China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theThree Months Ended March 31, 2020 and 2019 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, 2020 and 2019, 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$12,297,166 thousand and NT$13,660,335 thousand, which constituted 4.17%
and 4.62% of the consolidated total assets as of March 31, 2020 and 2019, and the total revenue
was NT$1,619,077 thousand and NT$2,515,246 thousand, which constituted 4.97% and 6.23% of
the consolidated total revenue for the three-month periods ended March 31, 2020 and 2019.
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 12 and 13 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, 2020 and 2019, the combined total assets ofthese non-significant subsidiaries were NT$22,565,190 thousand and NT$23,014,896 thousand,respectively, representing 7.64% and 7.79%, respectively, of the consolidated total assets, and the
combined total liabilities of these non-significant subsidiaries were NT$11,514,855 thousand andNT$11,653,856 thousand, respectively, representing 4.81% and 4.94%, respectively, of theconsolidated total liabilities; for the three-month periods ended March 31, 2020 and 2019, the-1-amounts of the combined comprehensive income of these non-significant subsidiaries were
NT$(103,781) thousand and NT$225,704 thousand, respectively, representing 2.50% and(106.76%) respectively, of the consolidated total comprehensive income. As of March 31, 2020
and 2019, the aforementioned investments accounted for using the equity method were
NT$2,173,929 thousand and NT$2,297,133 thousand, respectively; and for the three-month periods
ended March 31, 2020 and 2019, the amounts of the Group’s share of the profit of suchinvestments accounted for using the equity method were NT$(24,494) thousand and NT$69,904
thousand, respectively.
Qualified Conclusion
Based on our reviews, except for 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, 2020 and 2019 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 7, 2020

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, 2020
(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 31)
Financial assets at amortized cost - current (Notes 4 and 9)
Financial assets for hedging - current (Notes 4 and 31)
Notes and accounts receivable, net (Notes 4, 5, 10 and 31)
Notes and accounts receivable - related parties (Note 32)
Other receivables (Note 31)
Current tax assets (Notes 4 and 27)
Inventories, net (Notes 4 and 11)
Other assets - current (Note 17)

March 31, 2019
(Reviewed)
Amount%$ 39,600,960
567,970
1,724,004
12,473
7,046,769
7,684
689,745
64,306
7,941,066
1,872,669

13
1
2
3
1

$ 28,459,528
512,192
2,355,095
9,626
8,520,834
10,348774,206
54,6898,470,113
2,655,711

10
1
3
3
1

$ 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

59,527,646

20

51,822,342

18

45,785,380

15

210,925
207,968
2,173,929
142,531,989
68,591,872
2,075,000
1,151,247
5,288,631
13,476,986

1
48
23
1
2
5

209,221
105,586
2,223,793
145,886,971
71,033,617
2,075,068
1,182,692
5,337,626
13,171,063

1
50
24
1
2
4

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

235,708,547

80

241,225,637

82

249,834,318

85$ 295,236,193

100$ 293,047,979

100$ 295,619,698

100

Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8)
Financial assets at amortized cost - non-current (Notes 4 and 9)
Investments accounted for using the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 5, 14 and 33)
Right-of-use assets (Notes 4, 20 and 33)
Investment properties (Notes 4 and 15)
Other intangible assets (Notes 4 and 16)
Deferred income tax asset (Notes 4, 5 and 27)
Other assets - non-current (Notes 17, 20, 31, 33 and 34)
Total noncurrent assets
TOTAL

December 31, 2019
(Audited)
Amount%LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term debts (Note 18)
Short-term bills payable (Note 18)
Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 31)
Financial liabilities for hedging - current (Notes 4, 20 and 31)
Notes and accounts payable (Note 31)
Notes and accounts payable - related parties (Note 32)
Contract liabilities - current (Notes 4, 5 and 22)
Other payables (Notes 21 and 31)
Current tax liabilities (Notes 4 and 27)
Provisions - current (Notes 4, 23 and 31)
Lease liabilities - current (Notes 4 and 20)
Bonds payable and put options of convertible bonds - current portion (Notes 4, 19 and 31)
Loans and debts - current portion (Notes 18, 31 and 33)
Other current liabilities (Note 31)$

380,000
11,7498,618,506
1,495,606
542,015
21,060,773
13,187,972
374,178
360,393
2,340,873
10,000,000
14,148,892
3,830,570

3
1
7
5
1
3
5
1

28

76,351,527

40,472,454
16,300,000
60,337,972
2,326,234
11,057,817
397,517
15,665,569
9,218,089
472,647

14
6
20
1
4
5
3
-

Total non-current liabilities

156,248,299

Total liabilities

Total current liabilities
NON-CURRENT LIABILITIESFinancial liabilities for hedging - non-current (Notes 4, 20 and 31)
Bonds payable - non-current (Notes 4, 19 and 31)
Loans and debts - non-current (Notes 18, 31 and 33)
Contract liabilities - non-current (Notes 4 and 22)
Provisions - non-current (Notes 4, 23 and 31)
Deferred tax liabilities (Notes 4 and 27)
Lease liabilities - non-current (Notes 4 and 20)
Accrued pension costs (Notes 4, 5 and 24)
Other noncurrent liabilities (Note 31)

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 19 and 25)
Share capital
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficits)
Total retained earnings
Other equity
Treasury shares
Total equity attributable to owners of the Company
NON-CONTROLLING INTERESTS (Note 25)
Total equity
TOTAL

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 7, 2020)-3-

8,385,000
8,788,145
5,075
8,769,419
2,171,820
370,919
11,071,797
9,236,031
341,136
343,6452,549,104
13,022,470
15,941,499
1,997,256

3
3
3
1
4
3
1
4
5
1

82,993,316$$

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

26

64,730,022

22

42,420,205
22,052,625
53,514,891
2,236,311
10,011,464
557,142
15,801,724
9,435,035
534,938

15
8
18
1
3
5
3
-

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
-

53

156,564,335

53

171,070,496

58

239,241,615

81

232,915,862

79

235,800,518

80

54,209,846
2,484,998

19
1

54,209,846
2,488,907

19
1

54,209,846
1,241,214

18-

466,416
12,967(5,552,292)(5,072,909)
862,386(30,875)

(2)
(2)
-

466,416
12,967(1,777,225)(1,297,842)
1,196,233(43,372)-

351,923
118,810901,224
1,371,957(1,957)(43,372)1
1-

52,453,446

18

56,553,772

20

56,777,688

19

3,541,132

1

3,578,345

1

3,041,492

1

55,994,578

19

60,132,117

21

59,819,180

20$ 295,236,193

100$ 293,047,979

100$ 295,619,698

100

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
2020
2019
Amount%Amount%REVENUE (Notes 4, 26 and 32)$ 32,557,130

100$ 40,405,348

100

32,336,262

99

36,191,909

90

220,8681

4,213,439

10

OPERATING EXPENSES (Notes 4, 24 and 26)

3,191,724

10

3,451,966

8

OPERATING PROFIT(2,970,856)(9)761,4732

163,630(154,090)(820,672)(3)

153,256(66,441)(875,831)(2)(24,494)-

69,904-(835,626)(3)(719,112)(2)

PROFIT (LOSS) BEFORE INCOME TAX(3,806,482)(12)

42,361-

INCOME TAX EXPENSE (Notes 4 and 27)

4,083

-

189,237

1

NET INCOME (LOSS) FOR THE PERIOD(3,810,565)(12)(146,876)(1)

19,904

-

-

-

2,569

-

16,906-(4,105)18,368-(3,424)
13,482(Continued)

COSTS (Notes 4, 11, 16, 20, 23, 24, 26 and 32)
GROSS PROFITNON-OPERATING INCOME AND EXPENSES
Other income (Note 26)
Other gains and losses (Notes 14 and 26)
Finance costs (Notes 26 and 30)
Share of the profit of associates and joint ventures(Note 13)
Total non-operating income and expenses

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Gain 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 27)

-4-

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
2020
2019
Amount%Amount%Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 25)
Loss on hedging instruments not subject to basis
adjustment (Notes 4, 20, 25 and 31)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 27)

23,676-(1)(123,745)-

88,805(352,196)(1)

22,043(78,026)-

Other comprehensive loss for the period, net ofincome tax(333,828)(1)(64,544)-TOTAL COMPREHENSIVE INCOME (LOSS) FOR
THE PERIOD$ (4,144,393)

(13)

$

(211,420)(1)

NET INCOME (LOSS) ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests$ (3,773,333)(37,232)

(12)
-

$

(243,704)
96,828-$ (3,810,565)

(12)

$

(146,876)-$ (4,107,180)(37,213)

(13)
-

$

(312,357)
100,937(1)-$ (4,144,393)

(13)

$

(211,420)(1)

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

EARNINGS (LOSSES) PER SHARE (NEW TAIWANDOLLARS; Note 28)
Basic
Diluted$(18,063)-(422,938)$$(0.70)(0.70)$$$(0.04)(0.04)

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 7, 2020)-5-(Concluded)

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

Capital Stock

Capital Surplus

Legal Reserve

Equity Attributable to Owners of the Company
Other Equity
Unrealized
Gain onExchange
Financial Assets
UnappropriDifferences on
at Fair Value
ated Earnings
Translating
Through Other(Accumulated
ForeignComprehensive
Special Reserve
Deficits)
Operations
Income$ 54,209,846$ 1,241,214$$

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

Other comprehensive income (loss) for the three months ended
March 31, 2019, net of income tax-

Total comprehensive income (loss) for the three months ended
March 31, 2019
Loss of control of subsidiaries

BALANCE AT JANUARY 1, 2019$$

$ 57,081,572$ 2,965,512$ 60,047,084

-

-

-

-

(243,704)

96,828(146,876)

-

-

-

-

16,35913,482(98,494)-(68,653)

4,109(64,544)

-

-

-

-

(243,704)

16,35913,482(98,494)-(312,357)

100,937(211,420)

-

-

-

-

-

8,368

105

-

-

8,473

(24,957)(16,484)

BALANCE AT MARCH 31, 2019

$ 54,209,846$ 1,241,214$

351,923$

118,810$901,224$

15,063$56,206$(73,226)$(43,372)$ 56,777,688$ 3,041,492$ 59,819,180

BALANCE AT JANUARY 1, 2020

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

466,416$

12,967$ (1,777,225)$(54,707)$107,262$ 1,143,678$(43,372)$ 56,553,772$ 3,578,345$ 60,132,117

Net loss for the three months ended March 31, 2020

-

-

-

-

(3,773,333)

-

-

-

-

(3,773,333)(37,232)(3,810,565)

Other comprehensive income (loss) for the three months ended
March 31, 2020, net of income tax

-

-

-

-

-

(13,686)

2,445(322,606)-(333,847)

19(333,828)

Total comprehensive income (loss) for the three months ended
March 31, 2020

-

-

-

-

(3,773,333)(13,686)

2,445(322,606)-(4,107,180)(37,213)(4,144,393)

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

12,497

6,854

-

6,854

$ 54,209,846$ 2,484,998

12,967$ (5,552,292)(30,875)$ 52,453,446$ 3,541,132$ 55,994,578

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated May 7, 2020)-6-(68,393)$

109,707$

25,268(43,372)(243,704)$

42,619Total Equity

-

$

$

Non-controlling
Interests-

466,416(9,664)

Total$ 1,144,928$$

Treasury Stock
Held by
Subsidiaries

118,810BALANCE AT MARCH 31, 2020

351,923

Gain (Loss) on
Hedging
Instruments

821,072$

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
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES(Loss) income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Expected credit loss recognized on trade receivables
Net gain on fair value changes of financial assets and liabilities held
for trading
Interest income
Share of loss (profit) of associates and joint ventures
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
Net loss on foreign currency exchange
Finance costs
Recognition of provisions
OthersChanges in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities classified as at fair value through profit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash (used in) generated from operations
Interest received
Interest paid
Income tax paid
Net cash (used in) generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of amortized cost financial assets
Disposal of amortized cost financial assets-7-$ (3,806,482)$

42,361

8,167,598
49,902
172

8,206,346
49,842
8,382(3,296)(88,300)
24,494(5,121)
220,263
11,053820,672
1,443,036
16,860(11,140)(96,955)(69,904)(1,349)10,462(7,656)
307,608
62,929875,831
1,061,129-(52,608)(6,674)
1,413,470
709,392
42,345
848,941
833,409496,061(881,463)(3,678,880)(9,899,054)(469,834)(1,889,113)(216,946)(20,271)(5,920,374)
94,316(893,895)(18,968)(28,863)(221)
859,879(107,342)
88,887(240,529)
906,515(556,339)
46,360(723,887)(809,885)(480,795)
303,824(155,688)
5,797
9,545,599
104,346(910,199)(35,387)(6,738,921)

8,704,359(73,012)602,195(61,728)
2,677,338(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 312020
2019
Proceeds from disposal of 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 (Note 29)
Net cash (used in) generated from investing activities$(258,811)
6,946(167,653)
13,382(1,976,671)(18,457)(34,483)-$

35,692(631,083)
10,851(51,233)
38,620(1,568,331)(21,786)(6,844)(17,413)(1,906,564)

404,083

7,405,000
8,788,145(2,750,000)
13,582,703(4,367,016)(2,870,281)
13,809(54,935)
6,854

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

19,754,279(10,743,335)

32,63849,749NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

11,141,432(1,585,144)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD

28,459,528

24,937,537

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$ 39,600,960$ 23,352,393

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term debts
Increase in short-term bills payable
Repayments of bonds payable
Proceeds from long-term debts
Repayments of long-term debts
Repayments of the principal portion of lease liabilities
Proceeds of guarantee deposits received
Refund from guarantee deposits received
Proceeds from disposal of treasury shares
Net cash generated from (used in) 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 7, 2020)-8-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(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, 2020, December 31, 2019 andMarch 31, 2019, CADF and NDF held a combined 44.03% 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 7, 2020.

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
The application of the IFRSs endorsed and issued into effect by the FSC did not have material impact
on the Group’s accounting policies.
b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date
Announced by IASB (Note)

New IFRSs
Amendments to IFRS 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 “Classification of Liabilities as Current or
Non-current”
Note:

To be determined by IASB
January 1, 2021
January 1, 2022

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

-9-

The future initial application of the above new IFRSs in issue but not yet endorsed and issued into
effect by the FSC is not expected to have material impact on the Group’s accounting policies. As of thedate the consolidated financial statements were authorized for issue, the Group is continuously
assessing the possible impact that the application of other standards and interpretations will have on theGroup’s financial position and financial performance and will disclose the relevant impact when theassessment is completed.

4. SIGNIFICANT ACCOUNTING POLICIESStatement 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 Preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial
instruments which are measured at fair value.
The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fairvalue measurement inputs are observable and based on the significance of the inputs to the fair value
measurement in its entirety, are described as follows:
1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and3) Level 3 inputs are unobservable inputs for an asset or liability.
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.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
The critical accounting judgments and key sources of estimation uncertainty for these interim consolidated
financial statements are the same as those applied for the consolidated financial statements for the year
ended December 31, 2019.

- 10 -

6. CASH AND CASH EQUIVALENTS

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

March 31,2020

December 31,
2019

30,76015,916,090$$

483,951
7,206,938

March 31,2019$

398,043
9,310,641

11,246,906
12,407,204

16,565,821
4,202,818

12,533,288
1,110,421$ 39,600,960$ 28,459,528$ 23,352,393

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 31,2020

December 31,
2019

March 31,2019

0.00%-1.90%

0.00%-1.90%

0.00%-1.90%

0.34%-3.15%
0.39%-3.55%

0.59%-3.55%
0.47%-0.70%

0.59%-3.20%
0.55%-0.63%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)March 31,2020

December 31,
2019

March 31,2019

Financial assets - current
Financial assets mandatorily classified at FVTPL
Derivative financial instruments (not underhedge accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficial certificates

$

30

$

434

$

7,216

567,940

511,758

238,600$ 567,970$ 512,192$ 245,816$$$

Financial liabilities - current
Financial liabilities held for trading
Derivative financial instruments (not underhedge accounting)Foreign exchange forward contracts- 11 -

5,075

11,749-

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

2020.4.23-2020.7.31

NTD271,903/USD9,000

NTD/USD

2020.1.15-2020.7.31

NTD570,571/USD19,000

NTD/USD

2019.4.26-2019.10.29

NTD246,914/USD8,000

March 31, 2020
Buy forward contracts
December 31, 2019
Buy forward contracts
March 31, 2019
Buy forward contracts

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Investments in Equity Instruments
March 31,2020

December 31,
2019

March 31,2019

$ 182,109$ 182,356$ 128,788

28,816

26,865

21,527$ 210,925$ 209,221$ 150,315

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
March 31,2020

December 31,
2019

March 31,2019

$ 1,724,004$ 2,355,095$ 1,022,871

$

$

$

Current
Time deposits with original maturities of morethan 3 months
Non-current
Time deposits with original maturities of morethan 1 year

- 12 -

207,968

105,586-

The interest rates for time deposits with original maturities of more than 3 months ranged from 0.40% to
2.75%, from 0.60% to 2.75% and from 0.40% to 3.12% as of March 31, 2020, December 31, 2019 andMarch 31, 2019.

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable

March 31,2020

December 31,
2019

March 31,
2019

$

$

$

11,401

299,245415,630

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

7,254,151(218,783)
7,035,368

8,440,254(218,665)
8,221,589

8,952,971(234,886)
8,718,085$ 7,046,769$ 8,520,834$ 9,133,715

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.

- 13 -

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.
March 31, 2020
Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.07%

0.39%

7.67%

14.50%

99.27%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 5,648,200$ 1,251,611(3,834)(4,841)

Amortized cost

$ 5,644,366$ 1,246,770$

Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.12%

0.15%

6.16%

15.25%

97.18%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 6,705,662$ 1,332,640(8,123)(2,019)Amortized cost

$ 6,697,539$ 1,330,621$

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$

46,419$(3,562)42,857

116,938$(16,956)$

99,982

Total

190,983$ 7,254,151(189,590)(218,783)

1,393$ 7,035,368$

December 31, 2019$97,700$(6,021)
91,679113,716$(17,340)$

96,376

Total

190,536$ 8,440,254(185,162)(218,665)

5,374$ 8,221,589$

March 31, 2019$

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$

The movements of the loss allowance of trade receivables were as follows:
For the Three Months Ended
March 312020
2019
Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses
Disposal of a subsidiary$ 218,665
172
(55)
1
-

$ 227,306
8,382
(785)
(17)

Balance at March 31$ 218,783$ 234,886- 14 -

11. INVENTORIES

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersMarch 31,2020

December 31,
2019

March 31,2019

$ 7,217,977
602,247
96,58524,257$ 7,578,125
571,601
283,933
36,454$ 7,455,640
556,688598,592
24,359$ 7,941,066$ 8,470,113$ 8,635,279

The operating costs recognized for the three months ended March 31, 2020 and 2019 included losses frominventory write-downs of $139,463 thousand and $262,974 thousand, respectively.

12. 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.
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,
2020
2019
2019

Air transportation
Aircraft maintenance

77
100

77
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
Airport 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
49
48
25
100
100
100

59
54
49
48
25
100
100
100

59
54
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, 2020 and 2019 of these subsidiaries was reported according to information that was notindependently reviewed except for that of Mandarin Airlines and Tigerair Taiwan Co., Ltd.

- 15 -

In order to prepare the listing of Tigerair Taiwan Co., Ltd. and comply with the rules relating to theexamination for public listing, the release of the shares of Tigerair Taiwan Co., Ltd. held by the Company
and Mandarin Airlines was resolved in the shareholders’ meeting of the Company on June 25, 2019, and in
the shareholders’ meeting of Mandarin Airlines on June 27, 2019. The shares shall be subscribed by all
shareholders of the Company and Mandarin Airlines on the basis of the percentage of shareholdings. For
the subscribed shares that the original shareholders waived or for the undersubscribed portion, the chairman
was authorized to contact specific persons to subscribe. The subscription price was set at $41 per share. In
October and December 2019, the stock price was fully paid and the shares were completely delivered andtransferred. A total amount of 45,661,000 shares was disposed, and the proportion of ownership decreased
to 77%. The proceeds from disposal were $1,866,474 thousand. Since the Company did not loss control ofthe subsidiary, the related gain on disposal was $1,254,633 thousand and recognized in the capital surplus
account.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

March 31,2020

December 31,
2019

March 31,2019

$ 1,161,492
1,012,437$ 1,208,495
1,015,298$ 1,259,016
1,038,117$ 2,173,929$ 2,223,793$ 2,297,133

March 31,2020

December 31,
2019

March 31,
2019

$

$

$

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.

412,4639,573
445,285
251,102461,263
10,004446,161
248,350499,664
10,036457,207245,236

43,06942,717

46,873$ 1,161,492$ 1,208,495$ 1,259,016

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,
2020
2019
2019

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

- 16 -

20%
20%
28%
28%

20%
20%
28%
28%

20%
20%
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 312020
2019
China Aircraft Services
Asian Compressor Technology Services
Airport Air Cargo Terminal (Xiamen)
Airport Air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

$ (29,700)
(576)
2,975
4,943
725

$

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

$ (21,633)$ 14,073

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.
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 thesale of the 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, therelevant 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 29.
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 31,2020

December 31,
2019

March 31,
2019

$

$

$

799,660
167,097
37,812
7,868$ 1,012,437

801,071
168,547
37,813
7,867$ 1,015,298

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

$ 1,038,117

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,
2020
2019
2019
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

51%
55%
49%
51%

- 17 -

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 USNORDAM Aerospace Group in December 2017, planning to provide thrust reversers and composite
repair services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business disputation with their cooperative
partner, so their company operation was not impacted. As a result, NORDAM Asia suspended its
operation from October 5, 2018 to October 4, 2019 and resumed business on October 4, 2019. The
Company increased the capital of NORDAM Asia by $35,525 thousand in November 2019.
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.
Details of the investment income attributable to investments in jointly controlled entitles were as
follows:
For the Three Months Ended
March 312020
2019
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

$ (1,411)(1,449)(1)-$ 53,115
2,716-$ (2,861)$ 55,831

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.

- 18 -

14. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Buildings

FlightEquipment

Equipment
under FinanceLeasesOthersTotal

Cost
Balance at January 1,
2019
Additions
Disposals
Reclassification
Net exchange differences
Disposal of a subsidiary$

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)
290,378307(2,158)$ 318,427,067
631,083(1,110,414)
1,163,560
4,978(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

Balance at March 31,
2019

$

-

$

(6,686,278)$ (140,135,651)$(1,411,626)$ (10,770,779)$ (159,004,334)

Balance at March 31,
2019, net value$

1,017,242$

7,316,483$ 143,168,758$

986,476$

7,616,349$ 160,105,308$

1,002,499
3,207$

16,084,063
13,2645,817$ 272,077,692
181,295(1,256,170)
1,358,008
-

$

-

$

16,846,835
64,252(55,690)
12,328605$ 306,011,089
258,811(1,311,860)
1,370,336
9,629$

1,005,706$

16,103,144$ 272,360,825

$

-

$

16,868,330$ 306,338,005

$

-

$

(7,028,540)(122,706)(2,973)$ (141,886,170)(4,550,598)
1,177,898
536
-

$

-

$ (11,209,408)(233,605)
54,790(536)(4,704)$ (160,124,118)(4,906,909)
1,232,688(7,677)

Balance at March 31,
2020

$

-

$

(7,154,219)$ (145,258,334)$-$ (11,393,463)$ (163,806,016)

Balance at March 31,
2020, net value$

1,005,706$

8,948,925$ 127,102,491

$

-

$

$ 142,531,989

Balance at March 31,
2019
Accumulated depreciationand impairment
Balance at January 1,
2019
Depreciation expenses
Disposals
Reclassification
Net exchange differences
Disposal of a subsidiary

Cost
Balance at January 1,
2020
Additions
Disposals
Reclassification
Net exchange differences
Balance at March 31,
2020
Accumulated depreciationand impairment
Balance at January 1,
2020
Depreciation expenses
Disposals
Reclassification
Net exchange differences

Reclassification was mainly aircraft prepayment.

- 19 -

5,474,867

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

Refer to Note 33 for the carrying amounts of property, plant and equipment pledged by the Group.
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.

15. INVESTMENT PROPERTIES

Carrying amount
Investment properties

March 31,2020

December 31,
2019

March 31,2019

$ 2,075,000$ 2,075,068$ 2,075,274

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, 2019 and March 31, 2019, respectively. In addition, management assessed that there is no
significant difference in the fair values of March 31, 2020 and December 31, 2019.
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.

- 20 -

16. OTHER INTANGIBLE ASSETS
Computer
Software Cost$

Goodwill

Accumulated
Amortization

Net Value

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

1,357(2,501)

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

Balance at March 31, 2019

$ 2,255,310$

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

Balance at January 1, 2020
Additions
Amortization expenses$ 2,406,163
18,457-$

186,197-$ (1,409,668)(49,902)$ 1,182,692
18,457(49,902)

Balance at March 31, 2020

$ 2,424,620$

186,197$ (1,459,570)$ 1,151,247(3,858)The above other intangible assets are depreciated on a straight-line basis over 2-16 years.

17. OTHER ASSETSMarch 31,2020

December 31,
2019

March 31,2019

Current
Temporary payments
Prepayments
Restricted assets
Others$254,893
1,292,328
42,120283,328$

296,759
1,690,368
14,618653,966$

167,769
1,565,279
20,412
731,956$

1,872,669$

2,655,711$

2,485,416$

8,983,412
2,874,778
1,412,591
63,8073,384
139,014$

8,863,861
2,819,575
1,261,611
64,213
19,103
142,700$

593,921
1,356,804
1,059,590
98,954103,492$ 13,171,063$

3,212,761

Non-current
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
Others$ 13,476,986

The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
ATR72-600, A321neo, A320neo and B777F aircraft. For details on the aircraft purchase contracts, refer toNote 34.

- 21 -

18. BORROWINGSa. Short-term loans
March 31,2020

December 31,
2019

March 31,2019

Bank loans - unsecured$ 8,385,000$

380,000$ 4,200,000

Interest rates

0.87%-1.12%

0.95%-1.07%

0.87%-1.04%

March 31,2020

December 31,
2019

March 31,2019

$ 8,859,472
71,327$-$820,000-$ 8,788,145

$

-

$

820,000

b. Short-term and bills payable

Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate

1.00%-1.17%-

1.01%-1.04%

March 31,2020

December 31,
2019

March 31,2019

5,957,500
34,939,168$

c. Long-term debts

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

5,512,500
36,107,660

35,420,000
37,19776,279,471
15,941,499

31,730,000
60,14367,663,783
14,148,892

26,260,000
35,47067,844,690
7,957,425$ 60,337,972$ 53,514,891$ 59,887,265

1.00%-1.79%

1.08%-1.79%

0.92%-1.78%

Less: Current portion

Interest rates

1,929,827
34,064,099

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 33.
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 31,2020

December 31,
2019

March 31,20192009.2.42032.3.5

2008.2.262030.4.25

2007.5.242030.4.25

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until March 2025, were used by the Group to guarantee the commercial paperissued. As of March 31, 2020, December 31, 2019 and March 31, 2019, such commercial paper was
issued at discount rates of 0.9993%-1.1650%, 1.1300%-1.3380% and 1.0377%-1.1660%, respectively.
- 22 -

19. BONDS PAYABLE
March 31,2020
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
Unsecured corporate bonds first-time issued in2019
Convertible bonds sixth-time issues$

December 31,
2019

-

$

2,750,000

March 31,2019$

2,750,000

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

4,500,000

3,500,000
5,772,470
29,322,470

3,500,000
5,752,625
32,052,625

5,693,068
28,493,068

13,022,470

10,000,000

2,750,000$ 16,300,000$ 22,052,625$ 25,743,068

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
Principal repayable in June of 2023 and2024; indicator rate; payableannually
Principal repayable in June of 2025 and2026; indicator rate; payableannually
Unless bonds are converted to sharecapital or redeemed, principal
repayable one time in January 2023;
1.3821 discount rate p.a.

1.45

Less: Current portion and put option of
convertible bonds

Related issuance conditions were as follows:
Category
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
1.85% interest p.a., payable annually
Five-year unsecured bonds - issued at par in May 2016;
repayable in May 2020 and 2021; 1.19% interest p.a.,payable annually
Five-year unsecured bonds - issued at par in September
2016; repayable in September 2020 and 2021; 1.08%
interest p.a., payable annually
Three-year private unsecured bonds - issued at par in May
2017; repayable on due date; interest of 1.2% p.a.,payable annually
Seven-year private unsecured bonds - issued at par in May
2017; repayable on due date; interest of 1.75% p.a.,payable annually
Three-year private unsecured bonds - issued at par in
October 2017; repayable on due date; interest of 1.14%
p.a., payable annually
Five-year private unsecured bonds - issued at par in October
2017; repayable in November 2022 and 2023; 1.45%
interest 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 2021 and 2022;
1.45% interest p.a., payable annually
Five-year private unsecured bonds - issued at par in June
2019; repayable in June 2023 and 2024; 1.10% interestp.a., payable annually
Seven-year private unsecured bonds - issued at par in June
2019; repayable in June 2025 and 2026; 1.32% interestp.a., payable annually
Five-year convertible bonds - issued at discount in January
2018; repayable in lump sum upon maturity; 1.3821%
discount rate p.a.

Period2013.1.17-2020.1.17

2016.5.26-2021.5.26

2018.11.30-2023.11.30

2018.11.30-2025.11.30

2019.06.21-2024.06.21

2019.06.21-2026.06.21

2018.1.30-2023.1.30- 23 -

1.19

1.32

1.45

1.10

1.32

-

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 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, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 29, 2019, the conversion price was adjusted to NT$12.6.
.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,012,000(409,978)Liability component at the date of issuance$ 5,602,022

The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 7, 2019. The cumulative face value of the bonds shall not exceed $3,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years. The
period of public offerings has been extended to July 3, 2020 with the approval of the competent authority.

20. LEASE AGREEMENTS
a. Right-of-use assets

Carrying amounts
Land
Buildings
Flight equipment
Other equipment$

March 31,2020

December 31,
20198,170,745
1,291,054
59,127,742
2,331

$

$ 68,591,872- 24 -

8,153,382
824,955
62,052,701
2,579$ 71,033,617

March 31,2019$

8,439,908
1,227,444
66,027,560
1,801$ 75,696,713

For the Three Months Ended
March 31
2020
2019
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment$

720,868$

711,915$

155,719
290,064
2,814,198
640$

104,901
188,041
2,612,959
532$ 3,260,621$ 2,906,433

Except for the additions and recognitions of depreciation expense listed above, the Group’s
Right-of-use asset for the three months ended March 31, 2020 and 2019 did not have significant
sublease and impairment.
b. Lease liabilities

Carrying amounts
Current
Non-current

March 31,2020

December 31,
2019

March 31,2019

$ 2,549,104$ 15,665,569$ 2,340,873$ 15,801,724$ 5,067,954$ 30,249,514

Range of discount rate for lease liabilities (include US lease hedging instruments):

Land
Buildings
Flight equipment
Other equipment

March 31,2020

December 31,
2019

March 31,2019

0%-1.65%0%-3.56%
2.00%-3.34%
1.06%-1.50%

1.09%-1.65%
0%-3.56%
2.49%-3.34%
1.06%-1.50%

0%-2.87%0%-3.04%
2.00%-3.34%
1.06%-1.73%- 25 -

c. Financial liabilities under hedge accounting
The Group 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, 2020

December 31, 2019

March 31, 20192021.4.15-2028.5.15

2021.4.15-2028.5.15

2021.4.30-2028.5.31

Subject

Carrying Value

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

8,678,982
40,472,454
8,577,482
42,420,205
6,037,462
34,543,623

Influence of comprehensive income
Recognized in
Other
Comprehensive
IncomeFor the three months ended March 31, 2020
For the three months ended March 31, 2019

$ (356,468)(124,864)

Reclassified toIncome$50,487-d. China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes, fifteen 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:

Refundable deposits
Credit guarantees

March 31,2020

December 31,
2019

March 31,
2019

$

$

$

771,140
1,868,105

737,895
1,717,953

676,423
1,622,859

CAL Park, and Taoyuan International Airport Service signed a BOT contract with a land leaseagreement, refer to Note 34. 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 $876,820 thousand, $873,293 thousand and $865,173 thousand on March 31, 2020,
December 31, 2019 and March 31, 2019, respectively.

- 26 -

Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 34.
e. In September 2019, the Company signed a rental contract for six A321neo with Air Lease Corporation,
which is expected to be introduced between 2021 and 2022.
In October 2019, the Company signed a rental letter of intent for eight A321neo with CALC Lease
Corporation, which is expected to be introduced in 2022.
In September 2019, Tigerair Taiwan Co., Ltd. signed a rental letter of intent for eight A321neo withICBC Lease Corporation, which is expected to be introduced between 2021 and 2024.
f. Other lease information
The Company use operating lease agreement for investment properties, refer to Note 15.
For the Three Months Ended
March 312020
2019
Short-term and low price lease payment
Total of lease cash outflow$
6,384$ (3,314,349)$
8,303$ (2,808,101)

The Group choose to waive the recognition of the contract provisions for the short-term leases and low
price lease, and does not recognize the related right-of-use assets and lease liabilities for such lease.

21. OTHER PAYABLES
March 31,2020
Fuel costs
Ground service expenses
Repair expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
Others

December 31,
2019$

1,798,469
1,009,103
1,017,554
250,5311,734,796
672,530
497,470
2,255,578$$

9,236,031$ 13,187,972- 27 -

3,723,213
1,262,878
1,208,875
219,660
2,040,718
1,122,532
509,520
3,100,576

March 31,2019$

3,615,683
1,301,543
1,102,264
224,876
1,611,412
955,500
546,368
3,312,295$ 12,669,941

22. CONTRACT LIABILITIES/DEFERRED REVENUE

Frequent flyer program
Advance ticket sales$

March 31,2020

December 31,
2019

3,034,418
10,363,613$

2,895,535
20,401,549

March 31,2019$

2,591,215
17,957,284$ 13,398,031$ 23,297,084$ 20,548,499$ 11,071,797
2,326,234$ 21,060,773
2,236,311$ 18,550,487
1,998,012$ 13,398,031$ 23,297,084$ 20,548,499

March 31,2020

December 31,
2019

March 31,2019

Operating leases - aircraft$ 11,401,462$ 10,371,857$

9,401,631

Current
Non-current$$

360,393
10,011,464$

202,999
9,198,632$ 10,371,857$

9,401,631

Current
Non-current

23. PROVISIONS

343,645
11,057,817$ 11,401,462

Aircraft Lease
Contracts
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

Balance at January 1, 2020
Additional provisions recognized
Usage
Effects of exchange rate changes$ 10,371,857
1,443,036(469,834)
56,403

Balance at March 31, 2020

$ 11,401,462

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.

- 28 -

24. 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, 2019 and 2018.
For the Three Months Ended
March 312020
2019
Operating costs
Operating expenses$ 243,940
106,466$ 245,872
106,723$ 350,406$ 352,595

March 31,2020

December 31,
2019

March 31,2019

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

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

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

March 31,2020

December 31,
2019

March 31,
2019

$

$

$

25. EQUITY
a. Share capital
Ordinary shares

Numbers of authorized shares (in thousands)
Amount of authorized shares
Amount of issued sharesb. 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
Difference in sale price of shares ofsubsidiaries and book value
Others

315,114315,114315,11433,513
11,747
118,962
409,978

3,909
33,513
11,747
118,962
409,978

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

1,129,080
466,604

1,129,080
466,604

466,604$ 2,484,998$ 2,488,907$ 1,241,214

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.
- 29 -

c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”),
where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes,
offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting
aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining
profit together with any undistributed retained earnings shall be used by the Company’s board of
directors as the basis for proposing a distribution plan, which is to distribute dividends and bonus noless than 50% of the remaining profit and undistributed retained earnings. The dividends and bonus
mentioned above can be distributed in the form of new shares or cash, and the cash dividends should be
no less than 30% of the total dividends.
Under the Company Act, if surplus earnings are distributed in the form of new shares, the distributionof shares shall be approved in the meeting of the board of directors; if such earnings are distributed in
the form of cash, the cash distribution shall be authorized after a resolution has been adopted by amajority vote at a meeting of the board of directors attended by two-thirds of the total number of
directors; and in addition, a report of such distribution shall be submitted to the shareholders’ meeting.
If the Group has no loss, according to laws and regulations, the Group can distribute its capital reserve,in whole or in part, by issuing new shares or cash based on financial, business and management
considerations. If such surplus earnings is distributed in the form of new shares, it shall be approved bya meeting of the board of directors; if such surplus earning is distributed in the form of cash, it shall beauthorized after a resolution has been adopted by a majority vote at a meeting of the board of directors
attended by two-thirds of the total number of directors; and in addition thereto a report of such
distribution shall be submitted to the shareholders’ meeting.
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”) basedon the amended Company Act, where the Company made profit in a fiscal year, the profit shall be firstutilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of theremaining profit, setting aside or reversing a special reserve in accordance with the laws andregulations, and then any remaining profit together with any undistributed retained earnings shall be
used by the Company’s board of directors as the basis for proposing a distribution plan with due
consideration of any future aircraft acquisition plans and fund demands, which should be resolved in theshareholders’ meeting for the distribution of dividends and bonuses to shareholders by cash or shares(cash dividends cannot be less than 30% of total dividends distributed). However, if the Company’s
profit before tax in a fiscal year after deductions for the abovementioned items is not sufficient forearnings distribution, retained earnings can be used as a supplement for the deficiency.
The Company shall set aside profits as a legal reserve until the legal reserve amounts to the authorized
capital. The legal reserve could be used for offsetting deficit of the Company. If the Company has no
deficit in a fiscal year, the Company can distribute all or part of the capital surplus by cash or shareswith due consideration of finance, marketing and management requirements in accordance with thelaws and regulations.
The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.
1) Appropriation of earnings in 2018
The appropriation of earnings for 2018 was resolved in the board of directors meeting on June 25,
2019. The appropriation of earnings and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Cash dividends$- 30 -

114,493
1,136,278

Dividends Per
Share (NT$)$0.20960737

Rotation Special reserve is $105,843 thousand.
2) Offsetting deficits in 2019
On March 18, 2020, the board proposed to offset the accumulated deficit in 2019. The deficit
included a net loss of $1,199,798 thousand, negative adjustment of other retained earnings of$577,427 thousand, the remaining amount of accumulated deficit was $1,777,225 thousand.
The offsetting of deficits for 2019 is subject to the resolution of the shareholders in theshareholder’s meeting to be held on June 23, 2020.
d. Other equity items
The movement of other equity items is as follows:

Exchange
Differences on
Translating
Foreign
Operations(9,664)

Unrealized Gain
(Loss) on
Financial Assets
at Fair Value
Through Other
Comprehensive
Income$42,619Gain (Loss) on
Hedging
Instruments$

25,268

Total

Balance on January 1, 2019
Exchange differences on translating
foreign operations
Cumulative loss on changes in fairvalue of hedging instruments
Cumulative gain on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets atfair value through othercomprehensive income
Effects of income tax
Other comprehensive income (loss)
recognized in the period
Dispose of subsidiary$$

58,223

Balance on March 31, 2019$15,063$

Balance on January 1, 2020
Exchange differences on translating
foreign operations
Cumulative loss on changes in fairvalue of hedging instruments
Cumulative gain on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets atfair value through othercomprehensive income
Effects of income tax
Other comprehensive income (loss)
recognized in the period$(54,707)$ 107,262$ 1,143,678$ 1,196,233(16,816)--(16,816)--(355,209)(355,209)--(49,091)(49,091)

3,130

2,569
(124)

81,694

2,569
84,700(13,686)

2,445(322,606)(333,847)

Balance on March 31, 2020$

(68,393)$ 109,707$ 821,072$ 862,386

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- 31 -

56,206$(73,226)$(1,957)

e. Non-controlling interests
For the Three Months Ended
March 312020
2019
Beginning balance
Net (loss) 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

$ 3,578,345(37,232)(1,247)
1,471$ 2,965,512
96,828
4,093
46

(205)
19
-

(30)
4,109
(24,957)$ 3,541,132$ 3,041,492

Dispose of subsidiaries
Ending balance
f. Treasury shares

Treasury shares are the Company’s shares held by its subsidiaries as of March 31, 2020 and 2019 andwere as follows:(Shares in Thousands)

Purpose of Treasury Shares

Number of
Shares,Beginningof Year

Reduction
Duringthe Year

Number of
Shares,Endof Year

2,889
2,889

(814)
-

2,075
2,889

Three months ended March 31, 2020Three months ended March 31, 2019

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value

2,075$ 13,713$ 13,713

2,075
814

$ 18,796
7,376$ 18,796
7,376$ 26,172$ 26,172$ 20,456
8,028$ 20,456
8,028$ 28,484$ 28,484

March 31, 2020
Mandarin Airlines
December 31, 2019
Mandarin Airlines
Dynasty Aerotech International Corp.

March 31, 2019
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.

- 32 -

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.
Dynasty Aerotech International Corp. sold a total of 814 thousand shares of its shares in the Company
between January 1, 2020 and March 31, 2020. The disposal price was $6,854 thousand.

26. NET INCOME
a. Revenue
For the Three Months Ended
March 312020
2019
Passenger
Cargo
Others$ 18,728,022
11,095,611
2,733,497$ 27,250,147
10,161,698
2,993,503$ 32,557,130$ 40,405,348

b. Other income
For the Three Months Ended
March 312020
2019
Interest income
Subsidy income
Others

$88,30018,12557,205$ 163,630$

96,955
9,902
46,399$ 153,256

c. Other gains and losses
For the Three Months Ended
March 312020
2019
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
Others

$

5,121
3,296
(79,114)(83,393)$ (154,090)- 33 -$

1,349(10,462)
11,1407,656(26,900)(49,224)$ (66,441)

d. Finance costs
For the Three Months Ended
March 312020
2019
Interest expense
Bonds payable
Bank loans
Interest on lease liabilities$

Capitalization interest
Capitalization rate

97,232285,756
437,684$

94,675
219,751
561,405$ 820,672$ 875,831$$

27,6491.226%-1.453%

1,071

1.250%-1.316%

e. Depreciation and amortization expenses
For the Three Months Ended
March 312020
2019
Property, plant, equipment
Right of use assets
Investment properties
Intangible assets$ 4,906,909
3,260,621
68
49,902$ 5,299,843
2,906,433
70
49,842

Depreciation and amortization expenses$ 8,217,500$ 8,256,188

An analysis of depreciation by function
Operating costs
Operating expenses$ 7,749,835
417,763$ 7,751,905
454,441$ 8,167,598$ 8,206,346

$

3,538
46,364$

3,166
46,676$49,902$

49,842An analysis of amortization by function
Operating costs
Operating expenses- 34 -

f. Employment benefits expense
For the Three Months Ended
March 312020
2019
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$

155,859
350,406$

140,839
352,595$

506,265$

493,434$ 5,382,169
1,787,364$ 5,273,602
1,719,330$ 7,169,533$ 6,992,932$ 6,260,960
1,414,838$ 6,043,643
1,442,723$ 7,675,798$ 7,486,366

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, 2020 and 2019, the Company has experienced adeficit and, therefore, no employees’ compensation was estimated.
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 are available at the Market Observation Post System website of the
Taiwan Stock Exchange.

27. 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 312020
2019
Current tax
Current year
Adjustments for prior periods
Deferred tax
Current year$

Income tax expense recognized in profit or loss

- 35 -$

23,296-$ 148,035-(19,213)

41,202

4,083$ 189,237

b. Income tax recognized in other comprehensive income
For the Three Months Ended
March 312020
2019
Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Fair value changes of financial assets at FVTOCI
Hedging instruments’ fair value revaluation
Total income tax recognized in other comprehensive income

$

3,130
(124)
81,694$ (3,224)(3,424)25,267$ 84,700$ 18,619

c. Income tax assessment
Income tax returns for 2018 of the Company and its subsidiaries have been examined by the tax
authorities.

28. 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 312020
2019
Basic earnings (losses) per share
Diluted earnings (losses) per share$ (0.70)$ (0.70)

Earnings (losses) used in the computation of diluted earnings (losses)
per share$ (3,773,333)$ (0.04)$ (0.04)$(243,704)

Thousand unit
Weighted average number of ordinary shares used in thecomputation of diluted earnings (losses) per share

5,418,367

5,418,096

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.

29. 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.

- 36 -

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

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 of subsidiaries$ 34,036(50,934)
10,187
24,957(10,590)

Gain on disposal

$

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)

30. 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, 2019.

31. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments not measured at fair value
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, 2020
Carrying
AmountFair Value

December 31, 2019
Carrying
AmountFair Value

March 31, 2019
Carrying
AmountFair Value$ 29,322,470
76,279,471$ 32,052,625
67,663,783$ 28,493,068
67,844,690

Financial liabilities
Bonds payable
Loans and debt

$ 29,303,333
76,279,471- 37 -$ 32,062,874
67,663,783$ 28,556,362
67,844,690

Some long-term debts are floating-rate financial liabilities, so their carrying amounts are their fairvalues. As of March 31, 2020, December 31, 2019 and March 31, 2019, 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 0.65%, 0.67% and 0.666%, respectively, prevailing in the market for
long-term debts (Level 2). Fair values of bond payable trading in OTC and based on quoted market
prices (Level 1).
b. Fair value of financial instruments measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value isobservable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for 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, 2020
Level 1
Financial assets at FVTPL
Domestic money market
funds
Foreign exchange
agreement

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

Level 2567,940$-

Level 3

-

$

30

Total

-

$

-

567,94030$

567,940

$

30

$

-

$

567,970

$

-

$

-

$

28,816$

28,816--

182,109

182,109

$

-

$

-

$

210,925$

210,925

Financial liabilities at
FVTPL
Derivative instruments

$

-

$

5,075

$

-

$

5,075

Financial assets for hedging

$

-

$

11,853$620$

12,473Financial liabilities forhedging$ 49,151,436$

14,560$75,877- 38 -$ 49,241,873

December 31, 2019
Level 1
Financial assets at FVTPL
Domestic money market
funds
Foreign exchange
agreement

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

Level 2

511,758$-

Level 3

-

$

Total

-

434

$

511,758-434$

511,758

$

434

$

-

$

512,192

$

-

$

-

$

26,865$

26,865--

182,356

182,356

$

-

$

-

$

209,221$

209,221

Financial liabilities at
FVTPL
Derivative instruments

$

-

$

11,749$-$11,749Financial assets for hedging

$

-

$

147

$

9,479

$

9,626

Financial liabilities forhedging$ 50,997,687$

37,069$3,955$ 51,038,711

March 31, 2019
Level 1
Financial assets at FVTPL
Domestic money market
funds
Principal-protected notes
Financial products

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

Level 2

238,600$-

Level 3

-

$

7,216

Total

-

$

-

238,600
7,216$

238,600

$

7,216

$

-

$

245,816

$

-

$

-

$

21,527$

21,527--

128,788

128,788

$

-

$

-

$

150,315$150,315

Financial assets for hedging

$

-

$

26,566

$

7,905

$

34,471

Financial liabilities forhedging$ 40,581,085

$

22

$

983

- 39 -$ 40,582,090

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

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

Multiplier

Liquidity
Discount

0.75-13.23
0.75-13.23
0.74-15.29

80%
80%
80%

Derivative
Instruments

EquityInstruments

Balance at January 1, 2020
Recognized in other comprehensive income

$

5,524
(80,781)$ 209,221
1,704

Balance at March 31, 2020

$ (75,257)$ 210,925

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

March 31, 2020
December 31, 2019
March 31, 2019
The movements of Level 3 financial instruments are as follows:

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.

- 40 -

c. Categories of financial instruments
March 31,2020

December 31,
2019567,970
12,47350,795,648
210,925$

March 31,2019

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

512,192
9,626
41,479,556
209,221$245,816
34,47135,535,991
150,315

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

5,075
49,241,873
164,673,287

11,74951,038,711
134,240,993

40,582,090
161,555,051

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 and other restricted financial assets.
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, lease liabilities, provisions,parts of other current liabilities, parts of other non-current liabilities and guarantee deposits.
d. Financial risk management objectives and policies
The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and 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.

- 41 -

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.
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 a decrease in pre-tax profit and increase in pre-tax othercomprehensive income gain and losses for the three months ended March 31, 2020 of $146,379
thousand and $1,513,104 thousand and an increase in pre-tax profit and increase in pre-tax othercomprehensive income gain and loss for the three months ended March 31, 2019 of $845,448
thousand and $1,264,031 thousand, respectively.
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.
Please refer to Note 21 for rental contract for hedging:
March 31, 2020
Notional
AmountMaturity

NTD/USD

NTD417,205
USD13,809

2020.4.212021.3.5

29.5-30.8

Aviation fuel - forward
exchange contracts

NTD/USD

NTD755,287/
USD25,000

2020.4.302021.1.29

29.6-30.7

Aircraft prepayments forward exchange contracts

NTD/USD

NTD2,265,861/
USD75,000

2020.11.42020.12.4

29.6-30.5

Hedging Instruments
Cash flow hedge
Aircraft rentals - forward
exchange contracts

Currency- 42 -

Forward RateLine Item in
Balance Sheet

Financial assets forhedging/liabilities
for hedging
Financial assets forhedging - current/
liabilities forhedging - current
Financial assets forhedging - current/
liabilities forhedging - current

Carrying AmountAsset
Liability

$

664

$

3,680

2,482

3,769

8,707

7,111

The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals, aviation fuel in
U.S. dollars and Aircraft prepayment) are $(3,016) thousand, $(1,287) thousand and $1,596
thousand, respectively.
December 31, 2019
Notional
AmountMaturity

Forward Rate

NTD/USD

NTD509,507/
USD16,967

2020.1.212020.12.24

29.5-30.8

Aviation fuel - forward
exchange contracts

NTD/USD

NTD660,661/
USD22,000

2020.2.272020.11.30

29.7-30.7

Aircraft prepayments forward exchange contracts

NTD/USD

NTD1,411,411/
USD47,000

2020.11.4

29.6-30.5

Hedging Instruments
Cash flow hedge
Aircraft rentals - forward
exchange contracts

Currency

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging - current/
liabilities forhedging - current
Financial assets forhedging - current/
liabilities forhedging - current
Financial assets forhedging - current/
liabilities forhedging - current

$

38

$

8,491

32

10,19377

18,385The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals, aviation fuel in
U.S. dollars and Aircraft prepayment) are $(8,453) thousand, $(10,161) thousand and $(18,308)
thousand, respectively.
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

Carrying AmountAsset
Liability

Financial assets forhedging/liabilities
for hedging$

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.
For the three months ended March 31, 2020
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments

Note:

$

5,437
8,874
19,904

$

882
(271)
-

$ 34,215$

611

Decrease in operating costs or foreign exchange loss.

- 43 -

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

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

$

(902)

AmountReclassified toProfit and Lossand theAdjusted LineItem

$ 17,089(Note)

Decrease in operating costs or foreign exchange loss.

b) Interest rate risk
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.
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 31,2020

December 31,
2019

March 31,2019

$ 138,234,281$ 91,414,806$ 76,064,448

51,906,914

77,821,887

95,126,103

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, 2020 would havedecreased by $32,442 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, 2019 would havedecreased by $59,454 thousand.

- 44 -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, 2020
Hedging Instrument
Cash flow hedges - fuel options

Notional
AmountCurrency
USD

NTD 75,257

Maturity

Forward Rate

2020.6.302020.12.31

USD49.65-78.50

Line Item in
Balance Sheet
Financial assets forhedging

Carrying AmountAsset
Liability
$

620

$

75,877

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$(75,257) thousand.
December 31, 2019
Hedging Instrument
Cash flow hedges - fuel options

Notional
AmountCurrency
USD

NTD5,524

Maturity

Forward Rate

2020.3.312020.12.31

USD49.65-80.75

Line Item in
Balance Sheet
Financial assets forhedging

Carrying AmountAsset
Liability
$

9,479

$

3,955

Hedge accounting is continued to be applied to the abovementioned hedging instruments
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $5,524 thousand.
March 31, 2019
Hedging Instrument
Cash flow hedges - fuel options

Notional
AmountCurrency
USD

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
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $6,922 thousand.
For the three months ended March 31, 2020

Comprehensive Income
Cash flow hedges - fuel options
Note:

Increase in operating costs.

- 45 -

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

$ (80,781)$ (1,802)(Note)

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

$

2,021

AmountReclassified toProfit and Lossand theAdjusted Line
Item
$

(927)

(Note)

Increase in operating costs.

Sensitivity analysis
The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.
For the Three Months Ended March 31
2020
2019
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%$-$ (104,677)(114,314)

$

-

$

656
-

2) Credit risk
The goal, policies and procedure of credit risk management are same as consolidated financial
statement in 2019. 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 2019. Related illustration can be referred in Note 33.
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.

- 46 -

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, 2020
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

3,351,176$ 11,052,170$

1.1232

3,923,432

11,165,529

14,363,237

1.13683.11331.070912,100,000
10,070,758
7,329,913

35,000,000
38,679,892
19,360,504

5,173,331
3,335,338$ 36,775,279$ 115,258,095$ 30,022,363

Less than 1Year

1 to 5 Years

Over 5 Years

3,357,996$ 10,622,204$

1.90584,580,374

14,709,050

16,785,664

1.2601
3.11312.2573

10,100,000
10,060,822
10,823,905

21,200,000
39,729,062
19,871,174

6,373,333
3,383,401$ 38,923,097$ 106,131,490$ 35,491,592

2.4225$

7,150,457

December 31, 2019
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative instruments
Bonds payable

1.1613$- 47 -

8,949,194

March 31, 2019
The Weighted
Average
Effective
Interest Rate(%)

Less than 1Year

1 to 5 Years

Over 5 Years

2.7075%$ 5,327,595$ 20,619,240$ 13,959,968

1.1894%

8,078,562

14,408,672

18,634,648

1.1330%3.1630%1.0700%6,038,467
2,827,846$ 22,272,470

25,800,000
34,543,623
25,561,468$120,933,003

1,010,700$ 33,605,316

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative instruments
Bonds payable

32. 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

China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
Dynasty Holidays
China Pacific Catering Services
China Pacific Laundry Services
Nordam Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
Others

Associate
Associate
Associate
Associate
Associate (become associate in January 2019)
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- 48 -For the Three Months Ended
March 31
2020
2019
$
$
$

5,097
8
10,415

$
$
$

5,125
26
10,645

c. Purchases
For the Three Months Ended
March 312020
2019

Related Party Type
Major shareholders of the Company
Associates
Joint venture investments$ 11,417$ 77,664$ 330,901$ 11,324$ 107,241$ 457,683

December 31,
2019

March 31,2019

d. Accounts receivable - related parties (generated by operations)
March 31,2020

Related Party Type
Major shareholders of the Company
Joint venture investments

$

169
7,515

$

7,760
2,588

$

2,523
7,499

$

7,684

$

10,348$10,022

The 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 31,2020

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

35,607335,312$ 370,919

December 31,
2019
$

5,982
51,333484,700

March 31,2019$

$ 542,015

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

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.
f. 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, 2020 and 2019, the rental paid was $11,417 thousand
and $11,324 thousand, respectively.
g. Endorsements and assurances
March 31, 2020
Total Amount Amount Used

December 31, 2019
Total Amount Amount Used

March 31, 2019
Total Amount Amount Used

$ 3,850,000
2,825,136$ 2,046,400
482,322$ 3,850,000
1,080,000
3,012,668$ 2,129,400
685,444$ 3,850,000
1,080,000
1,084,500$ 2,256,700
419,7822,000,000

1,301,327

2,000,000

1,279,827

2,000,000

834,477

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

- 49 -

h. Compensation of key management personnel
For the Three Months Ended
March 312020
2019
Short-term employee benefits
Post-employment benefits

$

9,481
637

$ 13,619
875$ 10,118$ 14,494

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

33. 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
Right-of-use assets
Restricted assets

March 31,2020

December 31,
2019

March 31,2019

$ 29,067,660
68,591,872
157,148$ 31,260,801
71,033,617
130,052$ 41,278,074
75,696,713
119,366$ 97,816,680$ 102,424,470$ 117,094,153

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

34. COMMITMENTS AND CONTINGENT LIABILITIESThe 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 March 31, 2020, four of the aircraft has been
handed over to the Company, and the total list price of the lefts two aircraft was $40,000 thousand,which has been paid in the amount of US$8,314 thousand (recognized as prepayments for aircraft).
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.
However, TACT filed an arbitration for the total amount of expenditure in 2012 to revise the total
amount to $6,840,000 thousand.
- 50 -

As of March 31, 2020, 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, 2020, the cumulated consultant service expense and construction equipment had
amounted to $481,776 thousand (VAT included) and $5,218,750 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,755 thousand (VAT included) and$5,206,908 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.

- 51 -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. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery period of the eleven aircraft ranges from 2024 to 2026. As of March
31, 2020, the list price has been paid in the amount of US$17,014 thousand (recognized as prepayments
for aircraft). In October 2019, the Company signed a contract with International Aero Engines
Company to purchase four backup engines of A321neo. The total list price of the four engines is
US$60,289 thousand.
e. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three
B777F aircraft and exercised the option to purchase three B777F aircraft. The total list price of the six
aircraft is US$2,320,315 thousand, and the expected delivery period is from 2020 to 2023. As of March
31, 2020, the list price has been paid in the amount of US$241,650 thousand (recognized as
prepayments for aircraft).
f. In September 2019, Tigerair Taiwan Co., Ltd. signed a contract with Airbus S.A.S. to purchase sevenA320neo aircraft and an option to purchase two A320neo aircraft. The total list price of the sevenaircraft is US$729,746 thousand, and the list price of the option to purchase two aircraft is US$208,499
thousand. The expected delivery period of the seven aircraft ranges from 2025 to 2027. As of March 31,
2020, the list price has been paid in the amount of US$9,324 thousand (recognized as prepayments foraircraft). In addition, in December 2019, Tigerair Taiwan Co., Ltd. signed a contract with International
Aero Engines Company to purchase two backup engines of A320neo aircraft. The total list price of thetwo engines is US$27,345 thousand. As of March 31, 2020, the list price has been paid in the amount of
US$2,988 thousand (recognized as prepayments for aircraft).

35. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
By the end of January 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei province
in China became a pandemic. The Company has complied and continues to comply with the travel alerts
issued by the Taiwan Centers for Disease Control and has cancelled flights between several countries like
China, Hong Kong, Japan and Korea. Other flights have flexible capacity depending on the demand. So far,the air transport services for passengers have been severely affected. In addition to adjusting the operation,
the Company also takes measures about funding assistance, human resources, reducing expenditure, andasks the government for help in three main areas including guarantee for its operation, relief compared withthe burden, and a recovery plan.
The Company plans to complete the governmental $20 billion relief loans application. Interest subsidy planis provided by the government, with the advantage of full cargo fleet, and the flexible dispatch of passenger
aircraft to carry goods in the belly freight, the Company expects to take advantage of global air cargobusiness opportunities. For the three months ended March 31, 2020, the cargo revenue was higher than thesame period last year. As a result, the loss caused by the epidemic was abated.

- 52 -

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe following information was aggregated by the foreign currencies other than functional currencies of thegroup entities and the exchange rates between foreign currencies and respective functional currencies weredisclosed. The significant assets and liabilities denominated in foreign currencies were as follows:(Foreign Currencies in Thousands)
March 31, 2020
Foreign
Currencies

Exchange Rate

Carrying
Amount584,082
15,390
194,538
3,142,554
498,926

30.211533.3333
3.90170.27874.2680$ 17,646,000
512,983
759,030
875,837
2,129,419

2,366,374
7,851
73,1175,050,494
151,07630.211533.3333
3.90170.27874.268071,491,698
261,686
285,280
1,407,579
644,794

Exchange Rate

Carrying
Amount658,407
18,401
228,234
6,262,272
425,34330.0300
33.6700
3.85950.27664.3048$ 19,771,957
619,571
880,868
1,732,130
1,831,012

2,480,896
7,638
74,651
6,584,434
153,19630.0300
33.6700
3.85950.27664.304874,501,305
257,155
288,117
1,821,237
659,478

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY
December 31, 2019
Foreign
Currencies
Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 53 -

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

2,584,568
8,513
86,8476,440,161
159,591

30.864234.60213.92620.2782
4.583079,770,604
294,564
340,979
1,791,687
731,398

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, 2020 and 2019, net foreign exchange losses were $79,114 thousand
and $26,900 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by eachsignificant foreign currency due to the variety of the foreign currency transactions and functional currenciesof the group entities.

37. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided: 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)- 54 -

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 31)
b. Investments in mainland China: Table 6 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 7 (attached)d. Information of major shareholders: Table 8 (attached)

38. SEGMENT INFORMATIONThe Group mainly engages in air transportation services for passengers, cargo and others. Its major
revenue-generating asset is its aircraft fleet, which is used jointly for passenger and cargo services. Thus,
the 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.
For the three months ended March 31, 2020 and 2019, financial information of segments is listed below:
For the Three Months Ended March 31, 2020
Air
Adjustments
Transportation
Othersand Write-offs

Total

Operating revenue$ 31,322,443$

2,133,654$(898,967)$ 32,557,130

Operation profit and loss
Interest revenue
Investment income accounted for using
the equity method
Revenue
Financial costs
Expenses$$(58,585)$(21,363)$(2,890,908)(24,494)
74,703(820,672)(153,463)

Gain before income tax
Identifiable assets
Investments accounted for using theequity method
Assets(2,970,856)
88,300$$ 203,751,681$ 15,794,670$(6,347,490)(3,806,482)$ 213,198,861
2,173,929
79,863,403

Total assets$ 295,236,193- 55 -

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$

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

Gain before income tax
Identifiable assets
Investments accounted for using theequity method
AssetsTotal$$ 228,087,064$ 16,336,225$(6,545,994)

42,361$ 237,877,295
2,297,133
55,445,270

Total assets$ 295,619,698- 56 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENTS/GUARANTEES PROVIDEDFOR THE THREE MONTHS ENDED MARCH 31, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counter-party
Endorsement/
Guarantee
Provider

No.

0

Name

China Airlines
Cal Park(the “Company”) Tigerair Taiwan Ltd.

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

Nature of Relationship100% subsidiary
77.17% subsidiary bydirect and indirect
holdings
100% subsidiary

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

ActualBorrowingAmount$ 10,490,689
10,490,689$ 3,850,000
3,038,197$ 3,850,000
2,825,136$ 2,046,400
482,322

10,490,689

2,000,000

2,000,000

1,301,327

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.

- 57 -

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

-

7.34
5.79

$ 26,226,723
26,226,723

Yes
Yes

No
No

No
No

-

3.81

26,226,723

Yes

No

No

TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDMARCH 31, 2020
(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

Dynasty Aerotech International
Corp.

SharesChina Airlines

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

Financial Statement AccountFinancial 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

March 31, 2020
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount(%)
Value

Shares/Units

1,359,368$$

81,609Note74,19013.59

Note 1

135,937

7,419-

1,100,000

28,816

11.00

28,816

12,000,000
4,021

-

15.00
0.02

-

2,074,628

13,713-

13,713--

100,500

2.59
5.45

100,500

Note 2
Note 2-

98,23887,24388,617
81,171

-

-

-

-

-

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

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

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

9,451,969
486,501
5,464,065
6,444,010

98,23887,24388,617
81,171

SharesTransAsia Airways-

Financial assets at fair value through profit or loss - current

2,277,786-

Beneficial certificatesFuh Hwa Global Short-term Income FundFuh Hwa Emerging Market Short-term Income Fund-

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

1,671,657
1,233,211

19,102
17,470-19,102
17,470-Beneficial certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit or loss - current

349,523

4,755

-

4,755

-

-

0.40

(Continued)- 58 -

Holding Company Name

Kaohsiung Catering Services

Tigerair Taiwan Co., Ltd.

Marketable Securities Type and Issuer/Name

Relationshipwith theHoldingCompany

Financial Statement AccountBeneficial certificates
Prudential Financial Money Market Fund
Prudential Financial Return Fund
Taishin 1699 Money Market Fund-

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

Government bondPhilippines government bond-Amortized cost financial assets

March 31, 2020
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount(%)
Value

Shares/Units

5,407,832
4,493,628
1,106,807-$

85,88770,422
15,035-301

Not applicable$

85,88770,422
15,035

Note

-

301

Note 1: The subsidiary’s net asset value was $81,609 thousand, which included ordinary shares and preference shares as of and for the year ended March 31, 2020.
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)- 59 -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, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

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

Nature of Relationship

Subsidiary
Subsidiary
Equity-method investee

Purchase/
Sale

Amount% of
Total

Purchase
Purchase
Purchase$ 129,671
261,152
305,601

0.45
0.90
1.06

- 60 -

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

Abnormal Transaction
Payment Terms
30 days
40 days
90 days

Unit Price$--$ (46,472)(210,154)(320,422)(1.73)(7.81)(11.91)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, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

AmountAction Taken

Amounts Received
in Subsequent
PeriodAllowance for
Bad Debts

China Pacific Catering Services

China Airlines

Parent company$ 320,422

3.11

-

-

$ 163,430-

Taoyuan International Airport Service

China Airlines

Parent company

210,154

3.75

-

-

142,849-

Note:

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

- 61 -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, 2020
(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
Taipei, Taiwan
Taipei, Taiwan

Investment Amount
December 31,
March 31, 20202019

Balance as of March 31, 2020
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

77,27019,587(126,473)
33,1396,501

Note 4
Notes 1 and 4
Notes 2 and 4

799,660
713,121508,759449,235(2,766)(49,233)
4,654(11,687)(1,411)(24,124)
4,654(10,977)

-

20.00
47.35
53.67
100.0055.00

412,463
263,095
664,116
453,886
167,097(148,499)(25,126)
11,843(25,440)(2,635)(29,700)(11,897)
2,946(25,374)(1,449)Note 5Note 4-

77,270100.0099,895

4,728

4,728

Note 426,265
20,4002,500
1,272,063
1,350,000

1,600,000
160
250,000
138,906,275
135,000,000

100.00
20.00
25.00
69.45
100.0021,4139,573
7,568
1,892,660
847,641(3,880)(2,879)1,095(82,703)(74,355)(3,855)(576)
274(57,444)(74,348)

Note 4Note 4-37,9752,450

3,797,500

49.00

37,812(3)(1)

154,330
11,658200,000
11,65815,433,000
469,755

7.72
1.08

210,281
5,984(82,703)(25,126)(6,382)(271)-

77,270JPY

Air transportation and maintenance of aircraft
Airport services

26,2658,000
2,500
1,272,063
1,350,000

JPY

1,571,897
1,368,500
1,551,085
1,290,760

Note

8,283 $
(134,560)
61,3386,120

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

Investment
Income (Loss)

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

43,069

2,072

725

-

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

US$

5,877

-

100.00348,402

3,868

3,868

Note 3Kaohsiung Catering Services

Delica International Co., Ltd.

Kaohsiung, Taiwan

Catering business

10,2001,020,000

51.00

7,868

-

-

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:

Difference caused by lease arrangement between consolidated entities.

Note 5:Difference cause by acquisition.

10,200- 62 -TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE THREE MONTHS ENDED MARCH 31, 2020
(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, 2020

Investment Flows

Outflow

Inflow

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

Forwarding and storage $ 1,086,129
of air cargo(RMB 254,480)

Indirect(Note 1)$
126,465 $(US$4,186)

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

Forwarding and storage
59,752of air cargo(RMB 14,000)

Indirect(Note 1)

58,835
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,510,272
maintenance services (US$ 83,090)

Indirect(Note 1)64,991
2,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Indirect(Note 1)

19,215
636)

-

(US$

(US$

352,356
11,663)

Accumulated
Outflow ofInvestment
from Taiwan
as ofMarch 31, 2020

-

$

-

58,835
18,124
1,947) (RMB 4,187)

14.00

(US$

64,991
2,151)

-

2.589

-

(US$

19,214
636)

-

5.45

-

(US$

-

Limit on Investment$269,505 (US$8,920)$653,635 (Note 3)$33,596,747 (Note 4)

Investment
Gain (Loss)

14.00

-

Investment Amounts
Authorized by Investment Commission,
MOEA

Accumulated
Carrying
InwardAmount as of Remittance ofMarch 31, 2020 Earnings as ofMarch 31, 2020$
126,465 $11,112(US$
4,186) (RMB 2,567)-

Accumulated Investment in Mainland
China as of March 31, 2020

% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

$
(RMB

(RMB

1,419 $
223,268 $
106,845359) (RMB 52,312) (US$3,537)(Note 2)
2,406
125,513586) (RMB 29,408) (US$-47,146
1,561)(Note 2)-

100,500 $(RMB 23,547) (US$10,771
357)(Continued)- 63 -

Taiwan Airport Services

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2020

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

Forwarding and storage $ 1,086,129
of air cargo(RMB 254,480)

Indirect(Note 5)$
121,400 $(US$
4,018)

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

Forwarding and storage
59,752of air cargo(RMB 14,000)

Indirect(Note 5)

(US$

Remittance of Funds

Outward58,2101,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof March 31,
2020

Inward

-

$

-

-

$
121,400 $11,112(US$
4,018) (RMB 2,567)

14.00

58,21018,124
1,927) (RMB 4,187)

14.00

(US$

Accumulated Outward
Remittance for Investment in
Mainland China as of March 31, 2020

Investment Amounts Authorized by
Investment Commission, MOEA

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

$179,610 (US$5,945)$179,610 (US$5,945)$333,383 (Note 6)

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

Accumulated
Carrying
Repatriation of
Investment
Amount as ofInvestment
Income (Loss)
March 31, 2020 Income as ofMarch 31, 2020$
(RMB

1,556 $
222,020 $
137,195359) (RMB 52,019) (US$4,541)(RMB

2,537
125,591586) (RMB 29,426) (US$63,197
2,092)

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, 2020, 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)- 64 -TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIESFOR THE THREE MONTHS ENDED MARCH 31, 2020
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Financial Statement Account0

China Airlines, Ltd.

Taoyuan International Airport Service
Taiwan Air Cargo Terminal
Taoyuan International Airport Service
Mandarin Airlines

a
a
a
a

Terminal and landing fees
Other operating costs
Accounts payable - related parties
Bonds payable - non-current

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.

b

2

Mandarin Airlines

Taiwan Airport Services
China Airlines, Ltd.

3

Taoyuan International Airport Services

4

AmountTransaction Criteria% of Total
Consolidated
Total Revenue
or Assets$ 261,152
129,671
210,154250,000

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

0.08
0.40
0.07
0.08

Sales revenue

129,671

The same as ordinary transactions

0.40

c
b

Terminal and landing fees
Financial assets at amortized cost

189,853
250,000

The same as ordinary transactions
The same as ordinary transactions

0.58
0.08

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

bbc

Airport service revenue
Accounts receivable - related parties
Airport service revenue

261,152
210,154
197,179

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

0.08
0.07
0.61

Taiwan Airport Services

Mandarin Airlinesc

Operating revenue

189,853

The same as ordinary transactions

0.58

5

CAL Park

Cal Hotel Co., Ltd.

c

Operating revenue

114,281

The same as ordinary transactions

0.35

6

Cal Hotel Co., Ltd.

CAL Parkc

Operating revenue

114,281

The same as ordinary transactions

0.35

7

Tigerair Taiwan Ltd.

Taoyuan International Airport Servicec

Terminal and landing fees

197,179

The same as ordinary transactions

0.61

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.

- 65 -TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIESINFORMATION OF MAJOR STOCKHOLDERS
FOR THE THREE MONTHS ENDED MARCH 31, 2020

SharesNumber ofPercentage ofSharesOwnership (%)

Name of Major Stockholder

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

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

34.44
9.59

Note 1: The table presents information provided by the Taiwan Depository & Clearing Corporation on
stockholders holding greater than 5% of the Company’s common shares that have completed theprocess of dematerialized registration and delivery as of the last business day for the current quarter.
Number of shares in the consolidated financial report may differ from actual number of dematerialized
securities that have completed the process of registration and delivery due to different basis ofcomputation.
Note 2: If the stockholders transferred shares for trust, the accounts are disclosed separately by the principal
who opened a trust account for the subcontractor. Insiders’ shares of stockholders who held more than
10% of shares based on the laws and regulations of securities transaction include those held by thestockholders plus the shares for trust while the stockholders have controlling interest over trusted
property. For the stockholder’s rights in filing information of insiders, please refer to the Market
Observation Post System website.

- 66 -