Samoa)

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary(Continued)- 65 -

Related Party Name

Relationship with the Company

Dynasty Aerotech International Corp.
Yestrip
Global Sky Express
Mandarin Airlines
CAL Park
CAL Hotel Co., Ltd.
CAL-Asia Investment
CAL-Dynasty International Inc.
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance and Engineering Co., Ltd.
Kaohsiung Catering Services
China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
Dynasty Holidays, Inc.
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
Others

Subsidiary
Subsidiary (the liquidation was completed
in April 2021)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
Associate
Associate
Associate
Associate
Joint venture
Joint venture
Joint venture
Joint venture
Director of the Company and major
shareholder
Director, key management personnel,
chairman, general manager of theCompany, spouse and second-degree
relative(Concluded)b. Operating income

Account Items

Related Party Type

Other income

Subsidiary
Major shareholder of the Company
Associate
Joint venture

For the Year Ended December 31
2021
2020
$ 211,470$ 12,634$
56$ 20,365$ 696,100
$
5,097
$
122
$ 22,445

c. Purchases of goods
For the Year Ended December 31
2021
2020

Related Party Type
Subsidiary
Major shareholder of the Company
Associate
Joint venture$ 2,860,980$
28,574$ 536,086$ 221,802- 66 -$ 2,611,679$
11,417$ 457,005$ 516,347

d. Accounts receivable - related parties (generated by operations)
December 31
Related Party Type

2021

Subsidiary
Joint venture
Major shareholder of the Company

2020

$

52,126
1,563
785

$

99,757
1,667-$

54,474$

101,424

The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.
e. Accounts payable - related parties (generated by operations)
December 31
Related Party Type

2021

Subsidiary
Associate
Joint venture
Major shareholder of the Company

2020

$

603,265
68,82659,9301,816$

459,667
52,18776,380-$733,837$

588,234

The remaining balance of accounts payable - related parties will be paid in cash if they are not secured.
f. Lease arrangements (operating leases)
The Company rented out planes to Mandarin Airlines under an operating lease contract. The monthly
rental received is based on flight hours. For the years ended December 31, 2021 and 2020, the rentals
received amounted to $606,176 thousand and $384,080 thousand, respectively.
Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots. The Company paid the rental based on
usage hours. For the years ended December 31, 2021 and 2020, the Company paid rentals of $28,574
thousand and $11,417 thousand, respectively.
In March 2010, the Company signed a yearly renewable operating lease agreement to use the Operatingand Aviation Headquarters building of the Taiwan Taoyuan International Airport with CAL Park. For
the years ended December 31, 2021 and 2020, the Company paid rentals of $215,098 thousand and$207,003 thousand, respectively.
g. Endorsements and guarantees
December 31
2021

2020

AmountEndorsed

AmountUtilized

AmountEndorsed

AmountUtilized$ 3,850,000
2,590,360
2,000,000$ 1,663,320
258,454
1,459,000$ 3,850,000
2,656,591
2,000,000$ 1,892,540
265,062
1,336,000

The Company
CAL Park
Tigerair Taiwan
Taiwan Air Craft Maintenance- 67 -

h. Bonds payable - related parties
Related parties that invested in the first issue of unsecured bonds in 2016 (refer to Note 19) weresummarized as follows:
December 31, 2020
Aggregate
Units
Par/Dollars

Related Party
The first issue of unsecured bonds in 2016
Mandarin Airlines
Sabre Travel Network (Taiwan)

125
25$ 125,000
25,000For the year ended December 31, 2020, the interest expense was $2,499 thousand. As of December 31,
2020 the interest payable was $1,071 thousand. This bonds payable had been paid off in May 2021.
i.

Remuneration of key management personnel
For the Year Ended December 31
2021
2020
Short-term employee benefits
Post-employment benefits$

42,09342,123$33,376
2,525$

84,216$35,901

The remuneration of directors and key executives, as determined by the remuneration committee, isbased on the performance of individuals and market trends.

31. ASSETS PLEDGED AS COLLATERAL FOR SECURITY
The following assets were pledged or mortgaged as collateral for long-term bank loans, lease liabilities andbusiness transactions:
December 31

Property, plant and equipment
Right-of-use assets- 68 -

2021

2020$ 27,994,773
50,965,378$ 30,113,171
54,555,761$ 78,960,151$ 84,668,932

32. SIGNIFICANT COMMITMENTS AND CONTINGENT LIABILITIESIn addition to those disclosed in the other notes, significant commitments and contingent liabilities of theCompany at December 31, 2021 were as follows:a. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery periods of the eleven aircraft are from 2024 to 2026. As of December
31, 2021, the list price had been paid in the amount of US$32,578 thousand (recognized as prepayments
for aircraft). In October 2019, the Company signed a contract with International Aero Engines
Company to purchase four backup engines of A321neo. The total list price of the four engines is
US$60,289 thousand. As of December 31, 2021, one backup engine has been delivered, for details
please refer to Note 19.
b. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three
777F aircraft and exercised the option to purchase three 777F aircraft. The expected delivery periods
are from 2020 to 2023. In January 2022, the Company signed an additional contract with the Boeing
Company to purchase another four 777F aircraft. The expected delivery periods are from 2023 to 2024.
The total list price of the ten aircraft is US$3,914,818 thousand. As of December 31, 2021, three out of
ten aircraft have been delivered. The total list price of the remaining seven aircraft is US$1,172,357
thousand, and the list price has been paid in the amount of US$234,471 thousand (recognized as
prepayments for aircraft).

33. IMPACT OF COVID-19
Since the outbreak of the Covid-19 in January 2020, the coronavirus has become a pandemic. The
pandemic has now spread around the world and most countries have not removed their travel restrictions.
Because the number of inbound and outbound passengers has decreased significantly, the Company adjusts
the proportion between passenger aircraft and cargo aircraft used in operations to comply with thegovernment’s epidemic prevention policy and cater to market demand. The Company reduces the frequencyof passenger air services that have been severely affected, uses the passenger aircraft to support the cargoflight arrangement and expands the function of all-cargo aircraft to maximize the opportunities from air
cargo business. Since March 2020, cargo has become the main source of revenue for the Company.
The Company continues to adjust the response measures according to the situation. In addition, to ensure
the adequate liquidity, the Company also implements measures for human resource management such as
postponing the hiring of newcomers, relaxing the application of special leave, loosening the restrictions onleave without pay, encouraging employees to take leave, adjusting working hours and salaries, etc. The
Company’s policies to control spending include suspension of non-urgent capital expenditures, reduction in
unnecessary expenses for administrative management and sales, negotiation with suppliers for a lower priceand postponement of payments.
For the years ended December 31, 2021 and 2020, because of the COVID-19 pandemic, the Company
received subsidies of $1,425,517 thousand and $1,251,632 thousand, respectively, for airport landing feesand parking fees, etc. The subsidies for housing and land rental, and salary and interest expense were$933,457 thousand and $745,820 thousand, respectively. These subsidies were recognized as other income
or deduction from other expenses.
The Company has obtained relief loan from the government. Refer to Note 17 for details on the amount ofloan and its allocation.

- 69 -

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe following information was aggregated by the foreign currencies other than functional currencies of theCompany and the exchange rates between foreign currencies and respective functional currencies weredisclosed. The significant assets and liabilities denominated in foreign currencies were as follows:(In Thousands of Foreign Currencies)
December 31, 2021
Foreign
Currencies

Exchange Rate

Carrying
Amount

1,067,289
24,699545,975
4,949,258
751,761

27.700831.44653.54990.24074.3459$ 29,564,749
776,692
1,938,155
1,191,286
3,267,076

1,846,834
3,724
65,5192,806,634
107,89327.700831.44653.54990.24074.345951,158,785
117,113232,587
675,557
468,894

Exchange Rate

Carrying
Amount640,411
18,246
338,880
3,417,972
546,452

28.4091
34.8432
3.66030.27504.3440$ 18,193,504
635,752
1,240,403
939,9422,373,786

1,927,625
6,513
72,3972,986,256
136,957

28.4091
34.8432
3.66030.27504.344054,762,089
226,949
264,994821,220594,941

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB
December 31, 2020
Foreign
Currencies
Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB

- 70 -

For the years ended December 31, 2021 and 2020, the Company’s net foreign exchange gains (losses) were$(123,671) thousand and $259,796 thousand, respectively. It is impractical to disclose net foreign exchange
gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions.

35. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided to others: Table 1 (attached).
2) Endorsements/guarantees provided: Table 2 (attached).
3) Marketable securities held: Table 3 (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 4 (attached).
5) Acquisitions of individual real estates at costs of at least NT$100 million or 20% of the paid-in
capital: None.
6) Disposals of individual real estates at 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 5 (attached).
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 6 (attached).
9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 7 (attached).
10) Trading in derivative instruments: Notes 7 and 29.
b. Information on investments in mainland China: Table 8 (attached).
c. Information of major shareholders: Table 9 (attached).

36. SEGMENT INFORMATIONThe Company mainly engages in air transportation services for passengers, cargo and others. The major
revenue-generating asset is its aircraft fleet, which is jointly used for passenger and cargo services. Thus,
the Company’s sole reportable segment is flight segment. For the disclosure of operating segment in the
consolidated financial statements, the reportable segment of the Group comprises flight and non-flightbusiness departments. The related information of reportable segment has been disclosed in the consolidated
financial statements.

- 71 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESFINANCING PROVIDED TO OTHERSFOR THE YEAR ENDED DECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)No.

Lender1

Cal-Dynasty International

Borrower

Financial
Statement
Account

Dynasty Hotel of Notes receivable
Hawaii, Inc.

RelatedParty

HighestBalance for
the PeriodY$ 100,000

EndingBalance$

96,953

ActualAmountBorrowed$

96,953

Interest Rate
(%)

2.25

Nature ofFinancing

Short-term
financingfacility isnecessary

Note 1:

The maximum amount of loans to others by the Company is up to 40% of the Company's net worth as stated in its latest financial statements.

Note 2:The maximum amount of loans to an individual counterparty by the Company is up to 20% of the Company's net worth as stated in its latest financial statements.

- 72 -

Business
Transaction
AmountReasons for
Short-term
Financing$Operatingcycle capital
expenditure-

Allowance for
Impairment
Loss
$

-

Collateral
Item

Value

$

-

Financing
Limit for
Each
Borrower

Aggregate
FinancingLimit$ 141,266$ 282,532

Note

TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Endorsee/Guarantee
Endorsor/
Guarantor

No.

0

Name

China Airlines
CAL Park(the “Company”) Tigerair Taiwan Co., Ltd.

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

Relationship100% owned subsidiary
82.27% owned subsidiaryby direct and indirect
holdings
100% owned subsidiary

Limit onEndorsement/
Guarantee
Given on Behalfof Each Party(Note 1)

Maximum
AmountEndorsed/
Guaranteed
During the
PeriodOutstanding
Endorsement/
Guarantee atthe End of the
PeriodRatio ofAccumulated
Endorsement/ Endorsement/ Endorsement/
AmountAggregate
Endorsement/
Guarantee
Guarantee
Guarantee
Actual AmountEndorsed/Endorsement/
Guarantee toGiven by Parent
Given byGiven on Behalf
Borrowed
Guaranteed by
Guarantee
Net Equity inon Behalf of
Subsidiaries on of Companies in
Collateral
Limit (Note 2)
Latest Financial
Subsidiaries Behalf of Parent Mainland China
Statements (%)$ 14,808,715
14,808,715$ 3,850,000
2,671,771$ 3,850,000
2,590,360$ 1,663,320
258,454

14,808,715

2,000,000

2,000,000

1,459,000$

Note 1:

Based on the Company’s guidelines, the maximum amount of guarantee to an individual counterparty is up to 20% of the Company’s shareholders’ equity.

Note 2:

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s shareholders’ equity.

- 73 -

-

5.20
3.50

$ 37,021,787
37,021,787

Y
Y

N
N

N
N

-

2.70

37,021,787

Y

N

N

TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDDECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name

China Airlines (“Parent company”)

Mandarin Airlines

Cal-Asia Investment

Sabre Travel Network (Taiwan)

Taiwan Airport Services

Dynasty Aerotech International Corp.

Kaohsiung Catering Services

Tiger Taiwan Co., Ltd.

Type and Name of Marketable Securities

SharesEverest Investment Holdings Ltd. - ordinary shares
Everest Investment Holdings Ltd. - preference shares
Chung Hua Express Co.
Jardine Air Terminal Services
The Grand Hi Lai Hotel
SharesChina Airlines

Relationshipwith the Holding
Company-

Financial Statement AccountDecember 31, 2021
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount(%)
Value

Number of
Shares/Units

Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTPL - current
Financial assets at FVTPL - current

1,359,368
135,937
1,100,000
12,000,000
4,021

Parent company Financial assets at FVTOCI - non-current$

24,231
2,423
28,804
-

13.59
11.00
15.00
0.02

2,074,628

57,156-$

Note

26,65428,804-Note 1--

57,156-

12,426

2.59
5.45

12,426Note 2
Note 2-

49,379---

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

Financial assets at FVTPL - current
Financial assets at FVTOCI - non-current

Beneficiary certificates
FSITC Money Market Fund-

Financial assets at FVTPL - current

273,999

49,379

SharesTransAsia Airways-

Financial assets at FVTPL - current

2,277,786-

Beneficiary certificates
Taishin 1699 Money Market Fund-

Financial assets at FVTPL - current

349,523

4,781

-

4,781

-

Beneficiary certificates
Prudential Financial Money Market Fund
Taishin 1699 Money Market Fund-

Financial assets at FVTPL - current
Financial assets at FVTPL - current

5,407,832
1,106,807

86,48015,140-86,48015,140-Government bondPhilippines government bond-Financial assets at amortized cost - current-

552

Not applicable

552-

Note 1: The subsidiary’s net asset value was $26,654 thousand, which included ordinary shares and preference shares as of December 31, 2021.
Note 2: The Company does not issue shares because it is a limited company.
Note 3: The table only lists financial assets that are in accordance with IFRS 9.

- 74 -

0.40

TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

China Airlines, Ltd.
(the “Company”)

Type and Name ofMarketable Securities(Note 1)
Mandarin Airlines
Tiger Taiwan Co., Ltd.

Financial Statement
Account

Counterparty(Note 2)

Investment accounted for Mandarin Airlines
using the equity method
Investment accounted for Tiger Taiwan Co., Ltd.
using the equity method

Relationship(Note 2)Beginning Balance
Number ofAmountShares

Subsidiary-

Subsidiary-$

Acquisition (Note 3)
Number ofAmountShares
-

-

-

-

$

Disposal (Note 3)
Carrying
AmountAmountNumber of
Shares
-

-

-

-

$

-

$

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

-

-

-

-

$

-

Note 1:Marketable securities included shares, bonds, beneficiary certificates and marketable securities derived from the above stated items.

Note 2:Marketable securities recognized as investments accounted for using the equity method shall be included in these two columns, others are exempt.

Note 3:

Accumulated acquisition and disposal amount should be evaluated separately whether it reaches NT$300 million or 20% of the paid-in capital by their market value.

Note 4:Paid-in capital is the parent company’s paid-in capital. When the issuer issues shares without face value or face value other than NT$10, according to the policy for the transaction price of 20% of the paid-in capital, it is calculated based on 10% of the equity attributable to the owner of theparent company in balance sheets.

- 75 -TABLE 5

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 YEAR ENDED DECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

Relationship

Purchase/
Sale$

Amount% of
Total

Payment Terms

Unit Price

363,578
138,264( 127,598)
747,778
1,113,547( 201,463)( 147,001)
215,222
149,036

0.34
0.13(0.10)
0.70
1.05(0.15)(0.11)
0.2
0.14

2 months
1 month
2 months
30 days
40 days
15 days
1 month
2 months
2 months$

Dynasty Aerotech International Corp.
Cal Hotel Co., Ltd.
Mandarin Airlines
Taiwan Air Cargo Terminal
Taoyuan International Airport Service
Global Sky Express
Tigerair Taiwan Co., Ltd.
CAL Park
Taiwan Aircraft Maintenance andEngineering Co., Ltd.
Eastern United International Logistics
China Pacific Catering Services

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary

Purchase
Purchase
Sale
Purchase
Purchase
Sale
Sale
Sale
Purchase

Equity-method investee
Equity-method investee

Purchase
Purchase

478,437
204,687

0.45
0.19

Mandarin Airlines

Taiwan Airport Services
Tigerair Taiwan Co., Ltd.

Same parent company
Same parent company

Purchase
Purchase

120,005
164,165

Cal Hotel

CAL Park

Same parent company

Purchase

106,157- 76 -

Notes/Accounts Receivable
or Payable% ofPayment Terms Ending Balance
Total

Abnormal Transaction

Note( 37,949)( 29,503)
26,347( 62,743)( 251,044)
11,320( 55,763)(2.43)(1.89)
1.69(4.02)(16.08)
0.08
0.00
0.00
(0.41)--( 57,497)( 56,930)(3.68)(3.65)

-

-

-

(965)
-

(3.37)
0.00

-

-

-

(128)

(0.68)---

2 months
90 days

-

3.53
0.15

1 month
1 month73.25

1 month$TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

RelationshipEnding Balance

Turnover Rate

Mandarin Airlines

China Airlines

Parent company$ 154,849

NoteTaoyuan International Airport Service

China Airlines

Parent company

251,044

4.77

Note:

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

- 77 -

Action Taken

Amounts Received
in Subsequent
Period--$ 152,307--

251,044

Allowance for
Impairment Loss$-TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Original Investment Amount
Investor Company

Investee Company

Location

Main Business and Product

CAL Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
CAL-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
China Pacific Laundry Services

Taoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, USA
Taoyuan, Taiwan
Taoyuan, Taiwan
Territory of the British Virgin Islands
Taipei, Taiwan
Hong Kong International Airport
Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Taoyuan, Taiwan

Dynasty Aerotech International Corp.

Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.
NORDAM Asia Ltd.

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment
Sale and maintenance of hardware and software
Airport services
Airport services
In-flight catering
Hotel business
Cleaning and leasing of the towel of airlines, hotels,
restaurants and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Air transportation and maintenance of aircraft
Aircraft maintenanceTaoyuan, Taiwan

Aircraft maintenance

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation and maintenance of aircraft
Airport services

CAL-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Kaohsiung Catering
Services

Delica International Co., Ltd.

Kaohsiung, Taiwan

Catering business

China Airlines, Ltd.

Note 1:Adopted the treasury shares method in recognizing investment income or loss.

Note 2:

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

Note 3:

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

Note 4:The difference is due to lease arrangement between consolidated entities.

Note 5:The difference is due to acquisition.

December 31,
2021

December 31,
2020

$

$

1,500,000
4,039,140
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
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
12,289383,846
465,000
137,500

150,000,000
387,831,234
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
20,626,644
21,494,637
46,500,000
13,750,000

100.0096.96
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.0055.00

77,27077,270100.0026,265
20,4002,500
3,109,907
1,350,000

160
250,000
313,631,656
70,000,000

37,97537,975

154,330
11,6588,000
2,500
5,640,197
1,350,000

10,200- 78 -

1,656,167
1,787,355
1,691,853
1,169,505
533,251
613,697
514,959
190,694
137,378
381,148335,242
120,876$

Share of profit(Loss)

Note

59,549 Note 4(1,484,975) Notes 1 and 4
293,078
10,954 Note 2(172,546)
19,75650,423(42,097)(269,573)(59,549)(48,695) Note 5(70,111) Note 4(29,418)-

147,608

48,62048,649 Note 4100.00
20.00
25.00
78.41
100.007,630
2,955,909
557,918(7,181)
7,748(2,269,379)(141,846)(1,436)
1,937(1,740,148) Note 4(141,875) Note 4

3,797,500

49.00

28,836(18,227)(8,931)-

154,330
11,65815,433,000
469,755

3.86
1.08

145,453
3,125(2,269,379)(125,763)(113,068)(1,354)

-

HK$

3,329

1,050,000

35.00

52,14743,48015,218

-

US$

5,877

-

100.00406,340

32,65532,655 Note 3

10,2001,020,000

51.00

7,867

4

JPY

$

Net Income(Loss) of theInvestee

17,182 $(1,565,065)
542,784
10,237(338,326)
40,31950,423(44,817)(1,347,865)(125,763)(70,287)(70,040)(53,487)

77,270JPY

As of December 31, 2021
Percentage
Number ofof
Carrying
SharesOwnership
Amount(%)

2-

TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIESINFORMATION ON INVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2021
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

China Airlines

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
investment
from Taiwan asof January 1,
2021

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

Forwarding and storage $ 1,105,954
of air cargo(RMB 254,480)

Indirect(Note 1)

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

Forwarding and storage
60,843of air cargo(RMB 14,000)

Indirect(Note 1)

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,301,662
maintenance services (US$ 83,090)

Indirect(Note 1)

Taikoo Spirit Aerospace
Systems (Jinjiang)

Composite material

Indirect(Note 1)

Accumulated Outward Remittancefor Investment in Mainland China
as ofDecember 31, 2021
$247,109(US$8,920)

323,075(US$ 11,663)

Remittance of Funds

Outward$
115,955 $(US$4,186)

Inward--(US$53,946
1,947)

59,5902,151)

-

(US$

-

(US$

17,618636)

Investment Amount
Authorized by the Investment
Commission, MOEA

Upper Limit on the Amount of
Investments Stipulated by theInvestment Commission, MOEA

$604,181 (Note 3)$46,323,011 (Note 4)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2021$% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

Carrying
Amountas ofDecember 31,
2021

Investment
Gain (Loss)

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2021

-

$
115,955 $
130,500(US$4,186) (RMB 30,106)

14.00

$
18,264 $256,967 $(RMB 4,215) (RMB 59,128) (US$97,966
3,537)(Note 2)

-

14.00

(US$

53,946102,619
1,947) (RMB 23,674)

14,362
149,504(RMB 3,314) (RMB 34,401) (US$43,228
1,561)(Note 2)59,5902,151)

-

2.59

-

(US$

-

5.45

-

(US$

17,618
636)

-

-

-

-

12,426(RMB 2,859) (US$

9,875
357)

(Continued)- 79 -

Taiwan Airport Services

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2021

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

Forwarding and storage $ 1,105,954
of air cargo(RMB 254,480)

Indirect(Note 5)$111,312 $(US$4,018)

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

Forwarding and storage
60,843of air cargo(RMB 14,000)

Indirect(Note 5)

(US$

Accumulated Outward
Investment Amounts Authorized by theRemittance for Investment in
Investment Commission, MOEA
Mainland China as of December 31, 2021
$164,684(US$5,945)$164,684(US$5,945)

Remittance of Funds

Outward

Inward-53,373
1,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2021

$

-

-

Net Income(Loss) of theInvestee% Ownershipof Direct orIndirect
Investment$
111,312 $
130,500(US$
4,018) (RMB 30,106)

14.00

53,373
102,619
1,927) (RMB 23,674)

14.00

(US$

Investment
Gain (Loss)

Carrying
Amount as ofDecember 31,
2021

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2021$
18,270 $256,091 $
125,793(RMB 4,215) (RMB 58,888) (US$4,541)(RMB

14,367
149,467
3,314) (RMB 34,421) (US$57,9452,092)

Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA
$174,080(Note 4)Note 1: The Company invested in CAL-Asia Investment, which invested in a company located in mainland China.
Note 2: As of December 31,2021, the inward remittance of earnings amounted to US$3,536,561 and US$1,560,538.
Note 3: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.
Note 4: 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 consolidated net asset value.
Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which invested in a company located in mainland China.
Note 6: The RMB and U.S. dollar amounts of assets are converted at period-end rates and the gains (losses) are converted at the average of the period-end rates for the reporting period.
(Concluded)- 80 -TABLE 9

CHINA AIRLINES, LTD.
INFORMATION OF MAJOR SHAREHOLDERSDECEMBER 31, 2021

SharesNumber ofPercentage ofSharesOwnership (%)

Name of Major Shareholder

China Aviation Development Foundation (CADF)
National Development Fund (NDF)

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

31.43
8.74

Note 1: The information of major shareholders presented in this table is provided by the Taiwan Depository &Clearing Corporation based on the number of ordinary shares and preference shares held byshareholders with ownership of 5% or greater, that have been issued without physical registration(including treasury shares) by the Company as of the last business day for the current quarter. The
share capital in the consolidated financial statements may differ from the actual number of shares thathave been issued without physical registration because of different preparation basis.
Note 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by theindividual truster who opened the trust account. For shareholders who declare insider shareholdings
with ownership greater than 10% in accordance with the Security and Exchange Act, theshareholdings include shares held by shareholders and those delivered to the trust over whichshareholders have rights to determine the use of trust property. For information relating to insider
shareholding declaration, please refer to Market Observation Post System.

- 81 -