China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theThree Months Ended March 31, 2019 and 2018 andIndependent Auditors’ Review ReportINDEPENDENT AUDITORS’ REVIEW REPORTThe Board of Directors and the Shareholders
China Airlines, Ltd.
Introduction
We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. and its
subsidiaries (the “Group”) as of March 31, 2019 and 2018, the related consolidated statements ofcomprehensive income, changes in equity and cash flows for the three-month periods then ended,and the related notes, including a summary of significant accounting policies (collectively referred
to as the “consolidated financial statements”). Management is responsible for the preparation andfair presentation of the consolidated financial statements in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and International AccountingStandard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on the
consolidated financial statements based on our reviews.
We did not review the financial statements of some subsidiaries included in the consolidated
financial statements of the Group, but such statements were reviewed by other auditors. Our
conclusion, insofar as it relates to the amounts included in the consolidated financial statements forthese subsidiaries, is based solely on the reports of other auditors. The total assets of thesesubsidiaries were NT$13,660,335 thousand and NT$5,266,148 thousand, which constituted 4.62%
and 2.30% of the consolidated total assets as of March 31, 2019 and 2018, and the total revenue
was NT$2,515,246 thousand and NT$2,330,498 thousand, which constituted 6.23% and 5.87% of
the consolidated total revenue for the three-month periods ended March 31, 2019 and 2018.
Scope of Review
Except as explained in the following paragraph, we conducted our reviews in accordance with theStatement of Auditing Standard No. 65 “Review of Financial Information Performed by the
Independent Auditor of the Entity”. A review of consolidated financial statements consists ofmaking inquiries, primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially less in scope than an
audit and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Basis for Qualified Conclusion
As disclosed in Notes 13 and 14 to the accompanying consolidated financial statements, thefinancial statements of some non-significant subsidiaries and investments accounted for using theequity method were not reviewed. As of March 31, 2019 and 2018, the combined total assets ofthese non-significant subsidiaries were NT$23,014,896 thousand and NT$17,191,528 thousand,respectively, representing 7.79% and 7.52%, respectively, of the consolidated total assets, and the
combined total liabilities of these non-significant subsidiaries were NT$11,653,856 thousand andNT$6,290,635 thousand, respectively, representing 4.94% and 3.74%, respectively, of theconsolidated total liabilities; for the three-month periods ended March 31, 2019 and 2018, the-1-amounts of the combined comprehensive income of these non-significant subsidiaries were
NT$225,704 thousand and NT$171,137 thousand, respectively, representing (107%) and 138%,
respectively, of the consolidated total comprehensive income. As of March 31, 2019 and 2018, theaforementioned investments accounted for using the equity method were NT$2,297,133 thousand
and NT$2,279,493 thousand, respectively; and for the three-month periods ended March 31, 2019and 2018, the Group’s share of the profit of such investments accounted for using the equity
method were NT$69,904 thousand and NT$81,715 thousand, respectively.
Qualified Conclusion
Based on our reviews, except for the adjustments, if any, as might have been determined to benecessary had the financial statements of the non-significant subsidiaries and investments
accounted for by using the equity method as described in the preceding paragraph been reviewed,
nothing has come to our attention that caused us to believe that the accompanying consolidated
financial statements do not present fairly, in all material respects, the consolidated financial
position of the Group as of March 31, 2019 and 2018 and its consolidated financial performanceand its consolidated cash flows for the three-month periods then ended in accordance with theRegulations Governing the Preparation of Financial Reports by Securities Issuers, and International
Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the
Financial Supervisory Commission of the Republic of China.
The engagement partners on the reviews resulting in this independent auditors’ review report are
Huang, Jui Chan and Cheng, Shiuh Ran.

Deloitte & Touche
Taipei, Taiwan
Republic of China
May 8, 2019

Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated
financial position, financial performance and cash flows in accordance with accounting principles
and practices generally accepted in the Republic of China and not those of any other jurisdictions.
The standards, procedures and practices to review such consolidated financial statements arethose generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ review report and the accompanying
consolidated financial statements have been translated into English from the original Chineseversion prepared and used in the Republic of China. If there is any conflict between the English
version and the original Chinese version or any difference in the interpretation of the two versions,the Chinese-language independent auditors’ review report and consolidated financial statements
shall prevail.
-2-

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

March 31, 2019
(Reviewed)
Amount%ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 33)
Financial assets at fair value through profit or loss - current (Notes 4, 7 and 33)
Financial assets at amortized cost (Notes 4 and 9)
Financial assets for hedging - current (Notes 4 and 33)
Notes and accounts receivable, net (Notes 4, 5, 10 and 33)
Notes and accounts receivable - related parties (Note 34)
Other receivables (Note 33)
Current tax assets (Notes 4 and 28)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4 and 12)
Other assets - current (Notes 6 and 18)

March 31, 2018
(Reviewed)
Amount%$ 23,352,393
245,816
1,022,871
34,4719,133,715
10,022
834,849
30,5488,635,279
2,485,416

8
3
3
1$ 24,937,537
206,001
3,856,660
32,906
10,038,528
9,043
879,191
18,9488,654,710
46,154
4,147,882

11
2
4
4
2

$ 21,851,248
1,643,514
1,066,954
2,369
9,233,895
10,928774,728
29,276
8,757,780
520,139
4,762,314

10
1
4
4
2

45,785,380

15

52,827,560

23

48,653,145

21

150,315
2,297,133
160,105,308
75,696,713
2,075,274
1,180,239
5,116,575
3,212,761

1
54
26
1
2
1

132,191
2,200,149
163,107,718
2,075,345
1,210,796
5,152,070
3,430,753

1
71
1
1
2
1

133,291
2,279,493
160,541,123
2,075,553
1,198,210
5,478,287
8,323,274

1
70
1
1
2
4

249,834,318

85

177,309,022

77

180,029,231

79$ 295,619,698

100$ 230,136,582

100$ 228,682,376

100$

30,00020,00010,797
94,761
1,092,755
531,628
16,584,300
11,338,760
61,525739,029
4,424,611
23,140,173
1,471,348
3,820,191

1
7
5
2
10
1
2

Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8)
Investments accounted for using the equity method (Notes 4 and 14)
Property, plant and equipment (Notes 4, 5, 15 and 35)
Right-of-use assets (Notes 4, 21 and 35)
Investment properties (Notes 4 and 16)
Other intangible assets (Notes 4 and 17)
Deferred income tax asset (Notes 4, 5 and 28)
Other assets - non-current (Notes 18, 21, 33, 35 and 36)
Total noncurrent assets
TOTAL

December 31, 2018
(Audited)
Amount%LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Note 19)
Short-term bills payable (Note 19)
Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 33)
Financial liabilities for hedging - current (Notes 3, 4, 21 and 33)
Notes and accounts payable (Note 33)
Notes and accounts payable - related parties (Note 34)
Contract liabilities - current (Notes 4, 5 and 23)
Other payables (Notes 22 and 33)
Current tax liabilities (Notes 4 and 28)
Provisions - current (Notes 4, 24 and 33)
Lease liabilities - current (Notes 3, 4 and 21)
Bonds payable and put options of convertible bonds - current portion (Notes 4, 20 and 33)
Loans and debts - current portion (Notes 19, 33 and 35)
Capital lease obligations - current portion (Notes 4, 21, 33 and 35)
Other current liabilities (Note 33)

$

221
560
1,594,487
532,815
19,546,455
14,146,198
164,181
321,075
4,445,900
15,709,487
633,398
3,855,115

1
9
6
2
7
2

22

60,949,892

27

63,359,878

28

34,543,623
25,743,068
59,887,265
1,998,012
9,198,632
192,828
30,249,514
8,634,866
622,688

12
9
20
1
3
10
3
-

28,473,710
60,686,148
1,903,665
8,473,464
188,447
2,945
8,803,382
607,845

12
26
1
4
4
-

5,121
23,914,970
61,555,721
1,810,534
8,146,896
163,816
552,975
7,930,513
899,629

10
27
1
4
4
-

Total non-current liabilities

171,070,496

58

109,139,606

47

104,980,175

46

Total liabilities

235,800,518

80

170,089,498

74

168,340,053

74

54,209,846
1,241,214

18-

54,209,846
1,241,21424-

54,709,846
1,209,977

24-

351,923
118,810901,224
1,371,957(1,957)(43,372)1
1-351,923
118,810
1,144,928
1,615,661
58,223(43,372)1
1-

206,092
1,583,865
1,789,957(93,773)(43,372)

1
1-

56,777,688

19

57,081,572

25

57,572,635

25

3,041,492

1

2,965,512

1

2,769,688

1

59,819,180

20

60,047,084

26

60,342,323

26$ 295,619,698

100$ 230,136,582

100$ 228,682,376

100

Total current liabilities
NON-CURRENT LIABILITIESFinancial liabilities for hedging - non-current (Notes 3, 4, 21 and 33)
Bonds payable - non-current (Notes 4, 20 and 33)
Loans and debts - non-current (Notes 19, 33 and 35)
Contract liabilities - non-current (Notes 4 and 23)
Provisions - non-current (Notes 4, 24 and 33)
Deferred tax liabilities (Notes 4 and 28)
Lease liabilities - non-current (Notes 3, 4 and 21)
Capital lease obligations - non-current (Notes 4, 21, 33 and 35)
Accrued pension costs (Notes 4, 5 and 25)
Other noncurrent liabilities (Note 33)

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 20 and 26)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings
Total retained earnings
Other equity
Treasury shares
Total equity attributable to owners of the Company
NON-CONTROLLING INTERESTS (Note 26)
Total equity
TOTAL

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 8, 2019)-3-

4,200,000
820,000
6,038,467
1,540,406
522,206
18,550,487
12,669,941
232,039
202,999
5,067,954
2,750,000
7,957,425
4,178,098

2
2
1
6
4
2
1
3
1

64,730,022$

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

For the Three Months Ended March 31
2019
2018
Amount%Amount%REVENUE (Notes 4, 27 and 34)$ 40,405,348

100$ 39,735,027

100

COSTS (Notes 4, 11, 17, 21, 24, 25, 27 and 34)

36,191,909

90

35,941,020

90

GROSS PROFIT

4,213,439

10

3,794,007

10

OPERATING EXPENSES (Notes 4, 25 and 27)

3,451,966

8

3,373,082

9761,4732

420,9251

153,256(66,441)(875,831)(2)

132,225(58,702)(315,552)(1)

69,904-81,715-(719,112)(2)(160,314)(1)

PROFIT BEFORE INCOME TAX

42,361-

260,611-

INCOME TAX EXPENSE (Notes 4 and 28)

189,237

1

68,617-NET INCOME (LOSS) FOR THE PERIOD(146,876)(1)

191,994---(36,561)-

16,906

-

1,414

-

(3,424)
13,482-OPERATING PROFITNON-OPERATING INCOME AND EXPENSES
Other income (Note 27)
Other gains and losses (Notes 12, 15 and 27)
Finance costs (Notes 27 and 33)
Share of the profit of associates and joint ventures(Note 14)
Total non-operating income and expenses

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Loss on hedging instruments subject to basis
adjustment
Unrealized gain on investments in equity
instruments designated as at fair value throughother comprehensive income
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 28)

-4-

8,433
(26,714)(Continued)

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

For the Three Months Ended March 31
2019
2018
Amount%Amount%Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 26)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method (Notes 4, 21, 26
and 33)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 28)$

23,676-(123,745)(27,657)--(16,112)-22,043(78,026)-

2,635(41,134)-(64,544)-(67,848)-$(211,420)(1)$

124,146-$(243,704)
96,828-$125,492
66,502-$(146,876)-$

191,994-$(312,357)
100,937(1)-$

54,62869,518-$(211,420)(1)$

124,146-

Other comprehensive loss for the period, net ofincome tax
TOTAL COMPREHENSIVE INCOME (LOSS) FOR
THE PERIODNET INCOME (LOSS) ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests

EARNINGS (LOSSES) PER SHARE (NEW TAIWANDOLLARS; Note 30)
Basic
Diluted$$(0.04)(0.04)

$

$
$

0.02
0.02

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 8, 2019)-5-(Concluded)

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

Share Capital

Capital Surplus

Legal Reserve

Special Reserve

Equity Attributable to Owners of the Company
Other Equity
Unrealized Gainon Financial
Exchange
Unrealized Gain
Assets at
UnappropriatedDifferences on(Loss) on
Fair Value
Earnings
Translating
Available-forThrough Other(Accumulated
Foreignsale Financial
Comprehensive
Deficits)
Operations
AssetsIncome$ 54,709,846

$

$

$

$

Retained Earnings

BALANCE AT JANUARY 1, 2018799,999

206,092-

1,458,313$(34,986)

$

1,774

$

-

Gain (Loss) on
Hedging
Instruments

Cash Flow
Hedges$(74,429)$-

Treasury Shares
Held by
Subsidiaries
$

Total

(43,372)$ 57,023,237

Non-controlling
Interests

Total Equity$

2,134,282$ 59,157,519

Effect of retrospective application andretrospective restatement

-

-

-

-

60

-

(1,774)42,351

74,429(74,429 )-

40,637-

40,637BALANCE AT JANUARY 1, 2018 AS
RESTATED

54,709,846

799,999

206,092-

1,458,373(34,986)-

42,351-(74,429 )(43,372)

57,063,874

2,134,282

59,198,156

Issuance of convertible bonds-

409,978

-

-

-

-

-

-

-

-

-

409,978-

409,978

Basis adjustment to gain on hedging
instruments

-

-

-

-

-

-

-

-

-

44,155-

44,155-

44,155

Net profit for the three months ended
March 31, 2018

-

-

-

-

125,492

-

-

-

-

-

-

125,492

66,502

191,994

Other comprehensive income (loss) for thethree months ended March 31, 2018, netof income tax

-

-

-

-

-

(22,947)

-

1,454

-

(49,371)-(70,864)

3,016(67,848)

Total comprehensive income (loss) for thethree months ended March 31, 2018

-

-

-

-

125,492(22,947)

-

1,454

-

(49,371 )-

54,62869,518124,146

Non-controlling interests arising fromacquisition of subsidiaries

-

-

-

-

-

-

-

-

-

-

-

-

565,888565,888

BALANCE AT MARCH 31, 2018

$ 54,709,846$

1,209,977$

206,092$-$

1,583,865$(57,933)$-$

43,805$-$(79,645 )$(43,372)$ 57,572,635$

2,769,688$ 60,342,323

BALANCE AT JANUARY 1, 2019

$ 54,209,846$

1,241,214$

351,923$

118,810$

1,144,928$(9,664)$-$42,619$-$25,268$(43,372)$ 57,081,572$

2,965,512$ 60,047,084

Net profit (loss) for the three months ended
March 31, 2019

-

-

-

-

(243,704)

-

-

-

-

-

-

(243,704)

96,828(146,876)

Other comprehensive income (loss) for thethree months ended March 31, 2019, netof income tax

-

-

-

-

-

16,359-13,482-(98,494 )-(68,653)

4,109(64,544)

Total comprehensive income (loss) for thethree months ended March 31, 2019

-

-

-

-

(243,704)

16,359-13,482-(98,494 )-(312,357)

100,937(211,420)

Cash dividends from subsidiaries paid to
non-controlling interests

-

-

-

-

-

8,368

-

105

-

-

-

8,473

(24,957)(16,484)(43,372)$ 56,777,688

3,041,492$ 59,819,180

BALANCE AT MARCH 31, 2019

$ 54,209,846$

1,241,214$

351,923$

118,810$901,224$

15,063

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 8, 2019)

-6-

$

-

$

56,206$-$(73,226 )$$CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)(Reviewed, Not Audited)

For the Three Months Ended
March 31
2019
2018
CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Bad debt expense
Net (gain) loss on fair value changes of financial assets andliabilities held for trading
Interest income
Share of profit of associates and joint ventures
Loss (gain) on disposal of property, plant and equipment
Loss on disposal of non-current assets held for sale
Gain on disposal of investments
Loss on inventories and property, plant and equipment
Impairment loss recognized on property, plant and equipment andnon-current assets held for sale
Net (loss) gain on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale - leasebacks
Changes in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities held for trading
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Financial assets at amortized cost
Other current assets
Accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities-7-$

42,361$

260,6118,206,346
49,842
8,382

4,789,869
50,45912,325(11,140)(96,955)(69,904)(1,349)10,462(7,656)
307,608(2,866)(59,616)(81,715)
278,321
124,290(456,426)
404,188

62,929875,831
1,061,129-

50,000(146,230)
315,552
865,122(3,628)(28,863)(221)
859,879(107,342)
88,887(240,529)
2,615,610
906,515(556,339)
46,360(723,887)(809,885)(480,795)
303,824(155,688)
5,797
12,161,209
104,346(910,199)(35,387)(691,721)(359,757)
24,890(20,693)(340,853)
1,066,954(1,242,279)
456,971(94,607)(1,763,276)
202,672(301,966)(25,683)(221,735)(13,170)
3,076,003
41,844(395,770)(23,971)

11,319,969

2,698,106(Continued)

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

For the Three Months Ended
March 31
2019
2018
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from non-current assets held for sale
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software costs
Increase in restricted assets
Net cash outflow on disposal of associates
Acquisition of subsidiaries
Net cash used in investing activities$

35,692(631,083)
10,851(51,233)
38,620(1,568,331)(21,786)(6,844)(17,413)-$

540,811(1,395,006)
292,881(9,090)31,429(5,610,010)(30,819)(28,096)
136,769(2,211,527)(6,071,131)

4,200,000
820,000(4,445,900)
688,993(9,277,712)(2,725,995)
40,094(42,815)-

50,000(140,000)
20,000(2,700,000)
6,617,000(7,208,421)
49,600(27,511)
6,012,000(10,743,335)

2,672,668

49,749(33,727)

NET DECREASE IN CASH AND CASH EQUIVALENTS(1,585,144)(734,084)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD

24,937,537

22,585,332

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$ 23,352,393$ 21,851,248

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans
Decrease in short-term loans
Increase in short-term bills payable
Repayments of bonds payable
Proceeds from long-term debts
Repayments of long-term debts and capital lease obligations
Repayments of the principal portion of lease liabilities
Proceeds of guarantee deposits received
Refund from guarantee deposits received
Issuance of corporate bonds
Net cash 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 consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 8, 2019)-8-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)(Reviewed, Not Audited)

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its 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, aviation equipment and (f) leasing of aircraft.
The major shareholders of the Company are the China Aviation Development Foundation (“CADF”) andthe National Development Fund (“NDF”), Executive Yuan. As of March 31, 2019, December 31, 2018 andMarch 31, 2018, CADF and NDF held a combined 44.03%, 44.03% and 43.63% of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiaries (collectively, the “Group”) wereapproved by the board of directors and authorized for issue on May 8, 2019.

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), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)(collectively, the “IFRSs”) endorsed and issued into effect by the FSC
Except for the following, whenever applied, the initial application of the amendments to theRegulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs
endorsed and issued into effect by the FSC would not have any material impact on the Group’s
accounting policies: IFRS 16 “Leases”
IFRS 16 provides a comprehensive model for the identification of lease arrangements and theirtreatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”,
IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related
interpretations. Refer to Note 4 for information relating to the relevant accounting policies.
Definition of a lease
The Group elects to apply the guidance of IFRS 16 in determining whether contracts are, or contain,
a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified
as containing a lease under IAS 17 and IFRIC 4 are not reassessed and are accounted for inaccordance with the transitional provisions under IFRS 16.

-9-

The Group recognizes right-of-use assets and lease liabilities for all leases on the consolidatedbalance sheets except for those whose payments under low-value asset and short-term leases arerecognized as expenses on a straight-line basis. On the consolidated statements of comprehensive
income, the Group presents the depreciation expense charged on right-of-use assets separately fromthe interest expense accrued on lease liabilities; interest is computed using the effective interest
method. On the consolidated statements of cash flows, cash payments for the principal portion oflease liabilities are classified within financing activities; cash payments for the interest portion areclassified within financing activities. Prior to the application of IFRS 16, payments under operatinglease contracts, including property interest qualified as investment properties, were recognized as
expenses on a straight-line basis. Prepaid lease payments for land use rights were recognized as
prepayments for leases. Cash flows for operating leases were classified within operating activities
on the consolidated statements of cash flows. Leased assets and finance lease payables wererecognized on the consolidated balance sheets for contracts classified as finance leases.
Lease liabilities were recognized on January 1, 2019 for leases previously classified as operatingleases under IAS 17. Lease liabilities were measured at the present value of the remaining lease
payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019.
Right-of-use assets are measured at either an amount equal to the lease liabilities, adjusted by theamount of any prepaid or accrued lease payments, or their carrying amount as if IFRS 16 had been
applied since the commencement date, but discounted using the aforementioned incremental
borrowing rate, the Group applies IAS 36 to all right-of-use assets.
Leasehold which was previously accounted for as an operating lease under IAS 17, qualifies as aninvestment property. A lease liability for that leasehold is recognized and measured at the present
value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on
January 1, 2019.
If the Group determines that a sale and leaseback transaction does not satisfy the requirements of
IFRS 15 to be accounted for as a sale of an asset, it is accounted for as a financing transaction. If it
satisfies the requirements to be accounted for as a sale of an asset, the Group recognizes only theamount of any gain or loss which relates to the rights transferred to the buyer-lessor. Prior to theapplication of IFRS 16, the leaseback portion is classified as either a finance lease or an operatinglease and accounted for differently.
The Group does not reassess sale and leaseback transactions entered into before January 1, 2019 todetermine whether the transfer of an underlying asset satisfies the requirements in IFRS 15 to beaccounted for as a sale. Upon initial application of IFRS 16, the aforementioned transitional
provision for a lessee applies to the leaseback portion.
The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized on
January 1, 2019 is 2.58%. The difference between the (i) lease liabilities recognized and (ii)
operating lease commitments on December 31, 2018 is explained as follows:
The future minimum lease payments of non-cancellable operating leasecommitments on December 31, 2018

$ 78,030,370

Undiscounted amounts on January 1, 2019

$ 78,030,370

Discounted amounts using the incremental borrowing rate on January 1, 2019
Add: Finance lease payable on December 31, 2018
Add: Adjustments as a result of a different treatment of extension andtermination options
Add: Other
Less: Derivative financial instruments for hedging$ 67,420,164
633,775

Lease liabilities recognized on January 1, 2019

$ 36,296,387- 10 -

8,010,753
2,151,203(41,919,508)

The Group as lessor
The Group does not make any adjustments for leases in which it is a lessor, and it accounts for thoseleases with the application of IFRS 16 starting from January 1, 2019.
The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS
16 is set out as follows:

As OriginallyStated on
January 1, 2019

Adjustments
Arising from
InitialApplication

Restated on
January 1, 2019

Prepayments for leases
Refundable deposits
Right-of-use assets
Property, plant and equipment

$

$

$

Total effect on assets$ 165,058,453$ 77,582,030$ 242,640,483

Lease liabilities - current
Lease liabilities - non-current
Finance lease payables
Accrued rent payable
Financial liabilities for hedging- current
Financial liabilities for hedging non-current

$

$

$

Total effect on liabilities$

861,045
1,089,690
163,107,718

633,77590
560(861,045)(25,617)78,499,374(30,682)

3,924,776
32,371,611(633,775)(90)
5,947,449

1,064,073
78,499,374
163,077,036

3,924,776
32,371,611
5,948,009-

35,972,059

35,972,059

634,425$ 77,582,030$ 78,216,455

b. 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 3 “Definition of a Business”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IAS 1 and IAS 8 “Definition of Material”

January 1, 2020 (Note 2)
To be determined by IASB
January 1, 2021
January 1, 2020 (Note 3)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.
Note 2: The Group shall apply these amendments to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or afterJanuary 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Group shall apply these amendments prospectively for annual reporting periods
beginning on or after January 1, 2020.

- 11 -

The initial application of the amendments to the IFRSs endorsed and issued into effect by the FSC
would not have any material impact on the Group’s accounting policies, as of the date the consolidated
financial statements were authorized for issue, the Group is continuously assessing the possible impactthat the application of other standards and interpretations will have on the Group’s financial position
and financial performance and will disclose the relevant impact when the assessment is completed.

4. SIGNIFICANT ACCOUNTING POLICIESExcept for the policies listed below, the accounting policies adopted for these consolidated financial
statements are the same as those for the consolidated financial statements for the year ended December 31,
2018.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” asendorsed by the FSC. Disclosure information included in these interim consolidated financial statements isless than the disclosures required in a full set of annual consolidated financial statements.
Basis of Consolidation
The consolidated financial statements reporting principles are the same as those for the consolidated
financial statements for the year ended December 31, 2018.
Leases2019
At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.
a. The Group as lessor
Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
b. The Group as lessee
The Group 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 leaseterms.
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 and impairment losses and adjusted for any remeasurement of the lease liabilities.
Right-of-use assets are presented on a separate line in the consolidated 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.

- 12 -

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 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, the Group uses thelessee’s incremental borrowing rate.
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 to purchase an underlying asset, or a change in future lease payments resulting from a change in
an index or a rate used to determine those payments, the Group remeasures the lease liabilities with acorresponding adjustment to the right-of-use-assets. Lease liabilities are presented on a separate line in
the consolidated 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 Group 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 atfair value. 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.
2018
Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.
a. Financial leases
The Group as lessee
Assets held under finance leases are initially recognized as assets of the Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.
Minimum lease payments are apportioned between finance expenses and reductions of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case, they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are
incurred.
b. Sales and leasebacks
For a sale and leaseback transaction, if it meets the condition whereby all the risks and rewards ofownership of the leased asset are essentially transferred to the lessee, the sale and leaseback transaction
is classified as a finance lease. If part of the significant risks and rewards of ownership of the leased
asset remain with the lessor (i.e. the buyer), the sale and leaseback transaction is classified as an
operating lease.
1) Financial leases
This transaction does not actually dispose of the assets. The accounting treatment used is to treat thetransaction as if it did not occur, and the assets are continuously recognized at the book value of theasset before sale.
- 13 -

2) Operating leases
If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If the selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of the selling pricewhich is above fair value shall be deferred and amortized over the period of the lease.
Employee Benefits
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determinedpension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since thattime and for significant plan amendments, settlements, or other significant one-off events.
Income Tax
Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income
taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income thetax rate that would be applicable to expected total annual earnings.
Business Combinations
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated
as the aggregate of the fair value of the consideration received and any investment retained in the former
subsidiary at its fair value at the date when control is lost The Group accounts for all amounts recognized inother comprehensive income in relation to that subsidiary on the same basis as would be required had theGroup directly disposed of the related assets or liabilities.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
Except for the following, the critical accounting judgments and key sources of estimation uncertainty forthese interim consolidated financial statements are the same as those applied for the consolidated financial
statements for the year ended December 31, 2018.

6. CASH AND CASH EQUIVALENTS
March 31,2019
Cash on hand and revolving fund
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of lessthan three months
Repurchase agreements collateralized by bonds$

398,043
9,310,641

December 31,
2018$413,1397,770,200

March 31,2018$

418,632
8,041,758

12,533,288
1,110,421

15,784,323
969,875

10,979,115
2,411,743$ 23,352,393$ 24,937,537$ 21,851,248- 14 -

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

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

March 31,2019

December 31,
2018

March 31,2018

0%-1.90%0%-1.90%0%-1.90%

0.59%-3.20%
0.55%-0.63%

0.59%-3.55%
0.63%-3.30%

0.59%-4.7%
0.38%-2.00%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)March 31,2019

December 31,
2018

March 31,
2018

$

$

-

$ 1,072,237-

206,001-

478,427
92,850$ 1,643,514

Financial assets - current
Financial assets mandatorily classified at FVTPL
Hybrid financial assets
Principal-protected notes
Derivative instruments
Non-derivative financial assets
Beneficial certificates
Financial products

7,216
238,600-$

245,816$

206,001

$

-

$

221

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

10,797a. The Group and the bank have signed principal-protected notes with a duration of 1 to 3 months and anegotiated interest rate range of 0.63% to 4.24%.
b. At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:
Notional Amount(In Thousands)

Currency

Maturity Date

NTD/USD

2019.4.26-2019.10.29

NTD246,914/USD8,000

NTD/USD

2019.1.2-2019.1.31

NTD30,923/USD1,000

NTD/USD

2018.4.30-2019.1.31

NTD145,773/USD5,000

March 31, 2019
Buy forward contracts
December 31, 2018
Buy forward contracts
March 31, 2018
Buy forward contracts- 15 -

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 2019
Investments in Equity Instruments
March 31,2019

December 31,
2018

March 31,2018

$ 128,788$ 110,445$ 107,548

21,527

21,74625,743$ 150,315$ 132,191$ 133,291

Non-current
Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

These investments in equity instruments are not held for trading. Instead, they are held for medium- tolong-term strategic purposes. Accordingly, the management elected to designate these investments in equity
instruments as at FVTOCI as it believes that recognizing short-term fluctuations in these investments’ fairvalues in profit or loss would not be consistent with the Group’s strategy of holding these investments forlong-term purposes.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2019
March 31,2019

December 31,
2018

March 31,2018

$ 1,022,871$ 3,856,660$ 1,066,954

Current
Time deposits with original maturities of morethan 3 months (e)The interest rates for time deposits with original maturities of more than 3 months ranged from 0.40% to3.12%, from 0.40% to 1.36% and from 0.64% to 1.07% as of March 31, 2019, December 31, 2018 andMarch 31, 2018.

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE
March 31,2019
Notes receivable$

415,630

December 31,
2018$598,824

March 31,2018$

700,640

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

- 16 -

8,952,971(234,886)
8,718,085

9,667,010(227,306)
9,439,704

9,133,715$ 10,038,528

8,727,916(194,661)
8,533,255$

9,233,895

The average credit period was 7 to 55 days. In determining the recoverability of a trade receivable, theGroup considered any change in the credit quality of the receivable since the date credit was initiallygranted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Group’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position. The Group adopted a policy of
only dealing with entities that are rated the equivalent of investment grade or higher and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Credit rating information is obtained from independent rating agencies where available or, if not available,
the Group uses other publicly available financial information or its own trading records to rate its major
customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored andthe aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure
is controlled by counterparty limits that are reviewed and approved by the risk management committee
annually.
The Group applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience
with the debtors and an analysis of the debtors’ current financial position, adjusted for general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as theforecasted direction of economic conditions at the reporting date. As the Group’s historical credit loss
experience does not show significantly different loss patterns for different customer segments, the loss
allowance based on the past due status is not further distinguished according to the different segments of theGroup’s customer base.
The Group writes off a trade receivable when there is information indicating that the debtor is experiencing
severe financial difficulty and there is no realistic prospect of recovery. For accounts receivable that havebeen written off, the Group continues to engage in enforcement activity to attempt to recover thereceivables which are due. Where recoveries are made, these are recognized in profit or loss.
The following table details the loss allowance of trade receivables based on the Group’s provision matrix.
March 31, 2019
Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.05%

0.06%

1.15%

23.73%

99.57%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,356,799$ 1,035,131(3,929)(658)

Amortized cost

$ 7,352,870$ 1,034,473$

Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.06%

0.06%

3.67%

21.78%

97.5%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,856,048$ 1,424,421(4,546)(856)

Amortized cost

$ 7,851,502$ 1,423,565$

303,680$(3,504)300,176

38,842$(9,216)$

29,626$

Total

218,519$ 8,952,971(217,579)(234,886)940$ 8,718,085

December 31, 2018$

103,498$(3,796)$- 17 -

99,702

76,415$(16,642)$

59,773$

Total

206,628$ 9,667,010(201,466)(227,306)

5,162$ 9,439,704

March 31, 2018
Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.06%

0.03%

0.32%

11.29%

96.56%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,175,503$ 1,003,312(4,661)(278)

Amortized cost

$ 7,170,842$ 1,003,034$

281,463

$

(909)
$

81,653$(9,218)

280,554$

72,435

Total

185,985$ 8,727,916(179,595)(194,661)

6,390$ 8,533,255$

The movements of the loss allowance of trade receivables were as follows:
For the Three Months Ended
March 3120192018
Balance at January 1, 2019 per IFRS 9
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses
Disposal of a subsidiary$ 227,306
8,382
(785)
(17)

$ 181,868
12,325(477)
945-

Balance at March 31, 2019

$ 234,886$ 194,661

March 31,2019

December 31,
2018

March 31,2018

$ 7,455,640
556,688598,592
24,359$ 7,847,082
556,365
227,975
23,288$ 7,848,161
576,017
312,725
20,877$ 8,635,279$ 8,654,710$ 8,757,780

11. INVENTORIES

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersThe operating costs recognized for the three months ended March 31, 2019 and 2018 included losses frominventory write-downs of $262,974 thousand and $216,399 thousand, respectively.

12. NON-CURRENT ASSETS HELD FOR SALE
March 31,2019
Aircraft held for sale$-

December 31,
2018$

46,154

March 31,2018
$ 520,139

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. However, the actual loss shall be identified by the actual sale price.
For the three months ended March 31, 2019 and 2018, the Company retired a part of its old aircraft andrecognized disposal losses of $10,462 thousand and $124,290 thousand. The fair value was determinedaccording to similar transactions of the related market, and the proposed sale price was based on the current
status of the aircraft. The fair value measurement is classified as Level 3.
- 18 -

13. SUBSIDIARIES
Subsidiaries included in the consolidated financial statements are as follows:

Investor Company
China Airlines, Ltd.

Investee Company
Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance And
Engineering Co., Ltd.
Cal-Dynasty International
Cal-Asia Investment
Dynasty Aerotech International Corp.
Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)
Mandarin Airlines

Cal-Dynasty International
Taiwan Airport Services

Note:

Taiwan Air Cargo Terminal (Note)
Kaohsiung Catering Services, Ltd.
Dynasty Holidays
Taoyuan International Airport Services
Taiwan Airport Services (Note)
Global Sky Express
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)

Main Businesses and Products

Proportion of Ownership (%)
March 31,
December 31,
March 31,
2019
2018
2018

Air transportation
Aircraft maintenance

100
100

100
100

100
100

A holding company, real estate andhotel services
General investment
Cleaning of aircraft and maintenance ofmachine and equipment
Travel business
Real estate lease and international trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft
Air cargo and storage
In-flight catering
Travel businessAirport services
Airport services
Forwarding and storage of air cargo
Real estate management
Hotel businessAirport supporting service andinvestment

100

100

100

100
100

100
100

100
100

100
100
100
94

100
100
100
94

100
100
100
94

94

94

94

59
54
20
49
48
25
100
100
100

59
54
51
49
48
25
100
100
100

59
54
51
49
48
25
100
100
100

Proportion of ownership is considered from the Group view.

Each of the Company’s holdings of the issued share capital of Taoyuan International Airport Service,Taiwan Airport Service and Global Sky Express did not exceed 50%, but since the Company had control
over these investees, they were listed as subsidiaries. The financial information for the three months ended
March 31, 2019 and 2018 of these subsidiaries was reported according to information that was notindependently reviewed except for that of Mandarin Airlines and Tigerair Taiwan Co., Ltd.
The Group’s respective holdings of the issued share capital of China Pacific Catering Services, China
Pacific Laundry Services and Delica International Co., Ltd. exceeded 50%, yet the Group did not havecontrol over the investees. For related information, refer to Note 14,b.
The Group paid $243,743 thousand on March 7, 2018 to acquire an additional 18% of Kaohsiung Catering,
Ltd. (Kaohsiung Catering) of which the Group’s total holding of the issued share capital exceeded 50%.
Because the Group did have control over the investee, Kaohsiung Catering is listed as a subsidiary. For thedisclosure of the Group’s acquisition of Kaohsiung Catering, refer to Note 30.
The board of directors of the Company decided to sell part of the equity of Dynasty Holidays to H.I.S.
Taiwan Co., Ltd. on January 21, 2019, and completed the transaction on January 31, 2109. After the sale ofthe equity, the Group’s holding of the issued share capital decreased from 51% to 20%. Dynasty Holidays
was classified as an associate since the Group lost control of the subsidiary. Therefore, the relevant assets
and liabilities were not consolidated in the current period, and only the profit and loss from January 1, 2019
to January 31, 2019 was consolidated. For the information about the disposal of the subsidiary, please refer
to Note 31.

- 19 -

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

March 31,2019

December 31,
2018

March 31,2018

$ 1,259,016
1,038,117$ 1,217,863
982,286$ 1,284,152
995,341$ 2,297,133$ 2,200,149$ 2,279,493

March 31,2019

December 31,
2018

March 31,
2018

$

$

$

a. Investments in associates
The amount of investments in associates were as follows:

Unlisted companies
China Aircraft Services
Dynasty Holidays
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics(Holdings) Ltd.

499,664
10,036457,207245,236

497,362442,891
233,417479,209493,563
266,631

46,87344,19344,749$ 1,259,016$ 1,217,863$ 1,284,152

At the end of the reporting period, the proportion of ownership and voting rights of associates held by
the Group were as follows:
Proportion of Ownership and Voting Rights
March 31,
December 31,
March 31,
2019
2018
2018

Name of Associate
China Aircraft Services
Dynasty Holidays
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics(Holdings) Ltd.

20%
20%
28%
28%

20%
51%
28%
28%

20%
51%
28%
28%

35%

35%

35%

The investment income recognized for associates accounted for using the equity method were as
follows:
For the Three Months Ended
March 312019
2018
China Aircraft Services
Asian Compressor Technology Services
Kaohsiung Catering Services
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

- 20 -

$

1,850
(3)
4,140
6,429
1,657
-

$ (1,677)
3,508
6,912
976
15,113$ 14,073$ 24,832

In August 2017, the Group sold all of its holdings of Science Park Logistics to a non-related party, HCT
Logistics Co., Ltd. The agreed upon price was $380,850 thousand, and a disposal gain of $101,166
thousand was recognized.
The investments accounted for using the equity method and the share of profit or loss and othercomprehensive income of those investments were based on the associates’ financial statements whichhave not been reviewed. However, the management determined that there would have been no
significant adjustments to the related information presented in these consolidated financial statements
had this investee’s financial statements been independently reviewed.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

March 31,2019

December 31,
2018

March 31,2018$

858,272
169,617
2,358
7,870

$

805,157
166,901
2,358
7,870

$

810,345
174,770
2,360
7,866

$ 1,038,117$

982,286$

995,341

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled
entities held by the Group were as follows:
Proportion of Ownership and Voting Rights
March 31,
December 31,
March 31,
2019
2018
2018
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

51%
55%
49%
51%

51%
55%
49%
51%

51%
55%
49%
51%

The Group entered into a joint venture agreement with the Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both sides have theright to make major motion vetoes on the board of directors, and therefore, the Group does not havecontrol.
To enhance the Group’s maintenance capabilities, the Company established a joint venture with the US
Nordam Aerospace Group in December 2017 to provide thrust reversers and composite repair services
in Asia under the NORDAM brand. NORDAM has filed for bankruptcy reorganization in the USA on
July 22, 2018 to solve the business disputation with their cooperative partner, so their company
operation was not impact.
To expand the Group’s catering business, Kaohsiung Catering entered into a joint venture agreement toinvest in Delica International Co, Ltd., with the other company have the right to make decisions on
operations, and therefore, the Group does not have control.

- 21 -

Details of the investment income attributable to investments in jointly controlled entitles were as
follows:
For the Three Months Ended
March 312019
2018
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

$ 53,115
2,716-$ 53,381
3,541
(39)
-

$ 55,831$ 56,883

The investments accounted for using the equity method and the share of profit or loss and othercomprehensive income of those investments was based on the jointly controlled entities’ financial
statement which were not independently reviewed. However, the management determined that there
would have been no significant adjustments had this investee’s financial statements been independently
reviewed.
For information on the major businesses and products, the locations of the major business offices, andthe countries of registration for the above entities, refer to Tables 5 and 6 (names, locations, and related
information of investees on which the Company exercises significant influence and investment in
mainland China) following the notes to the consolidated financial statements.

15. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Equipment
under FinanceLeasesBuildings

FlightEquipment

13,698,308
13,360(44)885(21,876)$ 263,427,144
911,208(18,776,532)
858,370-

220,318-

OthersTotal

Cost
Balance at January 1,
2018
Additions
Disposals
Reclassification
Net exchange differences
Acquisitions throughbusiness combinations
Balance at March 31,
2018$922,626(12,306)$

76,704$

26,187,556(1,245,852)
269,366-$-

16,230,011
470,438(89,845)
49,816(2,239)$ 320,465,645
1,395,006(20,112,273)
1,178,437(36,421)

256,368

553,390$987,024$

13,910,951$ 246,420,190$

25,211,070$

16,914,549$ 303,443,784

$

-

$

(6,137,495)(104,679)
44
10,210$ (136,594,765 )(3,976,314)
18,412,073(50,000)
9,320,501-$ (14,142,872)(489,372)
966,677-$(9,972,982)(219,434)
77,759(3,883)
1,871$ (166,848,114)(4,789,799)
19,456,553(50,000)
9,316,618
12,081$-$(6,231,920)$ (112,888,505 )$ (13,665,567)$ (10,116,669)

Accumulated depreciationand impairment
Balance at January 1,
2018
Depreciation expenses
Disposals
Impairment loss
Reclassification
Net exchange differences
Balance at March 31,
2018$ (142,902,661)(Continued)- 22 -

Freehold Land

Buildings

FlightEquipment

Equipment
under FinanceLeasesOthersTotal

Cost
Balance at January 1,
2019
Additions
Disposals
Reclassification
Net exchange differences
Disposal of a subsidiary
Balance at March 31,
2019$1,015,564
1,678
-

$

13,993,585
6,183
2,993
-

$ 259,695,130
378,837(1,022,195)
24,252,637-$

25,805,008(22,977)(23,379,455)(4,474)$

17,917,780
246,063(65,242)
290,685(2,158)$ 318,427,067
631,083(1,110,414)
1,166,860
1,678(6,632)$

1,017,242$

14,002,761$ 283,304,409$

2,398,102$

18,387,128$ 319,109,642

$

-

$

(6,574,873)(103,004)(8,401)-$ (123,507,657 )(4,432,636)
977,478(13,172,836)-$ (14,634,822)(532,944)
22,977
13,731,051
2,112$ (10,601,997)(231,259)
64,467554(4,271)
1,727-$ (155,319,349)(5,299,843)
1,064,922
558,769(12,672)
3,839
-

$

-

$

(6,686,278)$ (140,135,651 )$$ (10,770,779)

Accumulated depreciationand impairment
Balance at January 1,
2019
Depreciation expenses
Disposals
Reclassification
Net exchange differences
Disposal of a subsidiary
Balance at March 31,
2019(1,411,626)$ (159,004,334)(Concluded)
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset:
Buildings
Main buildings
Others
Machinery equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

45-55 years
10-25 years
25 years
3-13 years
3-15 years
5 years
3-5 years
3-5 years
15-25 years
7-20 years
10-20 years
6-8 years
3-10 years
7-12 years
3-15 years
5-12 years

Regarding changes in fleet composition and the future retirement plan, the Group recognized impairment
losses on aircraft equipment for the three months ended March 31, 2018 of $50,000 thousand based on the
difference between the recoverable amount, which applied the fair value (Level 3), and the carrying
amount. The fair value was determined based on aircraft conditions and market estimates.
Refer to Note 35 for the carrying amounts of property, plant and equipment pledged by the Group.

- 23 -

Based on the particularity of risk in the aviation industry, all of the Group’s assets such as aircraft, realestate, and movable property are adequately insured to diversify the potential risk related to operations.

16. INVESTMENT PROPERTIES

Carrying amount
Investment properties

March 31,2019

December 31,
2018

March 31,2018

$ 2,075,274$ 2,075,345$ 2,075,553

The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to others. The buildings are depreciated on a straight-line basis over 55 years.
The fair values of the investment properties held by the Group were both $2,506,230 thousand as ofDecember 31, 2018 and March 31, 2018, respectively. In addition, management assessed that there is no
significant difference in the fair values of March 31, 2019 and December 31, 2018.
The fair value valuations were performed by independent qualified professional valuers, and the future
income evaluated by management was based on market transactions.
All of the Group’s investment properties were held under freehold interests.

17. OTHER INTANGIBLE ASSETS
Computer
Software Cost

Accumulated
Amortization

Net Value-$ (1,020,257)(50,459)$ 1,019,345
30,819(50,459)

186,197
-

(540)
98

186,883
11,524
98

Goodwill

Balance at January 1, 2018
Additions
Amortization expenses
Acquisitions through businesscombinations
Reclassification
Effects of exchange rate changes$ 2,039,602
30,819-$Balance at March 31, 2018

$ 2,083,171$

186,197$ (1,071,158)$ 1,198,210

Balance at January 1, 2019
Additions
Amortization expenses
Acquisitions through businesscombinations$ 2,237,382
21,786-$

186,197-$ (1,212,783)(49,842)$ 1,210,796
21,786(49,842)-

1,357(2,501)

Balance at March 31, 2019

$ 2,255,310

186,197$ (1,261,268)$ 1,180,239

686
12,064-(3,858)$The above other intangible assets are depreciated on a straight-line basis over 2-16 years.

- 24 -

18. OTHER ASSETSMarch 31,2019

December 31,
2018

March 31,
2018

$

$

$

Current
Temporary payments
Prepayments
Restricted assets
Others167,769
1,565,279
20,412
731,956

556,860
3,028,808
18,623
543,591

186,5223,739,364
161,550
674,878$ 2,485,416$ 4,147,882$ 4,762,314$$

529,963
1,603,400
1,089,690
100,141
107,559$ 5,503,297
1,349,216
1,363,121
96,398
11,242$ 3,430,753$ 8,323,274

Non-current
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Others593,921
1,356,804
1,059,590
98,954103,492$ 3,212,761

The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A350-900 and ATR72-600 aircraft. All A350-900 has been delivered at October 2018, for details of thecontract for the purchase of the ATR72-600 aircraft, refer to Note 36.

19. BORROWINGSa. Short-term loans
March 31,2019

December 31,
2018

March 31,2018

Bank loans - unsecured$ 4,200,000$$

Interest rates

0.87%-1.04%

-

1.16%

March 31,2019

December 31,
2018

March 31,2018-

30,000b. Short-term and bills payable

Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate

$ 820,000
-

$

-

$

20,000-$ 820,000$-$

20,0001.01%-1.04%- 25 --

0.44%

c. Long-term debts

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

March 31,2019

December 31,
2018

March 31,2018

5,512,500
36,107,660$

9,354,457
36,330,211$ 21,876,833
34,081,325

26,260,000
35,47067,844,690
7,957,425

30,770,000
59,03376,395,635
15,709,487

28,800,000
62,26484,695,894
23,140,173$ 59,887,265$ 60,686,148$ 61,555,721

0.92%-1.78%

0.92%-1.46%

0.92%-1.56%$

Less: Current portion

Interest rates

For information on secured bank loans which were secured by freehold, buildings, machinery
equipment and flight equipment. For details of such security, refer to Note 35.
Bank loans (New Taiwan dollars, U.S. dollars) are repayable quarterly, semiannually or in lump sum
upon maturity. Related information is summarized as follows:

Periods

March 31,2019

December 31,
2018

March 31,2018

2007.5.242030.4.25

2007.5.242030.4.25

2007.5.242029.11.9

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until March 2022, were used by the Group to guarantee the commercial paperissued. As of March 31, 2019, December 31, 2018 and March 31, 2018, such commercial paper was
issued at discount rates of 1.0377%-1.1660%, 1.0693%-1.2960% and 1.0517%-1.2987%, respectively.

20. BONDS PAYABLE
March 31,2019
Unsecured corporate bonds first-time issued in2013
Unsecured corporate bonds first-time issued in2016
Unsecured corporate bonds second-time issued in2016
Unsecured corporate bonds first-time issued in2017
Unsecured corporate bonds second-time issued in2017
Unsecured corporate bonds first-time issued in2018$- 26 -

2,750,000

December 31,
2018$

5,500,000

March 31,2018$

5,500,000

4,700,000

4,700,000

4,700,000

5,000,000

5,000,000

5,000,000

2,350,000

2,350,000

2,350,000

3,500,000

3,500,000

3,500,000

4,500,000

4,500,000(Continued)

Convertible bonds fifth-time issues
Convertible bonds sixth-time issues$

Less: Current portion and put option of
convertible bonds

March 31,2019

December 31,
20185,693,068
28,493,068$

1,695,900
5,673,710
32,919,610

March 31,2018$

1,674,611
5,614,970
28,339,581

2,750,000

4,445,900

4,424,611$ 25,743,068$ 28,473,710$ 23,914,970(Concluded)

Conditions

Rate (%)

Principal repayable in January of 2019and 2020; indicator rate; payableannually
Principal repayable in May of 2020 and2021; interest p.a. payable annually

1.85

2016.9.27-2021.9.27

Principal repayable in May of 2020 and2021; interest p.a. payable annually

1.08

2017.5.19-2020.5.19

Principal repayable on due date;indicator rate; payable annually

1.2

2017.5.19-2024.5.19

Principal repayable on due date;indicator rate; payable annually

1.75

2017.10.12-2020.10.12

Principal repayable on due date;indicator rate; payable annually

1.14

2017.10.12-2022.10.12

Principal repayable in November of2022 and 2023; indicator rate;
payable annuallyPrincipal repayable in November of2022 and 2023; indicator rate;
payable annuallyPrincipal repayable in October of 2021
and 2022; indicator rate; payableannually
Unless bonds are converted to sharecapital or redeemed, principal
repayable one time in December
2018; 1.8245 discount rate p.a.
Unless bonds are converted to sharecapital or redeemed, principal
repayable one time in January 2023;
1.3821 discount rate p.a.

1.45

Related issuance conditions were as follows:
Category

PeriodSeven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
1.85% interest p.a., payable annually
Five-year unsecured bonds - issued at par in May 2016;
repayable in May 2020 and 2021; 1.19% interest p.a.,payable annually
Five-year unsecured bonds - issued at par in September
2016; repayable in September 2020 and 2021; 1.08%
interest p.a., 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
November 2018; repayable in November 2022 and 2023;
1.32% interest p.a., payable annually
Five-year private unsecured bonds - issued at par in
November 2018; repayable in November 2022 and 2023;
1.45% interest p.a., payable annually
Five-year private unsecured bonds - issued at par in October
2017; repayable in October 2021 and 2022; 1.45%
interest p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum upon maturity;
1.8245% discount rate p.a.

2013.1.17-2020.1.17

Five-year convertible bonds - issued at discount in January
2018; repayable in lump sum upon maturity; 1.3821%
discount rate p.a.

2018.1.30-2023.1.30

2016.5.26-2021.5.26

2018.11.30-2023.11.30

2018.11.30-2025.11.30

2013.12.26-2018.12.26

1.19

1.32

1.45

-

-

The Company issued its 2016 first unsecured corporate bonds with a face value of $5,000,000 thousand,and the purchasers of the bonds included Mandarin Airlines and Sabre Travel Network (Taiwan), who held
a cumulative face value of $300,000 thousand which was eliminated from the consolidated financial
statements.
The Company issued the fifth issue of its unsecured convertible bonds, and the issuance conditions were as
follows:
a. The holders may demand a lump-sum payment for the bonds upon maturity.

- 27 -

b. The holders can request that the Company repurchase their bonds at 100.75% face value on the third
anniversary of the offering date. Because part of the holders exercise selling rights on December 26,
2016, the Company paid $994,705 thousand to the holders of the bonds payable who exercised the put
options, and the difference between the payment amount and carrying amount recognized was a loss on
the bonds payable buy back.
c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$12.24, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of August 14, 2018, the conversion price was adjusted to NT$11.38, and corporate bonds with a facevalue of NT$3,316,800 thousand were converted to 270,985 thousand shares of ordinary shares.
e. The convertible bonds has expired on December 26, 2018, the Company has fully repayable in January
8, 2019, the related capital surplus - share option has reclassified as capital surplus - other.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.8245% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,000,000(518,621)

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

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.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$13.2.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,012,000(409,978)Liability component at the date of issuance$ 5,602,022- 28 -

21. LEASE AGREEMENTS
Year 2019a. Right-of-use assets - 2019
December 31,
2019
Carrying amounts
Land
Buildings
Flight equipment
Other equipment$

8,439,908
1,227,444
66,027,560
1,801$ 75,696,713
For the Three
Months Ended
March 31, 2019
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment$

711,915$

104,901
188,041
2,612,959
532$ 2,906,433
b. Lease liabilities - 2019
March 31, 2019
Carrying amounts
Current
Non-current$ 5,067,954$ 30,249,514

Range of discount rate for lease liabilities (include US lease hedging instruments):
March 31, 2019Land
Buildings
Flight equipment
Other equipment

0%-2.87%0%-3.04%
2.00%-3.34%
1.06%-1.73%- 29 -

c. Financial liabilities under hedge accounting
The Company specifics a part of US lease contract as a hedging instruments to avoid exchange
fluctuations is US dollar passenger revenue, and applies the accounting treatment of cash flow hedging.
The lease information is as follows:
Maturity Date
March 31, 20192021.4.30-2028.5.31

Subject

Carrying Value

Financial liabilities for hedging current
Financial liabilities for hedging non-current$

6,037,462
34,543,623

Influence of comprehensive income
Recognized in
Other
Comprehensive
IncomeFor the three months ended March 31, 2019

$ (124,864)

Reclassified toIncome$-d. China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes, ten A330-300
planes, fifteen 737-800 planes, ten A320-200 planes, six ERJ190 planes and three ART72-600 planes
for operation, lease period are 6 to 12 years from February 2006 to May 2028. The rental pricing
method is partly a fixed amount of funds, and some of them are floating rents, floating rents areaccording to benchmark ratio, the rent is revised every half year. When the lease expires, the leaseagreements have no purchase rights.
The information of refundable deposits and opening of credit letter due to rental of planes:
March 31, 2019
Refundable deposits
Credit guarantees$

676,423
1,622,859

CAL Park, and Taoyuan International Airport Service signed a BOT contract with a land leaseagreement, refer to Note 36. The lease includes an option to extend the lease, as it is not possible toextend the lease, the amount of the lease related to the period covered by the option is not included in
the lease liability.
If the amount of the extended lease period is included in the lease liability, the lease liability will
increase by $865,173 thousand on March 31, 2019.
Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 36.

- 30 -

e. Other lease information
The Company use operating lease agreement for investment properties, refer to Note 16.
2019
For the Three
Months Ended
March 31, 2019
Short-term and low price lease payment
Total of lease cash outflow$
8,303$ (2,808,101)

The Company choose to waive the recognition of the contract provisions for the short-term leases andlow price lease, and does not recognize the related right-of-use assets and lease liabilities for such lease.
Year 2018
1) Sale-leaseback finance leases
December 31,
2018

March 31,2018

Within one year
Beyond one year and within five years$

596,000-$ 1,434,000
522,000

Present value of minimum lease payments$

596,000$ 1,956,000

Minimum lease payments - flight equipment

Interest rates

1.0680%1.0617%-1.1317%

The Group had leased the engines of a total of three aircraft, A330-300, under sale-leaseback
contracts under finance leases as of March 31, 2018. The lease terms are from June 2006 to April
2019. During the lease term, the Group retained all risks and rewards attached to the aircraft andengines and enjoyed the same substantive rights as were enjoyed prior to the transaction. Theinterest rates underlying all obligations under such finance leases were floating. Therefore, theminimum lease payments under the sale-leaseback aircraft contracts do not include interest expense.
2) Finance leases
Taiwan Air Cargo Terminal Co. (“TACT”) entered into a terminal construction contract. Refer toNote 36 for the terms of the contract. Dynasty Holiday Co., Ltd. signed a long-term equipment lease
contract, and the lease contract is a finance lease contract.
December 31,
2018

March 31,2018$

37,9982,974
40,972(629)$

37,61931,496
69,115(792)$

40,343$68,323(Continued)

Minimum lease payments - Cargo Terminal and others
Within one year
Beyond one year and within five years
Less: Finance costs
Present value of minimum lease payments- 31 -

December 31,
2018

March 31,2018$

37,3982,945$

37,34830,975$40,343$68,323Present value of minimum lease payments Cargo Terminal and others
Within one year
Beyond one year and within five years

Discount rate
Total amount of present value of minimum lease payments
Current
Non-current

4.756%

4.756%$

633,398
2,945$ 1,471,348
552,975$

636,343$ 2,024,323(Concluded)3) Operating lease arrangements (include sale-leaseback operating leases)
As of December 31, 2018 and March 31, 2018, the refundable deposits paid by the Group underoperating lease contracts were $693,466 thousand and $885,807 thousand, respectively. Some of theguarantees were secured by credit guarantees, and outstanding credit guarantees as of December 31,
2018 and March 31, 2018 were $1,682,774 thousand and $1,362,259 thousand, respectively.
The future minimum lease payments for the non-cancelable operating lease commitments are as
follows:

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

December 31,
2018

March 31,2018

$ 11,785,442
44,559,429
21,685,499$ 11,393,712
42,052,693
27,266,965$ 78,030,370$ 80,713,370

The lease payments recognized in profit or loss for the current period were as follows:
For the Three
Months Ended
March 31, 2018
Minimum lease payments$ 2,888,460- 32 -

22. OTHER PAYABLES
March 31,2019
Fuel costs
Ground service expenses
Repair expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
Others$3,615,683
1,301,543
1,102,264
224,876
1,611,412
955,500
546,368
3,312,295$ 12,669,941

December 31,
2018$3,822,018
1,167,214
1,031,700
266,268
2,237,409
1,151,578
484,341
3,985,670

March 31,2018$

3,390,667
1,259,301
797,988
210,832
1,708,040
909,226
342,9032,719,803$ 14,146,198$ 11,338,760

March 31,2019

December 31,
2018

March 31,2018

2,591,215
17,957,284$

23. CONTRACT LIABILITIES/DEFERRED REVENUE

Frequent flyer program
Advance ticket sales

Current
Non-current$

2,493,551
18,956,569$

2,444,407
15,950,427$ 20,548,499$ 21,450,120$ 18,394,834$ 18,550,487
1,998,012$ 19,546,455
1,903,665$ 16,584,300
1,810,534$ 20,548,499$ 21,450,120$ 18,394,834

The advances received originally included in deferred revenue were reclassified as the contract liabilities
after the application of IFRS 15 on January 1, 201824. PROVISIONSMarch 31,2019

December 31,
2018

March 31,2018

Operating leases - aircraft$ 9,401,631$ 8,794,539$ 8,885,925

Current
Non-current

$

$

$

202,999
9,198,632$ 9,401,631- 33 -

321,075
8,473,464$ 8,794,539

739,029
8,146,896$ 8,885,925

Aircraft Lease
Contracts
Balance at January 1, 2018
Additional provisions recognized
Usage
Effects of exchange rate changes$ 8,489,308
865,122(301,966)(166,539)

Balance at March 31, 2018

$ 8,885,925

Balance at January 1, 2019
Additional provisions recognized
Usage
Effects of exchange rate changes$ 8,794,539
1,061,129(480,795)
26,758

Balance at March 31, 2019

$ 9,401,631

The Company and Mandarin Airlines leased flight equipment under operating lease agreements. Under thecontracts, when the leases expire and the equipment is returned to the lessor, the flight equipment has to be
repaired according to the expected years of use, number of flight hours, flight cycles and the number ofengine revolution. The Company and Mandarin Airlines had existing obligations to recognize provisions
when signing a lease or during the lease term. Tigerair Taiwan Co., Ltd. also leased flight equipment underoperating lease agreements. In accordance to the contract, Tigerair had to pay the maintenance reserve
accounted for by using the number of flying hours.

25. RETIREMENT BENEFIT PLANS
Employee benefits expense in respect of the Group’s defined benefit retirement plan were calculated using
the actuarially determined pension cost discount rate as of December 31, 2018 and 2017.
For the Three Months Ended
March 3120192018
Operating costs
Operating expenses$ 245,872
106,723$ 253,368
113,276$ 352,595$ 366,644

March 31,2019

December 31,
2018

March 31,2018

6,000,000$ 60,000,000$ 54,209,846

6,000,000$ 60,000,000$ 54,209,846

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

26. EQUITY
a. Share capital
Ordinary shares

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued- 34 -

b. Capital surplus

Issuance of shares in excess of par value andconversion premium
Gain on sale of treasury shares held bysubsidiaries
Retirement of treasury shares
Employee share options expired
Long-term investments
Bonds payable - equity component
OthersMarch 31,2019

December 31,
2018

March 31,
2018

$

$

$

315,114315,114552,696

3,303
33,513
11,747955
409,978
466,604

3,303
33,513
11,747955
409,978
466,604

2,673
11,747955
556,567
85,339$ 1,241,214$ 1,241,214$ 1,209,977

The capital surplus from shares issued in excess of par (including additional paid-in capital from theissuance of ordinary shares and treasury share transactions) and donations may be used to offset
deficits; in addition, when the Group has no deficit, such capital surplus may be distributed as cash
dividends or transferred to capital (but limited to a certain percentage of the Group’s paid-in capital on
yearly basis).
The capital surplus arising from long-term investments and employee share options may not be used forany reason except to offset deficits. The capital surplus arising from share options for employees andconvertible bonds, cannot be used.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”)
amended on June 24, 2016 based on the amended Company Act, where the Company made profit in a
fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting
aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve inaccordance with the laws and regulations, and then any remaining profit together with any undistributed
retained earnings shall be used by the Company’s board of directors as the basis for proposing a
distribution plan with due consideration of any future aircraft acquisition plans and fund demands,
which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses toshareholders by cash or shares (cash dividends cannot be less than 30% of total dividends distributed).
However, if the Company’s profit before tax in a fiscal year after deductions for the abovementioned
items is not sufficient for earnings distribution, retained earnings can be used as a supplement for the
deficiency. If the Company has no deficit in a fiscal year, the Company can distribute all or part of thecapital surplus by cash or shares with due consideration of finance, marketing and management
requirements in accordance with the laws and regulations.

- 35 -

The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.
1) Appropriation of earnings in 2017
The appropriation of earnings for 2017 was resolved in the board of directors meeting on June 27,
2018. The appropriation of earnings and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Special reserve
Cash dividends$

145,831
118,810
1,193,670

Dividends Per
Share (NT$)$0.2181820086

2) Appropriation of earnings in 2018
The appropriation of earnings for 2018 was resolved in the board of directors meeting on March 20,
2019. The appropriation of earnings and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Cash dividends$

Dividends Per
Share (NT$)

114,493
1,136,278$0.20960737

Rotation Special reserve is $105,844 thousand.
The appropriation of earnings should be resolved in the shareholders’ meeting to be held on June25, 2019.
d. Other equity items
The movement of other equity items is as follows:

Exchange
Differences on
Translating
Foreign
Operations
Balance on January 1,
2018
Adjustments on initial
application of IFRS 9
Balance on January 1,
2018 after IFRS 9
adjustments
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments$ (34,986)

Unrealized
Gain (Loss) on
Available-forsale Financial
Assets$

Unrealized
Gain (Loss) on
Financial
Assets at Fair
Value Through
Other
Comprehensive
Income1,774$

Cash Flow
Hedges-$ (74,429)

Gain (Loss) on
Hedging
Instruments

$

Total

-

$ (107,641)-(1,774)42,351

74,429(74,429)

40,577(34,986)-

42,351-(74,429)(67,064)(30,702)

-

-

-

-

(30,702)

-

-

-

-

(74,169)(74,169)(Continued)- 36 -

Exchange
Differences on
Translating
Foreign
Operations
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at fairvalue through othercomprehensive income
Effect of change in tax
rate
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodTransfers of initialcarrying amount ofhedged items
Balance on March 31,
2018
Balance on January 1,
2019
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at fairvalue through othercomprehensive income
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodDispose of subsidiary
Balance on March 31,
2019

$

-

Unrealized
Gain (Loss) on
Available-forsale Financial
Assets$

Unrealized
Gain (Loss) on
Financial
Assets at Fair
Value Through
Other
Comprehensive
Income-$-Cash Flow
Hedges$-Gain (Loss) on
Hedging
Instruments$

21,525

Total$

21,525

-

-

1,414

-

-

1,414

1,198
6,557

-

(1,209)
1,249

-

2,530
743

2,519
8,549

(22,947)

-

1,454

-

(49,371)(70,864)

-

-

-

-

44,155

44,155$ (57,933)

$

-

$

43,805$-$ (79,645)$ (93,773)

$

$

-

$

42,619

$

-

$

$

$

(9,664)25,26858,223

19,583----

19,583----(107,629)(107,629)

-

-

-

-

(16,132)(16,132)(3,224)-

16,906(3,424)-25,267

16,906
18,61916,3598,368-

13,482
105-(98,494)-(68,653)8,473-$ (73,226)

15,063$-$56,206$$(1,957)(Concluded)- 37 -

e. Non-controlling interests
For the Three Months Ended
March 3120192018
Beginning balance
Net income attributable to non-controlling interests
Exchange differences on translating foreign operations
Gain (loss) on hedging instruments
Cumulative gain (loss) on changes in fair value of hedging
instruments reclassified to profit or loss

$ 2,965,512
96,8284,093
46$ 2,134,282
66,502
3,045
(6)

(30)
4,109
(24,957)
-

(23)
3,016
565,888$ 3,041,492$ 2,769,688

Dispose of subsidiaries
Non-controlling interests arising from acquisition of subsidiaries
Ending balance
f. Treasury shares

Treasury shares are the Company’s shares held by its subsidiaries as of March 31, 2019 and 2018 andwere as follows:(Shares in Thousands)
Number of
Shares,Beginningof Year

Purpose of Treasury Shares

Reduction
Duringthe Year

Number of
Shares,Endof YearThree months ended March 31, 2019
Company’s shares held by its subsidiaries reclassified frominvestments in shares of ordinary shares to treasury shares

2,889

-

2,889

2,889

-

2,889

Three months ended March 31, 2018
Company’s shares held by its subsidiaries reclassified frominvestments in shares of ordinary shares to treasury shares

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 20,456
8,028$ 20,456
8,028$ 28,484$ 28,484(Continued)

March 31, 2019
Mandarin Airlines
Dynasty Aerotech International Corp.

2,075
814

- 38 -

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 22,821
8,956$ 22,821
8,956$ 31,777$ 31,777$ 22,406
8,793$ 22,406
8,793$ 31,199$ 31,199(Concluded)

December 31, 2018
Mandarin Airlines
Dynasty Aerotech International Corp.

2,075
814

March 31, 2018
Mandarin Airlines
Dynasty Aerotech International Corp.

2,075
814

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 to subscribe for theCompany’s new shares and voting rights.
To maintain the Company’s credit standing and shareholders’ rights and interests, the board of directors
decided to buy back shares of the Company from Taiwan Stock Exchange at a price from $9 to $14 pershare. The expected period of purchase is from August 10, 2018 to October 9, 2018. As of 50,000
thousand shares had been repurchased. The treasury shares held by the Company has retired on
December 18, 2018, share capital decreases $500,000 thousand, additional paid-in capital in excess of
par-ordinary share decreases $2,906 thousand and additional paid-in capital - treasury share increases$33,513 thousand. Under the Securities Exchange Act, the treasury shares held by the Company cannot
be pledged and are not entitled to dividends distribution and voting rights, etc.

27. NET INCOME
a. Revenue
For the Three Months Ended
March 3120192018
Passenger
Cargo
Others$ 27,250,147
10,161,698
2,993,503$ 26,749,342
10,181,655
2,804,030$ 40,405,348$ 39,735,027

Refer to Note 24 for the balance of contract liabilities related to customer contracts.

- 39 -

b. Other income
For the Three Months Ended
March 312019
2018
Interest income
Subsidy income
Others$96,955
9,902
46,399$ 153,256$

59,616
1,897
70,712$ 132,225

c. Other gains and losses
For the Three Months Ended
March 312019
2018
Gain (loss) on disposal of property, plant and equipment
Gain (loss) on disposal of non-current assets held for saleNet gain (loss) on financial assets classified as held for sale
Gain (loss) on disposal of investments
Gain (loss) on foreign exchange, net
Impairment loss recognized on property, plant and equipment
and non-current assets held for sale
Others$

1,349(10,462)
11,1407,656(26,900)$ (278,321)(124,290)
2,866
456,426
19,591(49,224)(50,000)(84,974)$ (66,441)$ (58,702)

d. Finance costs
For the Three Months Ended
March 312019
2018
Interest expense
Bonds payable
Bank loans
Interest on obligations under financial leases
Loss arising on derivatives designated as hedging instruments
in cash flow hedge accounting reclassified from equity to
profit or loss$

94,675
219,751-$

92,659215,937
6,956

561,405-$ 875,831$ 315,552

Capitalization interest$$

Capitalization rate

1.250%1.316%- 40 -

1,071

18,7711.1889%1.3117%

e. Depreciation and amortization expenses
For the Three Months Ended
March 312019
2018
Property, plant, equipment
Right of use assets
Investment properties
Intangible assets$ 5,299,843
2,906,433
70
49,842$ 4,789,799
70
50,459Depreciation and amortization expenses$ 8,256,188$ 4,840,328

An analysis of depreciation by function
Operating costs
Operating expenses$ 7,751,905
454,441$ 4,567,419
222,450$ 8,206,346$ 4,789,869

$

3,166
46,676$

1,151
49,308$49,842$50,459An analysis of amortization by function
Operating costs
Operating expenses

f. Employment benefits expense
For the Three Months Ended
March 312019
2018
Post-employment benefits
Defined contribution plan
Defined benefit plan

Other employee benefits
Salary expenses
Personnel service expenses

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

140,839
352,595$

129,598
366,644$493,434$

496,242$ 5,273,602
1,719,330$ 5,125,202
1,534,641$ 6,992,932$ 6,659,843$ 6,043,643
1,442,723$ 5,873,338
1,282,747$ 7,486,366$ 7,156,085

To be in compliance with the Company Act as amended, the Articles stipulate the distribution of
employees’ compensation at rates of no less than 3% of the net profit before income tax and employees’
compensation. For the three months ended March 31, 2018, the employees’ compensation was $11,336
thousand of the base net profit. For the three months ended March 31, 2019, the Company has
experienced a deficit, and therefore, no employees’ compensation is estimated.

- 41 -

Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date that the annual consolidated financial statements are authorized for issue
are adjusted in the year that the bonuses and remuneration were recognized. If there is a change in the
proposed amounts after the annual consolidated financial statements are authorized for issue, thedifferences are recorded as a change in the accounting estimate.
Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2018 and 2017 are available on the Market Observation Post
System website of the Taiwan Stock Exchange.

28. INCOME TAX
a. Income tax expense recognized in profit or loss
The major components of tax expense (benefit) were as follows:
For the Three Months Ended
March 312019
2018
Current tax
Current year
Adjustments for prior periods
Deferred tax
Current year
Adjustments to deferred tax attributable to changes in tax rates
and laws
Income tax expense recognized in profit or loss

$ 148,035-$

43,3892,725

41,202927,061-(904,558)$ 189,237$

68,617In February 2018, it was announced that the Income Tax Law in the R.O.C. was amended and, startingfrom 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of thecorporate surtax applicable to unappropriated earnings will be reduced from 10% to 5%.
b. Income tax recognized in other comprehensive income
For the Three Months Ended
March 3120192018
Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Fair value changes of financial assets at FVTOCI
Hedging instruments’ fair value revaluation
Effect of change in tax rate

$ (3,224)(3,424)25,267-$

Total income tax recognized in other comprehensive income$ 18,619$ 11,068

7,755
1,249
743
1,321

c. Income tax assessment
Income tax returns for 2016 of the Company and its subsidiaries have been examined by the tax
authorities.

- 42 -

29. EARNING (LOSSES) PER SHARE
The numerators and denominators used in calculating earnings and losses per share were as follows:
For the Three Months Ended
March 3120192018
Basic earnings (losses) per share
Diluted earnings (losses) per share$ (0.04)$ (0.04)$$

Earnings (losses) used in the computation of diluted earnings (losses)
per share$ (243,704)$ 125,492

5,418,096

5,465,208-

17,922

5,418,096

5,483,130

Weighted average number of ordinary shares in computation of basic
earnings (losses) per share
Effect of potentially dilutive ordinary shares:
Employees’ compensation or bonus issued to employees
Weighted average number of ordinary shares used in thecomputation of diluted earnings (losses) per share

0.02
0.02

If the Group offered to settle compensation or bonuses paid to employees in cash or shares, the Groupassumed the entire amount of the compensation or bonuses would be settled in shares and the resulting
potential shares were included in the weighted average number of shares outstanding used in thecomputation of diluted earnings and losses per share, if the effect is dilutive. Such dilutive effect of thepotential shares was included in the computation of diluted earnings and losses per share until the numberof shares to be distributed to employees is resolved in the following year.

30. BUSINESS COMBINATIONSAs stated in Note 13, the other disclosures of the Group’s acquisition of Kaohsiung Catering on March 7,
2018 are as follows:a. Acquisition-related cash amounting to $243,743 thousand.
b. Assets acquired and liabilities assumed at the date of acquisition.
AssetsCurrent assets (included cash and cash equivalents of $380,512)
Property, plant and equipment
Intangible assets
Other assets
Total assets
Liabilities
Identifiable net assets$

918,033
553,390
186,883
49,4791,707,785(486,356)$ 1,221,429

c. The Company acquired the control of Kaohsiung Catering (the date of acquisition), and the 35.78%
equity held by the equity method was remeasured at the fair value of the acquisition date and thedifference recognized in gain on disposal of investment is $69,671 thousand.

- 43 -

d. The non-controlling interest of Kaohsiung Catering (46.33% of equity) was valued $565,888 thousand;at the fair value of the identifiable net assets attributed to the non-controlling interest on the date ofacquisition.
e. The bargain purchase benefit of $26,615 thousand of Kaohsiung Catering (the date of acquisition) was
measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s
previously held equity interests in the acquiree over the net of the acquisition-date amounts of theidentifiable assets acquired and the liabilities assumed.
f. Impact of acquisitions on the results of the GroupThe results of the acquirees since the acquisition date to March 31, 2018 included in the consolidated
statements of comprehensive income were as follows:
Kaohsiung
Catering
Revenue
Profit$ 174,199$ 21,668

Had these business combinations been in effect at the beginning of the annual reporting period, theGroup’s revenue from continuing operations would have been $40,062,522 thousand and the profit
from continuing operations would have been $229,469 thousand for the three months ended March 31,
2018. This pro-forma information is for illustrative purposes only and is not necessarily an indication of
the revenue and results of operations of the Group that actually would have been achieved had theacquisition been completed on January 1, 2018, nor is it intended to be a projection of future results.

31. DISPOSAL OF SUBSIDIARIESOn January 21, 2019, the board of directors of the Company decided to sell part of Dynasty Holidays to
Sanxian Travel agency for disposal price of NT$34,036 thousand and a disposition of NT$7,656 thousand.
After the disposal, the proportion of ownership decrease from 51% to 20%, loss control to the subsidiary.
a. Consideration received from disposals
Consideration received in cash and cash equivalents$ 34,036

b. Analysis of assets and liabilities on the date control was lost
Current assets
Cash and cash equivalents
Other current assets
Non-current assets
Current liabilities
Non-current liabilities$ 51,449
47,51017,035(49,742)(15,318)

Net assets disposed of$ 50,934- 44 -

c. Gain on disposals of subsidiaries
Consideration received
Net assets disposed of
Fair value of equity
Non-controlling interests
Reclassification of other comprehensive income in respect ofsubsidiaries$ 34,036(50,934)
10,187
24,957

Gain on disposal$(10,590)
7,656

d. Net cash inflow on disposal of subsidiaries
Consideration received in cash and cash equivalents
Less: Cash and cash equivalent balances disposed of$ 34,036(51,449)$ (17,413)

32. CAPITAL MANAGEMENT
The goal, policies and procedures as well as the composition of the Group’s capital management are thesame as those stated in Note 32 in the Group’s consolidated financial statements for the year ended
December 31, 2018.

33. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments
Except as detailed in the following table, the management considers the carrying amounts of financial
assets and financial liabilities recognized in the financial statements as approximating their fair values.
March 31, 2019
Carrying
AmountFair Value

December 31, 2018
Carrying
AmountFair Value

March 31, 2018
Carrying
AmountFair Value$ 28,493,068
67,844,690$ 32,919,610
76,395,635$ 28,339,581
84,695,894

Financial liabilities
Bonds payable
Loans and debt

$ 28,556,362
67,844,690$ 31,651,865
74,404,225$ 28,478,640
86,709,013

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying amounts are their fair values. As of March 31, 2019, December 31, 2018 and March 31, 2018,
the fair values of long-term debts and private bonds with fixed interest rates are estimated at the present
value of expected cash flows discounted at rates of 0.666%, 0.680% and 0.713%, respectively,
prevailing in the market for long-term debts (Level 2). Fair values of bond payable trading in OTC andbased on quoted market prices (Level 1).
b. Financial instruments evaluated at fair value - on a non-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 isobservable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;- 45 -

2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and3) Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable market data (unobservable inputs).
March 31, 2019
Level 1
Financial assets at FVTPL
Domestic money market funds
Principal-protected notes
Financial products$

Level 2

238,600$-

Level 3

-

$

Total

-

7,216

$

-

238,600
7,216$

238,600

$

7,216

$

-

$

245,816

$

-

$

-

$

21,527
128,788$

21,527
128,788

$

-

$

-

$

150,315$150,315

Financial assets for hedging

$

-

$

26,566

$

7,905

$

34,471

Financial liabilities for hedging$-$ 40,581,107$

983

Financial assets at FVTOCI
Investments in equity
instruments
United shares - domestic
Unlisted shares - foreign$ 40,582,090

December 31, 2018
Level 1
Financial assets at FVTPL
Beneficial certificates

Level 2

Level 3

Total$

206,001

$

-

$

-

$

206,001

$

-

$

-

$

21,746
110,445$

21,746
110,445

$

-

$

-

$

132,191$

132,191

Financial liabilities at FVTPL
Derivative instruments

$

-

$

221

$

-

$

221

Financial assets for hedging

$

-

$

28,005

$

4,901

$

32,906

Financial liabilities for hedging

$

-

$

560

$

-

$

560

Financial assets at FVTOCI
Investments in equity
instruments
United shares - domestic
Unlisted shares - foreign- 46 -

March 31, 2018
Level 1
Financial assets at FVTPL
Domestic money market funds
Principal-protected notes
Financial products

Level 2

Level 3

Total$

478,427-$

1,072,237
92,850$-$$478,427$ 1,165,087$-$ 1,643,514

$

-

$

-

$

25,743
107,548$

25,743
107,548

$

-

$

-

$

133,291$

133,291

Financial liabilities at FVTPL
Derivative instruments

$

-

$

10,797$-$

10,797

Financial assets for hedging

$

-

$

368

$

2,001

$

2,369

Financial liabilities for hedging

$

-

$

99,882$-$

99,882Financial assets at FVTOCI
Investments in equity
instruments
United shares - domestic
Unlisted shares - foreign

478,427
1,072,237
92,850

There were no transfers between Levels 1 and 2 in the current periods.
4) Valuation techniques and inputs applied for Level 2 fair value measurement
Financial Instrument
Derivative instruments foreign exchange forward
contracts and interest rate
swaps/principal-protected
notes/financial products

Valuation Techniques and Inputs
Discounted cash flow.
Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period and contract
forward rates, discounted at a rate that reflects the credit riskof various counterparties.

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. An increase in the implied fluctuation used in isolation
would result in a decrease in the fair value of fuel options.
The domestic unlisted equity investment is based on the comparative company valuation to estimate
the fair value. The main assumptions are based on the multiplier of the market price of thecomparable listed company and the net value per share, which have considered the liquidity
discount. The higher the multiplier or the lower the liquidity discount, the higher the fair value ofthe relevant financial instruments.

- 47 -

The multiplicator and liquidity discount of Level 3 financial instruments are as follows:

Multiplicator

Liquidity
Discount

0.74-15.29
0.74-15.29
0.85-18.68

80%
80%
80%

Derivative
Instruments

EquityInstruments

Balance at January 1, 2019
Recognized in other comprehensive income

$

4,901
2,021

$ 132,191
18,124

Balance at March 31, 2019

$

6,922

$ 150,315

Balance at January 1, 2018
Adjustments on initial application of IFRS 9
Other comprehensive income recognized during the period

$

2,001

$

40,637
1,454

Balance at March 31, 2018

$

2,001

$

42,091March 31, 2019
December 31, 2018
March 31, 2018
The movements of Level 3 financial instruments are as follows:

There were no financial assets measured using Level 3 fair value measurements in 2017.
Because some financial instruments and nonfinancial instruments may not have their fair values
disclosed, the total fair value disclosed herein is not the total value of the Group’s collective
instruments.
c. Categories of financial instruments
March 31,2019

December 31,
2018

245,816
34,47135,535,991
150,315$

March 31,2018

Financial assets
Financial assets at FVTPL
Derivative financial assets for hedging
Financial assets at amortized cost (Note 1)
Financial assets at FVTOCI$

206,001
32,90640,496,618
132,191$

1,643,514
2,369
34,647,163
133,291

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

40,582,090
161,555,051

221
560
127,271,892

10,797
99,882
137,456,484

Note 1: The balances include loans and receivables measured at amortized cost, which comprise cash
and cash equivalents, notes and accounts receivable, accounts receivable - related parties,
other receivables, refundable deposits, other financial assets and other restricted financial
assets.

- 48 -

Note 2: The balances include financial liabilities measured at amortized cost, which compriseshort-term loans, short-term notes payable, notes and accounts payable, accounts payable related parties, other payables, bonds payable and long-term loans, capital lease obligations,provisions, parts of other current liabilities, parts of other non-current liabilities and guarantee
deposits.
Note 3: The balances include the financial assets carried at cost.
Note 4: The balances include financial assets measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivable, accounts receivable - related parties, otherreceivables, refundable deposits and other restricted financial assets.
c. Financial risk management objectives and policies
The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and fuel prices, the Group has its operating costs stay within a specified range by using
appropriate financial hedging instruments and hedging percentages in accordance with the “Processing
Program of Derivative Financial Instrument Transactions” approved by the Group shareholders to
reduce the impact of market price changes 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 Group has a risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentage. This committee informs theGroup 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 Group is primarily exposed to the market risks of changes in foreign currency exchange rates,interest rates and fuel prices. The Group entered into derivative financial instruments to manage its
exposure to those related risk.
The Group enters into forward contracts, fuel option contracts, and interest swap contracts with fairvalues that are highly negatively correlated to the fair values of hedged items and evaluates thehedging effectiveness of these instruments periodically.
a) Foreign currency risk
The Group engages in ticket sales and purchase transactions which denominated in foreign
currency, which exposed to risks on change in exchange rates. The Group uses forward
contracts to manage risk within the scope of the Group’s policy of management exchange raterisk.
Sensitivity analysis
The Group was mainly exposed to the U.S. dollar.

- 49 -

The following details the Group’s sensitivity to increase and decrease in New Taiwan dollars(the functional currency) against the relevant foreign currencies. U.S. dollars increase/decrease
one dollar against New Taiwan dollars used when reporting foreign currency risk internally to
key management personnel and represents management’s assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis included only outstanding foreign
currency denominated monetary items and foreign currency forward contracts designated as
cash flow hedges, and adjusts their translation at the end of the reporting period for U.S. dollars
increase/decrease one dollar against New Taiwan dollars change in foreign currency rates.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be an increase in pre-tax profit for the three months ended March 31,
2019 of $2,113,130 thousand and a decrease in pre-tax profit for the three months ended March
31, 2018 of $7,658 thousand.
For the three months ended March 31, 2018
The Group’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the next year. Those transactions
are designated as cash flow hedges. When forecasted purchases actually take place, basis
adjustments are made to the initial carrying amounts of hedged items.
For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Group performs a qualitative assessment of theeffectiveness, and it is expected that the value of the foreign exchange forward contracts and thevalue of the corresponding hedged items will systematically change in the opposite direction in
response to movements in the underlying exchange rates.
The following table summarizes the information relating to the hedges of foreign currency risk.
March 31, 2019
Hedging Instruments
Cash flow hedge
Aircraft rentals - forward
exchange contracts

Currency

NTD/USD

Notional
AmountMaturity

Forward Rate

NTD1,567,777/
USD50,796

2019.9.12020.3.30

29.7-31.1

Line Item in
Balance Sheet

Financial assets forhedging/liabilities
for hedging

Carrying AmountAsset
Liability$

26,566$22

Hedge accounting is continued to be applied to the abovementioned hedging instruments. The
carrying amount of other equity which belongs to each hedging item (i.e. aircraft rentals
denominated in U.S. dollars and aircraft prepayments) are $26,544 thousand.
December 31, 2018
Hedging Instruments
Cash flow hedge
Aircraft rentals - forward
exchange contracts

Currency

NTD/USD

Notional
AmountMaturity

Forward Rate

NTD2,265,231/
USD13,620

2019.1.72019.12.26

28.3-30.9- 50 -

Line Item in
Balance Sheet

Financial assets forhedging/liabilities
for hedging

Carrying AmountAsset
Liability$

28,005$560

March 31, 2018
Hedging Instruments
Cash flow hedge
Aircraft rentals - forward
exchange contracts

Aircraft prepayments forward exchange contracts

Currency

NTD/USD

NTD/USD

Notional
AmountMaturity

Forward Rate

NTD2,173,270/
USD74,367

2018.4.92019.6.21

28.8-30

NTD1,224,490/
USD42,000

2018.6.152018.10.15

28.3-32

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging-Current/li
abilities forhedging-Non-curr
ent
Financial assets forhedging-Current/li
abilities forhedging-Non-curr
ent
Financial assets forhedging/liabilities
for hedging

$

360

$

66,345

-

5,121

8

28,416

For the three months ended March 31, 2019
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals

$

(902)

AmountReclassified toProfit and Lossand theAdjusted LineItem

$ 17,089(Note)

Note: Decrease in operating costs or foreign exchange loss.
For the three months ended March 31, 2018

Comprehensive Income

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeAmountReclassified toProfit and Lossand theAdjusted Line
Item

Cash flow hedge
Aircraft rentals
Aircraft prepayments$ (18,113)(36,561)$ 21,502-$ (54,674)$ 21,502(Note)

Note: Increase in operating costs
The amount of gains and losses on hedging instruments for the three months ended March 31,2018 reclassified from profit or loss to prepayments for equipment was $44,155 thousand.
b) Interest rate risk
The Group enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.
The Group was exposed to interest rate risk because entities in the Group borrowed funds atboth fixed and floating interest rates. The risk is managed by the Group by maintaining anappropriate mix of fixed and floating rate borrowings and using interest rate swap contracts andforward interest rate contracts.

- 51 -

The carrying amount of the Group’s financial assets and financial liabilities with exposure tointerest rates at the end of the reporting period were as follows.

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

March 31,2019

December 31,
2018

March 31,2018

$ 29,313,068$ 34,919,610$ 30,389,581

95,126,103

75,031,97884,720,218

Sensitivity analysis
The sensitivity analysis below was determined based on the Group’s exposure to interest rates
for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A one yard
(25 basis) point increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.
Had interest rates increased one yard (25 basis) points and had all other variables been held
constant, the Group’s pretax profit for the three months ended March 31, 2019 would havedecreased by $59,454 thousand.
Had interest rates increased one yard (25 basis) points and had all other variables been held
constant, the Group’s pretax profit for the three months ended March 31, 2018 would havedecreased by $52,950 thousand.
c) Other price risk
The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters into
fuel swaps contract to hedge against adverse risks on fuel price changes.
March 31, 2019
Hedging Instrument
Cash flow hedges - fuel options

Currency
USD

Notional
Amount
NTD6,922

Maturity

Forward Rate

2019.4.302019.12.31

USD55.00-78.45

Line Item in
Balance Sheet
Financial assets forhedging

Carrying AmountAsset
Liability
$

7,905

$

983

Hedge accounting is continued to be applied to the abovementioned hedging instruments. The
carrying amount of other equity which belongs to each hedging item (fuel payments) is $6,922
thousand.
December 31, 2018
Hedging Instrument
Cash flow hedges - fuel options

Currency
USD

Notional
Amount
NTD4,901

Maturity

Forward Rate

2019.1.312019.12.31

USD72-88

Maturity

Forward Rate

2018.4.302018.6.30

USD79.95-84.2

Line Item in
Balance Sheet
Financial assets forhedging

Carrying AmountAsset
Liability
$

4,901

$

-

March 31, 2018
Hedging Instrument
Cash flow hedges - fuel options

Currency
USD

Notional
Amount
NTD2,001- 52 -

Line Item in
Balance Sheet
Financial assets forhedging

Carrying AmountAsset
Liability
$

2,001

$

-

For the three months ended March 31, 2019
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedges - fuel options$

AmountReclassified toProfit and Lossand theAdjusted Line
Item

2,021

$

(927)

(Note)

Note：Increase in operating costs.
For the three months ended March 31, 2018
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedges - fuel options

$

2,001

AmountReclassified toProfit and Lossand theAdjusted Line
Item
$

-

Sensitivity analysis
The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.
For the Three Months Ended March 31
2019
2018
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%

$

-

$

656
-

$

8,999
-

$

6,997
(2,001)

2) Credit risk
The goal, policies and procedure of credit risk management are same as consolidated financial
statement in 2018. Related illustration can be referred to in Note 33.
3) Liquidity risk
The goal, policies and procedures of liquidity risk management are same as consolidated financial
statement in 2018. Related illustration can be referred in Note 33.

- 53 -

Liquidity and interest risk rate table
The following table shows the remaining contractual maturity analysis of the Group’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Group may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.
Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Group’s liquidity analysis for its derivative financial instruments
is also shown in the following table. The table was based on the undiscounted contractual net cash
inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted grosscash inflows and outflows on those derivatives that require gross settlement. When the amountpayable or receivable is not fixed, the amount disclosed has been determined by reference to theprojected interest rates as illustrated by yield curves at the end of the reporting period.
March 31, 2019
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative instruments
Bonds payable

Less than 1Year

1 to 5 Years

Over 5 Years

5,327,595$ 20,619,240$ 13,959,968

1.1894

8,153,919

40,524,247

18,634,643

1.07006,038,467
2,827,846

34,543,623
25,561,468

1,010,700$ 22,347,827$ 121,248,578$ 33,605,311

Less than 1Year

1 to 5 Years

Over 5 Years$$

2.7075$

December 31, 2018
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative instruments
Bonds payable

1.3104$

641,5243,024-

1.8105

14,853,360

42,143,959

20,810,464

0.1034
1.39052,000,517
239,138
5,999,321

30,835,449

1,051,418$ 23,733,860$ 72,982,432$ 21,861,882- 54 -

March 31, 2018
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative instruments
Bonds payable

1.1010Less than 1Year$1,476,920

1 to 5 Years

Over 5 Years$$

557,541-

1.1425

21,535,121

44,134,235

17,502,669

1.18001.39072,005,900
85,1344,515,960

5,121
21,677,898

1,013,907$ 29,619,035$ 66,374,795$ 18,516,576

34. RELATED-PARTY TRANSACTIONS
The transactions between subsidiaries (obtain business) relationship with China Airlines, Ltd., remaining
account balance, revenue and expense are eliminated when combined, which is not disclosed in the note.
Unless otherwise stated, the transactions between the merged company and other business related parties
are as follows:a. The related parties’ names and relationships
Name

Relationship with the Company

Kaohsiung Catering Services
Science Park Logistics
Asian Compressor Technology Services
China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
China Pacific Catering Services
China Pacific Laundry Services
Nordam Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
Others

Associate (become subsidiary in March 2018)
Associate (disposal in August 2017)
Associate (disposal in January 2018)
Associate
Associate
Associate
Associate
Joint venture investment
Joint venture investment
Joint venture investment
Joint venture investment
Director of the Company and major shareholder
Director, key management personnel, chairman,
general manager of the Group, spouse andsecond-degree relative

b. Operating income

Account Items
Other income

Related Party Type
Major shareholders of the Company
Associates
Joint venture investments- 55 -For the Three Months Ended
March 31
2019
2018
$
$
$

5,125
26
10,645$$$

10,58766
10,745

c. Purchases
For the Three Months Ended
March 312019
2018

Related Party Type
Major shareholders of the Company
Associates
Joint venture investments$ 11,324$ 107,241$ 457,683$ 23,865$ 172,100$ 483,688

December 31,
2018

March 31,2018

d. Accounts receivable - related parties (generated by operations)
March 31,2019

Related Party Type
Major shareholders of the Company
Joint venture investments

$

2,523
7,499

$

1,454
7,589

$

4,943
5,985

$

10,022

$

9,043

$

10,928The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accountreceivables - related parties. The payment period of such accounts was within 30 to 90 days, and there
are no overdue payments.
e. Accounts payable - related parties (generated by operations)
March 31,2019

Related Party Type
Major shareholders of the Company
Associates
Joint venture investments

$

5,273
51,231
465,702$ 522,206

December 31,
2018
$

3,368
54,948474,499

March 31,2018$

$ 532,815

10,79932,471
488,358$ 531,628

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.
f. Leases (operating leases)
The Company has signed a lease contract with the China Aviation Industry Development Foundation
for pilot trainings. The Company has leased the flight trainer and simulator, and the rental was
calculated based on use hours. As of March 31, 2019 and 2018, the rental paid was $54,831 thousand
and $23,865 thousand, respectively.
g. Endorsements and assurances
March 31, 2019
Total Amount Amount Used

December 31, 2018
Total Amount Amount Used

March 31, 2018
Total Amount Amount Used

$ 3,850,000
1,080,000$ 2,256,700-$ 3,850,000
1,080,000$ 2,339,700-$ 3,850,000
1,080,000$ 2,767,000
277,905

1,084,500

419,782

1,081,792

418,491

1,035,754

396,5292,000,000

834,4772,000,000

605,547

2,000,000-

The Company
Cal Park
Taiwan Air Cargo Terminal
Cal Hotel Co., Ltd.
Taigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

- 56 -

h. Compensation of key management personnel
For the Three Months Ended
March 3120192018
Short-term employee benefits
Post-employment benefits$ 13,619
875$ 14,769930$ 14,494$ 15,699

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

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

Property, plant and equipment
Restricted assets

March 31,2019

December 31,
2018

March 31,2018

$ 41,278,074
75,696,713
119,366$ 42,066,242
118,764$ 43,010,959
257,948$ 117,094,153$ 42,185,006$ 43,268,907

The above restricted assets included pledged time deposits and demand deposits restricted due to loan
agreements.

36. COMMITMENTS AND CONTINGENT LIABILITIESAs of March 31, 2018, the Group had commitments and contingent liabilities (except for those mentioned
in other notes) as follows:a. For operation needs, the board of directors of Mandarin Airlines resolved to enter into a contract to buy
six ATR72-600 aircraft, and the total list price of the six aircraft was $120,000 thousand. The expected
delivery period ranges from June 2018 to June 2020, as of December 31, 2018, two of the aircraft has
been handed over to the Company, and the total list price of the lefts four aircraft was $80,000
thousand, which has been paid in the amount of US$12,269 thousand (recognized as prepayments foraircraft).
b. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. The terminal
expansion and improvements and the equipment installation and upgrade in the Taiwan Taoyuan
International Airport cargo terminal and Kaohsiung cargo terminal were expected to be completed in
the first 10 years of the COP. This construction project was approved by TACT’s board of directors in
2003. TACT filed an application for a 10-year extension of the COP for the cargo terminals in the
Taiwan Taoyuan International Airport and Kaohsiung International Airport and received the approval
from the Taoyuan Airport Corporation and CAA in July 2013 and July 2015, respectively.

- 57 -

However, TACT filed an arbitration for the total amount of expenditure in 2012 to revise the total
amount to $6,840,000 thousand.
As of March 31, 2018, TACT had signed the following construction contracts with unrelated parties:

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan

Cargo Terminal Expansion Construction Consultant
Contract

Contract
Amount (VAT
Included)$ 552,285

As of March 31, 2019, the cumulated consultant service expense and construction equipment had
amounted to $481,776 thousand (VAT included) and $5,151,147 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,755 thousand (VAT included) and$5,151,086 thousand (VAT included) were reclassified to property, plant and equipment. The remaining
cumulative payments were recognized under construction in progress.
Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation when thechartered operating license expires.
TACT should pay royalties to Taoyuan Airport Corporation and the CAA during the charteredoperation period. The calculation is based on annual sales (including operating and nonoperating
revenue but excluding the rental revenue from specific districts), and Taoyuan Airport Corporation and
the CAA have the option to adjust the royalty rates every 3 years starting from the date of transfer of thechartered operation rights on the basis of actual revenue and expenditures. The current royalty rate is
6%.
c. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights on
this contract from the CAA. The contract is effective for 50 years (consisting of the development stage
and operating period) from the contract date. Three years before contract expiry date, CAL Park has thefirst option to renew the contract once with a 20-year extension.
CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.
CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow Article
No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies inInfrastructure Projects,” which states that rental calculation in the development stage should include theland value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of theamount based on the National Building Land Rental Standard plus land value tax, value-added tax andthe necessary maintenance fee.
During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.

- 58 -CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.
d. Taiwan Aircraft Maintenance Company contracted out Ronggong Engineering Co., Ltd. for aconstruction repair project. The contract expiration date is March 5, 2019, and the estimated total costof the project is $1.964 billion. As of March 31, 2019, $1,687,731 thousand was paid (recognized as
construction in progress).
e. The Company failed to mediate labor disputes with the labor union. After obtaining the right to strike,the labor union went on strike on February 8, 2019, and the flights resumed normal operation on
February 14, 2019. A total of 214 flights was cancelled and the accumulated revenue loss was about$500 million. The initial estimated compensation for customer losses and other expenditures were about$154 million (recognized as operating cost).

37. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe following information was aggregated by the foreign currencies other than functional currencies of thegroup entities and the exchange rates between foreign currencies and respective functional currencies weredisclosed. The significant assets and liabilities denominated in foreign currencies were as follows:(Foreign Currencies in Thousands)
March 31, 2019
Foreign
Currencies

Exchange Rate

Carrying
Amount416,293
16,831
184,1936,030,887
332,62730.864234.60213.92620.2782
4.5830$ 12,848,551
582,381
723,180
1,677,845
1,524,426

2,537,423
7,064
86,8476,440,161
159,584

30.864234.60213.92620.2782
4.583078,315,522
244,442
340,979
1,791,687
731,371

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 59 -

December 31, 2018
Foreign
Currencies

Exchange Rate

Carrying
Amount533,10920,519302,930
6,479,942
394,50330.7692
35.21133.92310.27784.4803$ 16,403,335
722,514
1,188,425
1,800,967
1,767,491

391,865
6,516
79,716
5,586,337
150,52930.7692
35.21133.92310.27784.4803

12,057,386
229,440
310,978
1,552,067
674,413

Exchange Rate

Carrying
Amount398,412
20,462
176,329
7,262,918
517,755

29.154535.84233.70920.27414.6425$ 11,615,502
733,422654,041
1,990,795
2,403,679

411,070
5,817
94,2535,370,355
169,508

29.154535.84233.70920.27414.6425

11,984,544
208,494
349,602
1,472,026
786,940

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY
March 31, 2018
Foreign
Currencies
Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

For the three months ended March 31, 2019 and 2018, net foreign exchange gains (losses) were $(26,900)
thousand and $19,591 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 andfunctional currencies of the group entities.

- 60 -

38. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided: None
2) Endorsements/guarantees provided: Table 1 (attached)
3) Marketable securities held: Table 2 (attached)4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None
5) Acquisitions of individual real estate at costs or price of at least NT$300 million or 20% of thepaid-in capital: None
6) Disposals of individual real estate at cost or prices of at least NT$300 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 3 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 4 (attached)9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 5 (attached)10) Derivative financial transactions (Notes 7 and 33)
b. Investments in mainland China: Table 6 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 7 (attached)

39. SEGMENT INFORMATION
Segment Information
The Company mainly engages in air transportation services for passengers, cargo and others. Its major
revenue-generating asset is its aircraft fleet, which is used jointly for passenger and cargo services. Thus,
the Company’s sole reportable segment is its flight segment. For operating segment reporting in the
consolidated financial statements, the reportable segment of the Company and its subsidiaries comprises theflight and the non-flight business departments. The accounting policy applied for reportable segments is
consistent with the policy mentioned in Note 4.

- 61 -

For the three months ended March 31, 2019 and 2018, financial information of segments is listed below:
For the Three Months Ended March 31, 2019
Air
Adjustments
Transportation
Othersand Write-offs
Operating revenue$ 39,635,656$

2,640,801$(1,871,109)

Operation profit and loss
Interest revenue
Investment income accounted for using
the equity method
Revenue
Financial costs
Expenses$$299,182$(31,340)

493,631$ 40,405,348$$$ 151,022,614$ 11,157,966$-

42,361$ 162,180,580
2,297,133
131,141,985

Total assets$ 295,619,698
For the Three Months Ended March 31, 2018
Air
Adjustments
Transportation
Othersand Write-offs

Operating revenue$ 39,085,225$

2,226,413$(1,576,611)

Operation profit and loss
Interest revenue
Investment income accounted for using
the equity method
Revenue
Financial costs
Expenses$$

231,651$-

189,274

Total$ 39,735,027$

420,925
59,616
81,715130,442(315,552)(116,535)

Gain before income tax
Identifiable assets
Investments accounted for using theequity method
Assets

761,473
96,95569,90455,366(875,831)(65,506)

Gain before income tax
Identifiable assets
Investments accounted for using theequity method
AssetsTotal$$ 152,037,256$ 10,579,420$-

260,611$ 162,616,676
2,279,493
63,786,207

Total assets$ 228,682,376- 62 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENTS/GUARANTEES PROVIDEDFOR THE THREE MONTHS ENDED MARCH 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counter-party
Endorsement/
Guarantee
Provider

No.

0

Name

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

Nature of Relationship100% subsidiary
54% subsidiary
100% subsidiary by direct
and indirect holdings
100% subsidiary

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

ActualBorrowingAmount$ 11,355,538
11,355,538
11,355,538$ 3,850,000
1,080,000
1,084,500$ 3,850,000
1,080,000
1,084,500$ 2,256,700
419,782

11,355,538

2,000,000

2,000,000

834,477

Note 1:

Based on the Group’s guidelines, the maximum amount of guarantee to an individual counter-party is up to 20% of the Group’s shareholders’ equity.

Note 2:

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

- 63 -

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant, Net Equity ofor Equipment
the Latest
Financial
Statement (%)$

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given by Parent
Given byGiven on Behalf
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China

-

6.78
1.90
1.91

$ 28,388,844
28,388,844
28,388,844

Yes
Yes
Yes

No
No
No

No
No
No

-

3.52

28,388,844

Yes

No

No

TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDMARCH 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name

Marketable Securities Type and Issuer/Name

Relationshipwith theHoldingCompany

China Airlines (the “Company”) Shares
Everest Investment Holdings Ltd. - ordinary shares-

Everest Investment Holdings Ltd. - preferred shares-

Chung Hua Express Co.

-

Jardine Air Terminal Services
The Grand Hi Lai Hotel-

Mandarin Airlines

Cal-Asia Investment

Sabre Travel Network (Taiwan)

Taiwan Airport Services

SharesChina Airlines

Financial assets at fair value through other comprehensive
income - non-current
Financial assets at fair value through other comprehensive
income - non-current
Financial assets at fair value through other comprehensive
income - non-current
Financial assets at fair value through profit or loss - current
Financial assets at fair value through profit or loss - current

Parent company Financial assets at fair value through other comprehensive
income - non-current

Shares/Units

1,359,368$$

63,341

Note

57,583

13.59

Note 1

135,937

5,758-

1,100,000

21,527

11.00

21,527

12,000,000
4,021

-

15.00
0.02

-

2,074,628

20,456-

20,456--

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

Financial assets at fair value through profit or loss - current
Financial assets at fair value through other comprehensive
income - non-current-

65,4472.59
5.45

65,447Note 2
Note 2

Beneficial certificatesFranklin Templeton SinoAm Money Market Fund-

Financial assets at fair value through profit or loss - current

5,910,768

61,087-61,087-

SharesTransAsia Airways-

Financial assets at fair value through profit or loss - current

2,277,786

-

-

-

-

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

787,007730,495

9,293
8,101

-

9,293
8,101

-

Parent company Financial assets at fair value through other comprehensive
income - non-current

814,152

8,028

-

8,028

-

349,523

4,728

-

4,728

-

Beneficial certificatesFuh Hwa Global Short-term Income FundFuh Hwa Emerging Market Short-term Income Fund
Dynasty Aerotech International
Corp.

Financial Statement AccountMarch 31, 2019
Percentage
Market Value
Carryingofor Net Asset
AmountOwnership
Value
(%)

SharesChina Airlines

Beneficial certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit or loss - current

0.40(Continued)- 64 -

Holding Company Name

Kaohsiung Catering Services

Marketable Securities Type and Issuer/Name

Beneficial certificates
Prudential Financial Money Market Fund
Prudential Financial Return Fund

Relationshipwith theHoldingCompany-

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

March 31, 2019
Percentage Market Value
Carryingofor Net Asset
AmountOwnership
Value
(%)

Shares/Units

5,407,832
4,493,628$

85,39070,000-$85,39070,000Note-

Note 1: The subsidiary’s net asset value was $61,620 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2018.
Note 2: The Company does not issue shares because it is a limited company.
Note 3: The table only lists financial assets that are IFRS 9 regulated.
(Concluded)- 65 -TABLE 3

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 THREE MONTHS ENDED MARCH 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

Taiwan Air Cargo Terminal
Taiwan Airport Services
Mandarin Airlines
Taoyuan International Airport Service
Kaohsiung Catering Services
China Pacific Catering Services

Nature of Relationship

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Equity-method investee

Purchase/
Sale

Amount% of
Total

Purchase
Purchase
Sale
Purchase
Purchase
Purchase$ 118,419
107,880(547,138)
288,384
138,729
429,9270.37
0.33(1.56)
0.89
0.43
1.33

- 66 -

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

Abnormal Transaction
Payment Terms
30 days
40 days
2 months
40 days
60 days
90 days

Unit Price$--$ (20,755)(72,809)410,486(356,826)(86,998)(446,655)(0.79)(2.76)
4.43(13.54)(3.30)(16.95)Note-TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALMARCH 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 410,486

Note

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines

Parent company

263,105

China Pacific Catering Services

China Airlines

Parent company

Taoyuan International Airport Service

China Airlines

Parent company

Note:

Amount$Action Taken

Amounts Received
in Subsequent
PeriodAllowance for
Bad Debts--$ 410,486

Note

-

-

260,629-446,655

3.81

-

-

159,398-

356,826

3.20

-

-

194,774-

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

- 67 -$-TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE THREE MONTHS ENDED MARCH 31, 2019
(In Thousands of New Taiwan Dollars/U.S. Dollars/Hong Kong Dollars/Japanese Yen)

Investor Company

China Airlines, Ltd.

Investee Company

Cal Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International

Location

Main Businesses and Products

Taoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, U.S.A.

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel
services
China Pacific Catering Services
Taoyuan, Taiwan
In-flight catering
Taoyuan International Airport Services Taoyuan, Taiwan
Airport services
Cal-Asia Investment
Territory of the British Virgin Islands General investment
Sabre Travel Network (Taiwan)
Taipei, Taiwan
Sale and maintenance of hardware andsoftware
China Aircraft Service
Hong Kong International Airport
Airport services
Taiwan Airport Services
Taipei, Taiwan
Airport services
Kaohsiung Catering Services
Kaohsiung, Taiwan
In-flight catering
Cal Hotel Co., Ltd
Taoyuan, Taiwan
Hotel business
China Pacific Laundry Services
Taoyuan, Taiwan
Cleaning and leasing of the towel of airlines,
hotels, restaurants and health clubs
Dynasty Aerotech International Corp. Taoyuan, Taiwan
Cleaning of aircraft and maintenance ofmachine and equipment
Yestrip
Taipei, Taiwan
Travel businessDynasty Holidays
Tokyo, Japan
Travel business
Global Sky Express
Taipei, Taiwan
Forwarding and storage of air cargo
Tigerair Taiwan Co., Ltd.
Taipei, Taiwan
Air transportation and maintenance of aircraft
Taiwan Aircraft Maintenance andTaoyuan, Taiwan
Aircraft maintenanceEngineering Co., Ltd.
NORDAM Asia Ltd.
Taoyuan, Taiwan
Composite repair and manufacturing business

Balance as of March 31, 2019
Number ofPercentage ofCarrying
SharesOwnership
AmountNet Income(Loss) of theInvestee$

1,500,000
2,042,368
1,350,000
US$ 26,145$

1,500,000
2,042,368
1,350,000
US$ 26,145

150,000,000
188,154,025
135,000,000
2,614,500

100.0093.99
54.00
100.00$439,110147,000
US$
7,172
52,200439,110147,000
US$
7,172
52,20043,911,000
34,300,000
7,172,346
13,021,042

51.00
49.00
100.00
93.93

HK$

HK$

58,00012,289383,846
465,000
137,500

28,400,000
20,626,644
21,494,637
46,500,000
13,750,000

77,2709,556
7,515
27,058
9,318

Note 4
Notes 1 and 4
Note 2858,272776,642
527,888495,372

104,147
42,9056,920
43,887

53,11521,024
6,920
41,223

-

20.00
47.35
53.67
100.0055.00

499,664
289,722
696,831453,538
169,617

9,248
41,30670,189
1,369
4,938

1,850
19,55834,013(7,701)
2,716

Note 5Note 4-

77,270100.0090,076

978974

Notes 1 and 4

26,265
20,4002,500
1,600,000
1,350,000

1,600,000
160
250,000
180,000,000
135,000,000

100.00
20.00
25.00
90.00
100.0026,663
10,036
7,353
2,077,505
1,090,486

(293)
(971)
1,429
299,166(37,652)

(283)
(499)
357
269,250(37,652)

2,450

2,450

245,000

49.00

2,358

-

-

200,000
11,658200,000
11,65820,000,000
469,755

10.00
1.08

230,834
6,590

299,166
41,30629,917446-

77,270JPY

Air transportation and maintenance of aircraft
Airport services

26,2658,000
2,500
1,648,387
1,350,000

JPY

1,517,000
1,208,941
1,560,303
1,280,178

Note(2,273) $7,983
50,106
9,318

58,00012,289383,846
465,000
137,500$

Investment
Income (Loss)

Note 4Note 4-

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Cal-Asia Investment

Eastern United International Logistics Hong Kong

Forwarding and storage of air cargo

HK$

3,329

HK$

3,329

1,050,000

35.00

46,873

4,735

1,657

-

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

US$

5,877

-

100.00402,998

5,142

5,142

Note 3Kaohsiung, Taiwan

Catering business

10,2001,020,000

51.00

7,870

-

-

Kaohsiung Catering Services Delica International Co., Ltd.

Taipei, Taiwan
Taipei, Taiwan

Investment Amount
December 31,
March 31, 20192018

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:

Investee acquired by merger.

Note 5:Difference cause by acquisition.

10,200- 68 -TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE THREE MONTHS ENDED MARCH 31, 2019
(In Thousands of New Taiwan Dollars/Renminbi/U.S. Dollars)

China Airlines

Investee Company Name

Main Businesses andProducts

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan
Capitalas ofJanuary 1, 2019

Investment Flows

Outflow

Inflow

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

Forwarding and storage $ 1,166,269
of air cargo(RMB 254,480)

Indirect(Note 1)$
129,197 $(US$4,186)

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

Forwarding and storage64,161of air cargo(RMB 14,000)

Indirect(Note 1)

60,106
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,564,506
maintenance services (US$ 83,090)

Indirect(Note 1)

66,3952,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Indirect(Note 1)

19,630
636)

-

(US$

(US$

359,969
11,663)

Accumulated
Outflow ofInvestment
from Taiwan
as ofMarch 31, 2019

-

$

-

60,10623,561
1,947) (RMB 5,175)

14.00

(US$

66,3952,151)

-

2.589

-

-

-

(US$

19,630
636)

-

5.45

-

65,447(RMB 14,281)

-

(US$

-

Limit on Investment$275,328 (US$8,920)$667,900 (Note 3)$35,891,508 (Note 4)

Investment
Gain (Loss)

14.00

-

Investment Amounts
Authorized by Investment Commission,
MOEA

Accumulated
Carrying
InwardAmount as of Remittance ofMarch 31, 2019 Earnings as ofMarch 31, 2019$
129,197 $15,227(US$
4,186) (RMB 3,344)-

Accumulated Investment in Mainland
China as of March 31, 2019

% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee$(RMB

2,008 $
229,308 $468) (RMB 50,035) (US$86,4742,802)(Note 2)

(RMB

3,130
122,592724) (RMB 26,750) (US$27,016875)(Note 2)

(Continued)- 69 -

Taiwan Airport Services

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2019

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

Forwarding and storage $ 1,166,269
of air cargo(RMB 254,480)

Indirect(Note 5)$
124,023 $(US$
4,018)

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

Forwarding and storage64,161of air cargo(RMB 14,000)

Indirect(Note 5)

(US$

Remittance of Funds

Outward59,4681,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof March 31,
2019

Inward

-

$

-

-

$
124,023 $
15,227(US$
4,018) (RMB 3,344)

14

59,46823,561
1,927) (RMB 5,175)

14

(US$

Accumulated Outward
Remittance for Investment in
Mainland China as of March 31, 2019

Investment Amounts Authorized by
Investment Commission, MOEA

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

$183,491 (US$5,945)$183,491 (US$5,945)$367,124 (Note 4)

Net Income(Loss) of theInvestee% Ownershipof Direct orIndirect
Investment

Accumulated
Carrying
Repatriation of
Investment
Amount as ofInvestment
Income (Loss)
March 31, 2019 Income as ofMarch 31, 2019$
(RMB

2,132 $
227,899 $117,479468) (RMB 49,728) (US$3,806)(RMB

3,299
122,644724) (RMB 26,761) (US$43,414
1,407)

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.
Note 2: As of March 31, 2019, the inward remittance of earnings amounted to US$2,801,749 and US$875,330.
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 in return, invested in a company located in mainland China.
Note 6: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates of refer for the reporting period.
(Concluded)- 70 -TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIESFOR THE THREE MONTHS ENDED MARCH 31, 2019
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Financial Statement Account0

China Airlines, Ltd.

Mandarin Airlines
Taoyuan International Airport Service
Taiwan Airport Services
Taiwan Air Cargo Terminal
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Service
Mandarin Airlines
Kaohsiung Catering Services

a
a
a
a
a
a
a
a
a

Passenger revenue
Terminal and landing fees
Terminal and landing fees
Other operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties
Bonds payable - non-current
Passenger service cost

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.

b

2

Mandarin Airlines

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

3

Taoyuan International Airport Services

4

AmountTransaction Criteria% of Total
Consolidated
Total Revenue
or Assets$ 476,708
288,384
107,880
118,419
410,486
263,105
356,826
250,000
138,729

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

1.18
0.71
0.27
0.29
0.14
0.09
0.12
0.08
0.34

Sales revenue

118,419

The same as ordinary transactions

0.29

b
b
b
b

Flight operation costs
Accounts receivable - related parties
Financial assets at amortized cost
Notes and accounts payable - related parties

476,708
263,105
250,000
410,486

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

1.18
0.09
0.08
0.14

China Airlines, Ltd.
China Airlines, Ltd.

bb

Airport service revenue
Accounts receivable - related parties

288,384
356,826

The same as ordinary transactions
The same as ordinary transactions

0.71
0.12

Taiwan Airport Services

China Airlines, Ltd.

b

Operating revenue

107,880

The same as ordinary transactions

0.27

5

Kaohsiung Catering Services

China Airlines, Ltd.

b

Operating revenue

138,729

The same as ordinary transactions

0.34

6

CAL Park

Cal Hotel Co., Ltd.

c

Operating revenue

114,281

The same as ordinary transactions

0.28

7

Cal Hotel Co., Ltd.

CAL ParkcOther operating expense

114,281

The same as ordinary transactions

0.28

Note 1: Three kinds of business relationships between China Airlines, Ltd. and its subsidiaries were as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were written off in the consolidated financial statements.
Note 3: The Company only discloses transaction amounts or balances of more than $100,000 thousand.

- 71 -