China Airlines, Ltd.
Financial Statements for theYears Ended December 31, 2020 and 2019 andIndependent Auditors’ ReportINDEPENDENT AUDITORS’ REPORTThe Board of Directors and the Shareholders
China Airlines, Ltd.
OpinionWe have audited the accompanying financial statements of China Airlines, Ltd. (the “Company”),
which comprise the balance sheets as of December 31, 2020 and 2019, and the statements ofcomprehensive income, changes in equity and cash flows for the years then ended, and the notes tothe financial statements, including a summary of significant accounting policies (collectively
referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Company as of December 31, 2020 and 2019, and its financial
performance and its cash flows for the years then ended in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and other regulations.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and Attestationof Financial Statements by Certified Public Accountants and auditing standards generally acceptedin the Republic of China. Our responsibilities under those standards are further described in the
Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the Company in accordance with The Norm of Professional Ethics for Certified
Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the year ended December 31, 2020. These matters wereaddressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter in the audit of the Company’s financial statements is stated below:
Recognition of Cargo Revenue
In accordance with IFRS 15 “Revenue from Contracts with Customers”, cargo sales are accounted
for as cargo revenue after relevant transportation services have been provided. For the year ended
December 31, 2020, cargo revenue amounted to NT$81,692,574 thousand. Refer to Notes 4 and 26
to the accompanying financial statements for detailed information.

-1-

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

We understood the internal controls related to the recognition of cargo, including manual andautomatic control.

2.

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

3.

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

Other Matter - Audit by Other Independent Auditors
The financial statements of some investments accounted for using the equity method in Note 13
were audited by other independent auditors, and our audit opinion is based solely on the reports ofother auditors. As of December 31, 2020, the aforementioned investments accounted for using theequity method amounted to NT$2,304,113 thousand, representing 0.88% of total assets. For theyear ended December 31, 2020, comprehensive income (loss) (including share of profit or loss of
subsidiaries, associates and joint ventures and share of other comprehensive income (loss) of
subsidiaries, associates and joint ventures accounted for using the equity method) amounted to
NT$(952,289) thousand.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate theCompany or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including the audit committee and supervisors, are responsible foroverseeing the Company’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with the auditing standards generally accepted in the
Republic of China will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of thesefinancial statements.

-2-

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

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

2.

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

3.

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

4.

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

5.

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

6.

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

We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those mattersthat were of most significance in the audit of the financial statements for the year ended December
31, 2020 and are therefore the key audit matters. We describe these matters in our auditors’ report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

-3-

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

Deloitte & Touche
Taipei, Taiwan
Republic of China
March 18, 2021

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

-4-CHINA AIRLINES, LTD.
BALANCE SHEETSDECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars)

2020
Amount%2019
Amount$ 19,959,820
5,863,137
7,613,636
9,198,055
101,424
427,72260,1298,093,152
89,296452,414

8
2
3
4
3
-

$ 20,626,014
434
1,460,450
9,588
7,694,431
232,386
560,819
52,776
8,246,515
2,106,199

8
3
3
151,858,785

20

40,989,612

15

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

5
48
21
1
2
3

107,856
13,482,877
131,029,886
64,262,830
2,047,448
971,298
4,757,142
11,227,556

5
49
24
1
2
4

209,050,980

80

227,886,893

85$ 260,909,765

100$ 268,876,505

100

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 30)
Financial assets at fair value through profit or loss - current (Notes 4, 7 and 30)
Financial assets at amortized cost - current (Notes 9 and 30)
Financial assets for hedging - current (Notes 4, 6 and 30)
Notes and accounts receivables, net (Notes 4, 10 and 30)
Accounts receivables - related parties (Note 31)
Other receivables
Current tax assets (Notes 4 and 27)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4 and 12)
Other current assets (Note 17)
Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4, 8 and 30)
Investments accounted for using the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 14 and 32)
Right-of-use assets (Notes 4, 20 and 32)
Investment properties (Notes 4 and 15)
Other intangible assets (Notes 4 and 16)
Deferred tax assets (Notes 4 and 27)
Other non-current assets (Notes 17, 20 and 30)
Total non-current assets
TOTAL

%

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term bills payable (Notes 18 and 30)
Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 30)
Financial liabilities for hedging - current (Notes 4, 20 and 30)
Notes and accounts payable (Note 30)
Accounts payable - related parties (Note 31)
Other payables (Notes 21 and 26)
Tax liabilities - current
Lease liabilities - current (Notes 4 and 20)
Contract liabilities current (Notes 4 and 22)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 19, 30 and 31)
Loans and debts - current portion (Notes 18, 30 and 32)
Other current liabilities

11,7498,610,015
1,222,410
1,469,434
10,892,203
695,215
18,584,287
10,000,000
13,708,320
2,806,540

3
1
4
7
4
5
1

22

68,000,173

25

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

13
4
26
1
5
4
3
-

42,420,205
22,352,625
48,618,168
2,236,311
9,431,736
399,253
10,909,262
7,588,745
366,255

16
8
18
1
4
4
3
-

Total non-current liabilities

146,610,272

56

144,322,560

54

Total liabilities

203,350,282

78

212,322,733

79

54,209,846
1,187,327

21-

54,209,846
2,488,907

20
1(350,581)(350,581)
2,543,766(30,875)1-

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

57,559,483

22

56,553,772

21$ 260,909,765

100$ 268,876,505

100

Total current liabilities
NON-CURRENT LIABILITIESFinancial liabilities for hedging - non-current (Notes 4, 20 and 30)
Bonds payable (Notes 4, 19, 30 and 31)
Loans and debts (Notes 18, 30 and 32)
Contract liabilities (Notes 4 and 22)
Provisions (Notes 4 and 23)
Deferred tax liabilities (Notes 4 and 27)
Lease liabilities - non-current (Notes 4 and 20)
Accrued pension costs (Notes 5 and 24)
Other non-current liabilities

EQUITY (Notes 19 and 25)
Share capital
Capital surplus
Retained earnings (accumulated deficit)
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficit)
Total retained earnings
Other equity
Treasury shares
Total equity
TOTAL

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

-5-$8,088,882
8,126,239
1,128,517
588,234
7,128,080
2
842,592
3,218,846
12,132,859
14,798,442
687,317

3
3
1
3
1
5
6
-

56,740,010$

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

2020
Amount%2019
Amount%REVENUE (Notes 4, 26 and 31)$ 106,327,123

100$ 146,372,401

100

COSTS (Notes 4, 11, 26 and 31)

95,190,179

89

135,008,166

92

GROSS PROFIT

11,136,944

11

11,364,235

8

OPERATING EXPENSES (Notes 4, 26 and 31)

6,252,089

6

11,284,000

8

OPERATING PROFIT

4,884,855

5

80,235-

440,761(523,827)(2,780,363)(3)524,233(569,582)(3,034,172)(2)(1,850,331)(2)

1,811,960

1(4,713,760)(5)(1,267,561)(1)

PROFIT (LOSS) BEFORE INCOME TAX

171,095-(1,187,326)(1)

INCOME TAX EXPENSE (Notes 4 and 27)

31,095-

12,472-NET INCOME (LOSS)

140,000-(1,199,798)(1)(474,202)-(17,705)-

39,305-24,490-(494,218)(1)(562,259)-(9,095)-(72,718)(Continued)

NON-OPERATING INCOME AND EXPENSES
Other income (Note 26)
Other gains and losses (Notes 12, 13, 14 and 26)
Finance costs (Notes 26 and 31)
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:
Loss on hedging instruments subject to basis
adjustments (Notes 4, 25 and 30)
Unrealized (loss) gain on investments in equity
instruments designated as at fair value throughother comprehensive income (Notes 4 and 25)
Remeasurement of defined benefit plans (Notes 4
and 24)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method (Notes 4 and 25)-6-

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

2020
AmountIncome tax relating to items that will not bereclassified subsequently to profit or loss
(Note 27)
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translation of thefinancial statements of foreign operations(Notes 4 and 25)
Share of the other comprehensive loss of
associates and joint ventures accounted forusing the equity method (Notes 4 and 25)
Gain on hedging instruments not subject to basis
adjustment (Notes 4, 25 and 30)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 27)$

Other comprehensive income (loss) for the year,
net of income tax
TOTAL COMPREHENSIVE INCOME (LOSS) FOR
THE YEAR$EARNINGS (LOSS) PER SHARE (NEW TAIWANDOLLARS; Note 28)
Basic
Diluted%163,172-(101,142)--(59,174)

-

4,205

-

(13,259)-

2,098,393

2

1,425,306

1(399,450)-(273,227)-

826,9681

552,7131

966,9681(647,085)

-

0.03
0.03

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

$%

101,259

$
$

-7-

2019
Amount$$$(0.22)(0.22)(Concluded)

CHINA AIRLINES, LTD.
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars)

Retained Earnings

Share Capital

Capital Surplus

Legal Reserve

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

Basis adjustments to gain on hedging instruments--

Appropriation of 2018 earnings
Legal reserve
Special reserve
Cash dividends - $0.20960737 per share-

Changes in capital surplus from investments in associates andjoint ventures accounted for using the equity method

BALANCE AT JANUARY 1, 2019

118,810$ 1,144,928

-

-

-

-

-

-

(603)

-

114,493-(105,843)-(114,493)
105,843(1,136,278)

-

-

-

-

(1,136,278)

-

606

-

-

-

-

-

-

-

606

Actual disposal or acquisition of interests in subsidiaries-

1,247,087

-

-

-

-

-

-

-

1,247,087

Net loss for the year ended December 31, 2019

-

-

-

-

(1,199,798)

-

-

-

-

(1,199,798)

Other comprehensive income (loss) for the year ended
December 31, 2019, net of income tax

-

-

-

-

(577,427)(53,411)64,538

1,119,013-

552,713

Total comprehensive income (loss) for the year ended
December 31, 2019

-

-

-

-

(1,777,225)(53,411)64,538

1,119,013-(647,085)

Changes in capital surplus from investments in associates andjoint ventures accounted for using the equity method

-

-

-

-

-

8,368

105

-

-

8,473

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

Issuance of employee share options by subsidiaries

-

172

-

-

-

-

-

-

-

172

Changes in percentage of ownership interests in subsidiaries

-

-

-

-

(169,272)

-

-

-

-

(169,272)

Basis adjustment to gain on hedging instruments

-

-

-

-

-

-

-

200,989-

200,989

Appropriation of 2019 earnings
Legal reserve
Special reserve
Capital surplus used to cover accumulated deficit-(1,297,843)(466,416)-(12,967)-

466,416
12,967
1,297,843

-

-

-

-

-

Net profit for the year ended December 31, 2020

-

-

-

-

140,000

-

-

-

-

140,000

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

-

-

-

-

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

1,261,992-

826,968

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

-

-

-

-

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

1,261,992-

966,968

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

12,497

6,854$ 54,209,846$ 1,187,327

71,359$ 2,606,659(30,875)$ 57,559,483

-

$

-

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

-8-$(350,581)$(134,252)$$

42,619$25,268$

Total Equity

(603)

$

(9,664)

Treasury Shares
Held by
Subsidiaries$ 57,081,572

BALANCE AT DECEMBER 31, 2020$

Gain (Loss) on
Hedging
Instruments(43,372)

BALANCE AT DECEMBER 31, 2019351,923

UnappropriatedEarnings(Accumulated
Deficit)

Exchange
Differences on
Translation of the
Financial
Statements ofForeign Operations

Other Equity
Unrealized
Gain (Loss) on
Financial Assets at
Fair Value
Through Other
Comprehensive
Income$CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars)

2020
CASH FLOWS FROM OPERATING ACTIVITIESIncome (loss) before income tax
Adjustments for:
Depreciation expense
Amortization expense
Expected credit loss recognized on trade receivables
Net gain on fair value changes of financial assets and liabilities atfair value through profit or loss
Interest income
Dividend income
Share of loss (profit) of associates and joint ventures
Gain on disposal of property, plant and equipment
Gain on disposal of investments accounted for using the equity
methodLoss on disposal of non-current assets held for sale
Loss on inventories and property, plant and equipment
Impairment loss recognized on property, plant and equipment
Net (gain) loss on foreign currency exchange
Impairment loss recognized on investments accounted for using theequity method
Finance costs
Recognition of provisions
Loss on sale-leasebacks
OthersChanges in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities mandatorily classified as at fair value throughprofit 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
Cash generated from operations
Interest received
Dividends received

-9-

$

2019

171,095$ (1,187,326)

28,018,746
169,158
3,000

29,398,635
165,981
24,000(3,596)(208,081)(8,720)1,850,331(8,005)(25,700)(314,944)(10,112)(1,811,960)(26,377)

471,518
424,573(1,048,369)(7,656)
10,462571,960
41,292

46,7572,780,363
5,580,416
1,876

3,034,172
3,616,519
103,775
5

4,030

25,266(11,749)(1,467,229)
130,962
107,524(70,344)
1,701,803(59,328)(881,200)(3,724,692)(15,840,648)(705,117)(1,915,678)
134,432
15,643,828
228,141
842,919

11,5281,507,192
65,925101,047(128,037)
351,186
53,077(114,250)(731,599)
1,851,452(1,970,226)(120,655)
93,70334,578,335
307,503
940,039(Continued)

CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars)

2020

2019

$ (2,966,777)(23,308)$ (3,038,729)(41,260)

13,724,803

32,745,888(5,896,451)
1,460,450(10,269,055)
2,363,897(1,837,845)(859,654)
23,385-(1,467,317)
2,310,000(35,525)(2,397,742)
38,59635,692(18,214)
34,599(9,966,342)(95,217)

1,713,825(387,244)
104,825(13,699,043)(157,571)(25,060,447)(13,941,504)

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

3,500,000(4,445,900)
4,905,660
5,500,000(15,336,255)(9,666,313)
167,034(133,938)(1,136,278)

Net cash generated from (used in) financing activities

10,486,387(16,645,990)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES

183,063(220,402)

NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS(666,194)1,937,992

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

20,626,014

18,688,022

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 19,959,820$ 20,626,014

Interest paid
Income tax paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of financial assets at amortized cost
Disposal of financial assets at amortized cost
Payments to acquire financial assets for hedging
Proceeds from disposal of financial assets for hedging
Acquisition of investments accounted for using the equity method
Payments for disposal of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of non-current assets held for sale
Proceeds from disposal of investments accounted for using the equity
methodIncrease in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software costs
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term bill payable
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds from sale-leasebacks
Proceeds from long-term debts
Repayments of long-term debts
Repayments of the principal portion of lease liabilities
Proceeds from guarantee deposits received
Refunds of guarantee deposits received
Dividends paid to owners of the Company

The accompanying notes are an integral part of the financial statements.
- 10 -(Concluded)

CHINA AIRLINES, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its shares have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine aircraft
maintenance; (c) major maintenance of flight equipment; (d) communications and data processing services
to other airlines; (e) the sale of aircraft parts, equipment and the entire aircraft; and (f) leasing of aircraft.
The major shareholders of the Company are China Aviation Development Foundation (CADF) andNational Development Fund (NDF), Executive Yuan. As of December 31, 2020 and 2019, CADF and NDF
jointly held 44.03% of the Company’s shares. As of December 31, 2020 and 2019, the Company had
11,534 and 12,175 employees, respectively.

2. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Company’s board of directors on March 18, 2021.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. Initial application of the amendments to the International Financial Reporting Standards (IFRS),International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC)(collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission(FSC)
Except for the following, the initial application of the IFRSs endorsed and issued into effect by the FSC
did not have material impact on the Company’s accounting policies:
Amendment to IFRS 16 “Covid-19-Related Rent Concessions”
The Company elected to apply the practical expedient provided in the amendment to IFRS 16 withrespect to rent concessions negotiated with the lessor as a direct consequence of the COVID-19. The
related accounting policies are stated in Note 4. Prior to the application of the amendment, theCompany shall determine whether or not the abovementioned rent concessions need to be accounted for
as lease modifications.
The Company applied the amendment from January 1, 2020. Because the abovementioned rent
concessions affect only in 2020, retrospective application of the amendment has no impact on theretained earnings as of January 1, 2020.

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b. The IFRSs endorsed by the FSC for application starting from 2021
Effective Date
Announced by IASBNew IFRSs

Amendments to IFRS 4 “Extension of the Temporary Exemption from Effective immediately upon
Applying IFRS 9”
promulgation by the IASB
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
January 1, 2021
“Interest Rate Benchmark Reform - Phase 2”
As of the date the financial statements were authorized for issue, the Company is continuously
assessing the possible impact that the application of other standards and interpretations will have on the
Company’s financial position and financial performance and will disclose the relevant impact when theassessment is completed.
c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date
Announced by IASB (Note 1)

New IFRSs“Annual Improvements to IFRS Standards 2018-2020”
Amendments to IFRS 3 “Reference to the Conceptual Framework”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IFRS 17
Amendments to IAS 1 “Classification of Liabilities as Current or
Non-current”
Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Definition of Accounting Estimates”
Amendments to IAS 16 “Property, Plant and Equipment - Proceeds
before Intended Use”
Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling aContract”

January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 6)
January 1, 2023 (Note 7)
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods
beginning on or after their respective effective dates.
Note 2: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges offinancial liabilities that occur on or after the annual reporting periods beginning on or afterJanuary 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively tothe fair value measurements on or after the annual reporting periods beginning on or afterJanuary 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied
retrospectively for annual reporting periods beginning on or after January 1, 2022.
Note 3: The amendments are applicable to business combinations for which the acquisition date is on
or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 4: The amendments are applicable to property, plant and equipment that are brought to thelocation and condition necessary for them to be capable of operating in the manner intended
by management on or after January 1, 2021.
Note 5: The amendments are applicable to contracts for which the entity has not yet fulfilled all its
obligations on January 1, 2022.

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Note 6: The amendments will be applied prospectively for annual reporting periods beginning on orafter January 1, 2023.
Note 7: The amendments are applicable to changes in accounting estimates and changes in accounting
policies that occur on or after the beginning of the annual reporting period beginning on orafter January 1, 2023.
The application of new IFRSs in issue but not yet endorsed and issued into effect by the FSC would nothave any material impact on the Company’s accounting policies. As of the date the financial statements
were authorized for issue, the Company is continuously assessing the possible impact that theapplication of other standards and interpretations will have on the Company’s financial position andfinancial performance and will disclose the relevant impact when the assessment is completed.

4. SIGNIFICANT ACCOUNTING POLICIESStatement of Compliance
The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers and other regulations.
Basis of Preparation
The financial statements have been prepared on the historical cost basis except for financial instruments
which are measured at fair value.
The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fairvalue measurement inputs are observable and based on the significance of the inputs to the fair value
measurement in its entirety, are described as follows:a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); andc. Level 3 inputs are unobservable inputs for an asset or liability.
When preparing these parent company only financial statements, the Company used the equity method toaccount for its investments in subsidiaries, associates and joint ventures. In order for the amounts of the net
profit for the year, other comprehensive income for the year and total equity in the parent company only
financial statements to be the same with the amounts attributable to the owners of the Company in its
standalone financial statements, adjustments arising from the differences in accounting treatments between
the parent company only basis and the standalone basis were made to investments accounted for using theequity method, the share of profit or loss of subsidiaries, associates and joint ventures, the share of othercomprehensive income of subsidiaries, associates and joint ventures and the related equity items, as
appropriate, in these parent company only financial statements.
Current and Non-current Assets and Liabilities
Current assets include:a. Assets held primarily for the purpose of trading;b. Assets expected to be realized within 12 months after the reporting period; and- 13 -

c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period.
Current liabilities include:a. Liabilities held primarily for the purpose of trading;b. Liabilities due to be settled within 12 months after the reporting period; andc. Liabilities for which the Company does not have an unconditional right to defer settlement for at least
12 months after the reporting period.
Assets and liabilities that are not classified as current are classified as non-current.
Foreign Currencies
In preparing the financial statements of the Company, transactions in currencies other than the Company’sfunctional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of
the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items that are measured at historical cost in aforeign currency are not retranslated. Non-monetary items measured at fair value that are denominated inforeign currencies are retranslated at the rates prevailing at the date when the fair value was determined.
Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;
b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.
Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.
For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign
operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising are recognized in other comprehensive income (attributed to the owners of theCompany and non-controlling interests as appropriate).
On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.
Inventories
Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sale and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.

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Non-current Assets Held for Sale
Non-current assets are classified as held-for-sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the Non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.
Non-current assets classified as held-for-sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.
Investments Accounted for by the Equity Method
Investments in subsidiaries, associates and jointly controlled entities are accounted for by the equity
method.
a. Investment in subsidiaries
Subsidiaries (including special purpose entities) are the entities controlled by the Company.
Under the equity method, the investment is initially recognized at cost and the carrying amount isincreased or decreased to recognize the Company’s share of the profit or loss and other comprehensive
income of the subsidiary after the date of acquisition. Besides, the Company also recognizes theCompany’s share of the changes in other equity of the subsidiary.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s lossof control over the subsidiaries are accounted for as equity transactions. Any difference between the
carrying amounts of the investment and the fair value of the consideration paid or received isrecognized directly in equity.
When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary(which includes any carrying amount of the investment in subsidiary accounted for by the equity
method and long-term interests that, in substance, form part of the Company’s net investment in thesubsidiary), the Company continues recognizing its share of further losses.
The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired isrecognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net
identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.
When the Company ceases to have control over a subsidiary, any retained investment is measured atfair value at that date and the difference between the previous carrying amount of the subsidiary
attributable to the retained interest and its fair value is included in the determination of the gain or loss.
Furthermore, the Company accounts for all amounts previously recognized in other comprehensive
income in relation to that subsidiary on the same basis as would be required if the Company had
directly disposed of the related assets or liabilities.
Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits andlosses from upstream with a subsidiary and side stream transactions between subsidiaries are recognizedin the Company’s financial statements only to the extent of interests in the subsidiary that are notrelated to the Company.

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b. Investments in associates and joint ventures
An associate is an entity over which the Company has significant influence and that is neither asubsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby theCompany and other parties that have joint control of the arrangement and the rights to the net assets of
the arrangement.
The Company uses the equity method to account for its investments in associates and joint ventures.
Under the equity method, an investment in an associate and jointly controlled entity is initiallyrecognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss andother comprehensive income of the associate and jointly ventures. The Company also recognizes thechanges in the Company’s share of equity of associates and jointly ventures attributable to theCompany.
When the Company subscribes for additional new shares of an associate and joint ventures at apercentage different from its existing ownership percentage, the resulting carrying amount of theinvestment differs from the amount of the Company’s proportionate interest in the associate and joint
ventures. The Company records such a difference as an adjustment to investments with thecorresponding amount charged or credited to capital surplus. If the Company’s ownership interest is
reduced due to the subscription of additional new shares of the associate and jointly controlled entity,
the proportionate amount of the gains or losses previously recognized in other comprehensive income inrelation to that associate and joint ventures is reclassified to profit or loss on the same basis as would be
required had the investee directly disposed of the related assets or liabilities. When the adjustment
should be debited to capital surplus, but the capital surplus recognized from investments accounted forusing the equity method is insufficient, the shortage is debited to retained earnings.
When the Company’s share of losses of an associate and joint ventures equals or exceeds its interest inthat associate and joint ventures which includes any carrying amount of the investment accounted forusing the equity method and long-term interests that, in substance, form part of the Company’s net
investment in the associate and joint ventures entity, the Company discontinues recognizing its share offurther losses. Additional losses and liabilities are recognized only to the extent that the Company has
incurred legal obligations, or constructive obligations, or made payments on behalf of that associate andjoint ventures.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets and liabilities of an associate and joint ventures recognized at the date of acquisition isrecognized as goodwill, which is included within the carrying amount of the investment and is notamortized. Any excess of the Company’s share of the net fair value of the identifiable assets andliabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single
asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is
not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment.
Any reversal of that impairment loss is recognized to the extent that the recoverable amount of theinvestment subsequently increases.
The Company discontinues the use of the equity method from the date on which it ceases to havesignificant influence and joint control. Any retained investment is measured at fair value at that date andthe fair value is regarded as its fair value on initial recognition as a financial asset. The difference
between the previous carrying amount of the associate and the jointly controlled entity attributable to
the retained interest and its fair value is included in the determination of the gain or loss on disposal of
the associate and the jointly controlled entity. The Company accounts for all amounts previously
recognized in other comprehensive income in relation to that associate and the jointly controlled entity
on the same basis as would be required if that associate had directly disposed of the related assets or
liabilities.

- 16 -

When the Company transacts with its associate and joint ventures, profits and losses resulting from thetransactions with the associate are recognized in the Company’ financial statements only to the extent ofinterests in the associate and the jointly controlled entity that are not related to the Company.
Property, Plant and Equipment
Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes and are expected to be used for more than
one period. The cost of an item of property, plant and equipment shall be recognized as an asset if, and only
if, it is probable that future economic benefits associated with the item will flow to the Company; and thecost of the item can be measured reliably. Property, plant and equipment are stated at cost less recognizedaccumulated depreciation and recognized accumulated impairment loss.
Freehold land is not depreciated.
Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation methods are reviewed at the end of eachreporting period, with the effects of any changes in the estimates accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. Assets are depreciated over the shorter of the lease term and their useful lives using the straight-line
method.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.
Investment Properties
Investment properties are properties held to earn rentals or for capital appreciation. Investment properties
also include land held for a currently undetermined future use.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.
Any gain or loss arising on the derecognition of investment properties is calculated as the difference
between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss inthe period in which the property is derecognized.
Intangible Assets
Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, andamortization methods are reviewed at the end of each reporting period, with the effects of any changes inthe estimates being accounted for on a prospective basis. The residual value of an intangible asset with afinite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset
before the end of its economic life.

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Impairment of Tangible and Intangible Assets Other Than Goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its tangible andintangible assets, excluding goodwill, to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimatedin order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit towhich the asset belongs. Corporate assets are allocated to the individual cash-generating units on areasonable and consistent basis; otherwise, corporate assets are allocated to the smallest group of
cash-generating units on a reasonable and consistent allocation basis.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the Company uses the estimated cash flows discounted by the future pre-tax discount rate, and thediscount rate reflects the current market time value of money and the specific risks to the asset for estimatedfuture cash flows not yet adjusting to the market.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
When an impairment loss is subsequently is reversed, the carrying amount of the asset or cash-generating
unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying
amount that would have been determined had no impairment loss been recognized for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.
Financial Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to thecontractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issuance of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of thefinancial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized
immediately in profit or loss.
a. Financial assets
All regular purchases or sales of financial assets are recognized and derecognized on a trade date basis.
All regular purchases or sales of financial assets are buy or sell of financial assets in the period set byregulation or market convention.
1) Measurement category
Financial assets are classified into the following categories: Financial assets at FVTPL, financial
assets at amortized cost, and investments in equity instruments at FVTOCI.
a) Financial assets at FVTPL
Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified
or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include
investments in equity instruments which are not designated as at FVTOCI and debt instrumentsthat do not meet the amortized cost criteria or the FVTOCI criteria.
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Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses
arising on remeasurement recognized in profit or loss. Fair value is determined in the manner
described in Note 31.
b) Financial assets at amortized cost
Financial assets that meet the following conditions are subsequently measured at amortized
cost:
i. The financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; andii. The contractual terms of the financial asset give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, financial assets at amortized cost, including cash and cash
equivalents, trade receivables, other receivables and other financial assets, are measured atamortized cost, which equals the gross carrying amount determined using the effective interest
method less any impairment loss. Exchange differences are recognized in profit or loss.
Interest income is calculated by applying the effective interest rate to the gross carrying amountof a financial asset.
Cash equivalents include time deposits with original maturities within 3 months from the date ofacquisition, which are highly liquid, readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. These cash equivalents are held for the
purpose of meeting short-term cash commitments.
c) Investments in equity instruments at FVTOCI
On initial recognition, the Company may make an irrevocable election to designate investmentsin equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if an equity
investment is held for trading or if it is contingent consideration recognized by an acquirer in abusiness combination.
Investments in equity instruments at FVTOCI are subsequently measured at fair value withgains and losses arising from changes in fair value recognized in other comprehensive income
and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit orloss on disposal of the equity investments; instead, they will be transferred to retained earnings.
Dividends on these investments in equity instruments are recognized in profit or loss when the
Company’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of an investment.
2) Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on financial assets at
amortized cost (including trade receivables), as well as contract assets.
The Company always recognizes lifetime expected credit losses (ECLs) for trade receivables andother receivables. For all other financial instruments, the Company recognizes lifetime ECLs when
there has been a significant increase in credit risk since initial recognition. If, on the other hand, thecredit risk on a financial instrument has not increased significantly since initial recognition, theCompany measures the loss allowance for that financial instrument at an amount equal to 12-month
ECLs.
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Expected credit losses reflect the weighted average of credit losses with the respective risks of a
default occurring as the weights. Lifetime ECL represents the expected credit losses that will result
from all possible default events over the expected life of a financial instrument. In contrast,
12-month ECL represents the portion of lifetime ECL that is expected to result from default eventson a financial instrument that are possible within 12 months after the reporting date.
The impairment loss of all financial assets is recognized in profit or loss by a reduction in theircarrying amounts through a loss allowance account, except for investments in debt instruments thatare measured at FVTOCI, for which the loss allowance is recognized in other comprehensive
income and the carrying amounts of such financial assets are not reduced.
3) Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.
On derecognition of a financial asset at amortized cost in its entirety, the difference between theasset’s carrying amount and the sum of the consideration received and receivable is recognized in
profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference
between the asset’s carrying amount and the sum of the consideration received and receivable andthe cumulative gain or loss which had been recognized in other comprehensive income isrecognized in profit or loss. However, on derecognition of an investment in an equity instrument at
FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable is recognized in profit or loss, and the cumulative gain or loss which had
been recognized in other comprehensive income is transferred directly to retained earnings, without
recycling through profit or loss.
b. Equity instruments
Debt and equity instruments issued by the Company are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of afinancial liability and an equity instrument.
Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue
costs.
Repurchase of the Company’s own equity instruments is recognized in and deducted directly fromequity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.
c. Financial liabilities
1) Subsequent measurement
Except for financial liabilities at FVTPL, all financial liabilities are measured at amortized costusing the effective interest method.
2) Derecognition of financial liabilities
The difference between the carrying amount of a financial liability derecognized and theconsideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in
profit or loss.

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d. Convertible bonds
The component parts of compound instruments (i.e. convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.
On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized and includedin equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which case,the balance recognized in equity will be transferred to capital surplus - share premiums. When theconversion option remains unexercised at maturity, the balance recognized in equity will be transferred
to capital surplus - share premiums.
Transaction costs that relate to the issuance of the convertible notes are allocated to the liability andequity components in proportion to the allocation of the gross proceeds. Transaction costs relating to
the equity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.
e. Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options swaps and fuel swaps.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gain orloss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event, the timing of the recognition in profit or loss depends on the natureof the hedging relationship. When the fair value of a derivative financial instrument is positive, thederivative is recognized as a financial asset; when the fair value of a derivative financial instrument isnegative, the derivative is recognized as a financial liability.
Derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of
IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid
contract. Derivatives embedded in non-derivative host contracts that are not financial assets within thescope of IFRS 9 (e.g., financial liabilities) are treated as separate derivatives when they meet thedefinition of a derivative, their risks and characteristics are not closely related to those of the hostcontracts, and the host contracts are not measured at FVTPL.
Hedge Accounting
The Company enters into some derivative transactions that aim to manage interest rates, foreign exchange
rates, fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging
transactions are defined as cash flow hedges. When entering into hedging transactions, the Company has
prepared official documents that describe the hedging relationship between hedging instruments and items
which have been hedged, the objective of risk management, the hedging strategy, and the way to evaluate
the effectiveness of the hedging instrument.

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The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.
The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period as when the hedged item affects profit or loss. If a hedge of a forecasted transaction
subsequently results in the recognition of a non-financial asset or a non-financial liability, the associatedgains and losses that were recognized in other comprehensive income are removed from equity and areincluded in the initial cost of the non-financial asset or non-financial liability.
Starting from 2018, the Company discontinues hedge accounting only when the hedging relationship ceases
to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or
exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized inother comprehensive income from the period in which the hedge was effective remains separately in equity
until the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur, thegain or loss accumulated in equity is recognized immediately in profit or loss.
Provisions
The Company recognizes provisions when the Company has a present obligation (legal or constructive)
arising from past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.
The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows. When the aircraft lease contracts expire and will
be returned to lessor, the Company will assess if there are existing obligations and if a provision is required
when signing the lease contract.
Revenue Recognition
The Company recognizes revenue by applying the following steps:






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

Shipping service revenue
Passenger and cargo revenue are recognized as revenue when the passengers and goods are actually carried.
When the tickets are sold, due to the fact that the fulfillment obligations of the shipment have not been met,
the relevant amount of revenue is first recorded as contract liabilities until passengers actually board.
Leasing
At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.
The Company as lessee
The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date ofa lease, except for short-term leases and low-value asset leases accounted for applying a recognition
exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.
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Right-of-use assets are initially measured at cost, which comprises the initial measurement of leaseliabilities adjusted for lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives
received. Right-of-use assets are subsequently measured at cost less accumulated depreciation andimpairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets arepresented on a separate line in the balance sheets.
Right-of-use assets are depreciated using the straight-line method from the commencement dates to theearlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. However, if
leases transfer ownership of the underlying assets to the Company by the end of the lease terms or if thecosts of right-of-use assets reflect that the Company will exercise a purchase option, the Company
depreciates the right-of-use assets from the commencement dates to the end of the useful lives of theunderlying assets.
Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed
payments, in-substance fixed payments, variable lease payments which depend on an index or a rate,
residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option, and payments of penalties for terminating a lease if the lease term reflects suchtermination, less any lease incentives payable. The lease payments are discounted using the interest rate
implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, theCompany uses the lessee’s incremental borrowing rate.
Subsequently, lease liabilities are measured at amortized cost using the effective interest method, withinterest expense recognized over the lease terms. When there is a change in a lease term, a change in theamounts expected to be payable under a residual value guarantee, a change in the assessment of an option topurchase an underlying asset, or a change in future lease payments resulting from a change in an index or arate used to determine those payments, the Company remeasures the lease liabilities with a corresponding
adjustment to the right-of-use-assets. Lease liabilities are presented on a separate line in the balance sheets.
Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods
in which they are incurred.
For sale and leaseback transactions, if the transfer of an asset satisfies the requirements of IFRS 15 to beaccounted for as a sale, the Company recognizes only the amount of any gain or loss which relates to therights transferred to the buyer-lessor, and adjusts the off-market terms to measure the sale proceeds at fairvalue. If the transfer does not satisfy the requirements of IFRS 15 to be accounted for as a sale, it isaccounted for as a financing transaction.
Employee Benefits
a. Short-term employee benefits
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related services.
b. Retirement benefits
Payments to the defined contribution retirement benefit plan are recognized as expenses whenemployees have rendered services entitling them to the contributions.
Defined benefit costs (including service cost, net interest and remeasurement) under the defined
contribution retirement benefit plan are determined using the projected unit credit method. Service cost(including current service cost and past service cost) and net interest on the net defined benefit
liabilities (assets) are recognized as employee benefits expense in the period in which they occur.
Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest),- 23 -

is recognized in other comprehensive income in the period in which it occurs. Remeasurement
recognized in other comprehensive income is reflected immediately in retained earnings and will not bereclassified to profit or loss.
Net defined benefit liabilities (assets) represent the actual deficit in the Company’s defined benefit
plans.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets which are substantially ready for their intended use or sale through a fairly long period) are added tothe cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period
in which they are incurred.
Government Grants
Government grants are not recognized until there is reasonable assurance that the Company will comply
with the conditions attached to them and that the grants will be received.
Government grants are recognized in profit or loss on a systematic basis over the periods in which theCompany recognizes as expenses the related costs for which the grants are intended to compensate.
Government grants that are receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Company with no future related costs are recognizedin profit or loss in the period in which they are received.
The benefit of a government loan received at a below-market rate of interest is treated as a government
grant measured as the difference between the proceeds received and the fair value of the loan based onprevailing market interest rates.
Frequent Flyer Programs
The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member rewards.
A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
Company recognizes this deferred revenue as revenue only when the Company has fulfilled its obligations
on the granting of rewards or when the period for converting the mileage to rewards has expired.
Share-based Payment Arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Company’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the granted share options are vested immediately.

- 24 -

Taxation
Income tax expense represents the sum of the current tax and deferred tax.
a. Current tax
The current tax liabilities are based on current taxable profit. Since part of the income and expenses aretaxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the statements of comprehensive
income. The Company’s current tax liabilities are calculated by the tax rate was legislated or
substantially legislated at the balance sheet date.
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the shareholders approve the retention of these earnings.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
b. Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred
tax assets are generally recognized for all deductible temporary differences, unused loss carryforwards
and unused tax credits for purchases of machinery, equipment and technology, research anddevelopment expenditures, and personnel training expenditures to the extent that it is probable thattaxable profit will be available against which those deductible temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates and interests in joint ventures, except where the Company is able to control
the reversal of the temporary difference and it is probable that the temporary difference will not reversein the foreseeable future. Deferred tax assets arising from deductible temporary differences associatedwith such investments and interests are only recognized to the extent that it is probable that there will be
sufficient taxable profit against which to utilize the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period inwhich the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that havebeen enacted or substantively enacted by the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences that would follow from the manner in which theCompany expects, at the end of the reporting period, to recover or settle the carrying amount of its
assets and liabilities.
c. Current and deferred taxes for the year
Current and deferred taxes are recognized in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity, in which case, the current and deferredtaxes are also recognized in other comprehensive income or directly in equity, respectively.

- 25 -

Maintenance and Overhaul Costs
Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.
The overhaul costs of an owned or leased aircraft that meet the criteria for fixed asset capitalization are
capitalized as replacements for aircraft and engines and are depreciated on a straight line basis over the
expected annual overhaul cycle.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
In the application of the Company’s accounting policies as disclosed in Note 4, management is required tomake judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other factors that are considered relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised if the revisions affect only that
period or in the period of the revisions and future periods if the revisions affect both current and future
periods.
Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year are discussed below.
Defined Benefit Obligations
The present value of defined benefit obligations at the end of the reporting period is calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgments and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may have amaterial impact on the amount of defined benefit obligations.

6. CASH AND CASH EQUIVALENTS
December 31
2020
Cash on hand and revolving funds
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds- 26 -$

65,987
12,864,010

2019$

58,661
4,867,015

5,880,682
1,149,141

12,662,162
3,038,176$ 19,959,820$ 20,626,014

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

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

2020

2019

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

0.01%-1.90%
0.60%-2.55%
0.55%-0.70%

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

Maturity Date
December 31, 20202021.1.4-2021.11.1

Carrying
Value

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

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

$ (372,632)

The amount of hedging instrument settlements recognized as prepayments for equipment in 2020 was$81,111 thousand.

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

2019

Financial assets - current
Financial assets mandatorily classified at FVTPL
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts

$

-

$

434

$

-

$ 11,749

Financial liabilities - current
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts- 27 -

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

2020.01.15-2020.07.31

December 31, 2019
Buy forward contracts

NTD570,571/USD19,000

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

2019

Non-current
Foreign investments
Unlisted shares
Domestic investments
Unlisted shares$ 117,457$

80,991

29,704

26,865$ 147,161$ 107,856

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 Company’s strategy of holding these investments
for long-term purposes.

9. FINANCIAL ASSETS AT AMORTIZED COST
December 31
2020

2019

$ 5,863,137$ 1,460,450

Current
Time deposits with original maturities of more than 3 months

The range of interest rates for time deposits with original maturities of more than 3 months wasapproximately 0.40%-0.53% and 0.60%-2.44% per annum as of December 31, 2020 and 2019, respectively.

- 28 -

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE
December 31
2020
Notes receivable

$

2019
-

$

297,075

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

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

7,577,460(180,104)
7,397,356$ 9,198,055$ 7,694,431

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

- 29 -

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

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Total

Expected credit loss rate

-

1.04%

47.77%

100%

100%

-

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 9,167,202

Amortized cost

$ 9,167,143$

Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Total

Expected credit loss rate

0.03%

0.15%

15.89%

22.14%

100%-

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 6,070,753$ 1,241,766(2,052)(1,862)

Amortized cost

$ 6,068,701$ 1,239,904$

29,463

(59)

$

(309)
29,154

3,366$(1,608)
$

1,758

2,887

$

(2,887)$-

160,859$ 9,363,777(160,859)(165,722)-$ 9,198,055$

December 31, 2019$37,891$(6,020)$31,87173,058$(16,178)$

56,880

153,992$ 7,577,460(153,992)(180,104)-$ 7,397,356$

The movements of the loss allowance of accounts receivables were as follows:
For the Year Ended December 31
2020
2019
Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses$ 180,104
3,000(17,382)-$ 191,079
24,000(34,975)-

Balance at December 31$ 165,722$ 180,104

11. INVENTORIES
December 31

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

2020

2019

$ 7,251,353
627,437
214,362$ 7,390,981
571,601
283,933$ 8,093,152$ 8,246,515

The operating costs for the years ended December 31, 2020 and 2019 included losses from inventory
write-downs of 190,548 thousand and $317,629 thousand, respectively.

- 30 -

12. NON-CURRENT ASSETS HELD FOR SALE
December 31
2020
Aircraft held for sale2019

$ 89,296$-

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft
according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original
book value which was higher than the expected sale price and which was recognized as an impairment loss.
However, the actual loss shall be identified by the actual sale price.
In 2019, the Company completed the disposal procedures of some aircraft and recognized a loss on disposalof $10,462 thousand for the year ended December 31, 2019.
The fair value was determined by transactions of the related market, and the proposed sale price was basedon the current status of the aircraft. The fair value is classified as Level 3.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
December 31

Investments in subsidiaries
Investments in associates
Investments in jointly controlled entities

2020

2019

$ 11,155,607
282,471883,079$ 12,004,180
471,267
1,007,430$ 12,321,157$ 13,482,877

a. Investment in subsidiaries
December 31
2020

2019

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

2,304,113
1,605,033
1,223,259
1,188,110
1,556,133
602,688469,979
232,883
405,353
200,794
136,630
699,793
10,2707,643
512,926$ 11,155,607- 31 -$

1,946,328
1,552,310
1,494,603
1,276,546
1,517,946
737,245559,562460,213479,259
276,134
88,313921,989
25,2687,294
661,170$ 12,004,180

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

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

2020

2019

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

69%
54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
100%

100%
25%
54%

100%
25%
54%

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.
In order to prepare for 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 theCompany was resolved in the shareholders’ meeting of the Company on June 25, 2019. The shares shallbe subscribed by all shareholders of the Company on the basis of the percentage of shareholdings. For
the waiver of subscribed shares by the original shareholders or the undersubscribed portion, thechairman was authorized to designate specific persons for subscription. The subscription price was set
at $41 per share. In October and December 2019, the shares were fully paid and were completely
delivered and transferred. The amount of proceeds from disposal was $1,679,789 thousand, and therelated gain on disposal was $1,129,080 thousand and recognized as capital surplus.
To strengthen the capital structure of Tigerair Taiwan Co., Ltd., the board of directors of the Company
approved the plan to issue ordinary shares for cash at $25 per share on August 6, 2020. The Company
subscribed for 47,228 thousand shares in October 2020 and 26,286 thousand shares in November 2020.
Because the shares are subscribed at a percentage different from its existing ownership percentage, theCompany’s retained earnings decreased by $169,272 thousand.
The share of profit or loss of subsidiaries recognized under the equity method was as follows:

Share of profit (loss)- 32 -

20202019$ (1,590,853)$ 1,529,721

b. Investments in associates
December 31
2020

2019

$ 277,234
5,237$ 461,263
10,004$ 282,471$ 471,267

Unlisted companies
China Aircraft Services
Dynasty Holidays

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

China Aircraft Services
Dynasty Holidays (Note)

2020

2019

20%
20%

20%
20%

Note: Dynasty Holidays was listed as an associate on January 31, 2019.
The recognized investment income of associates accounted for using the equity method was as follows:2020
China Aircraft Services
Dynasty Holidays2019$ (102,758)(4,740)$10,36515$ (107,498)$

10,380The board of directors of the Company decided to sell a portion of the equity of its subsidiary, Dynasty
Holidays, to H.I.S. Taiwan Co., Ltd. on January 21, 2019 and completed the transaction on January 31,
2109. After the disposal of the equity, the Company’s issued share capital decreased from 51% to 20%.
Dynasty Holidays was classified as an associate since the Company lost control of the subsidiary.
Therefore, the relevant assets and liabilities were not consolidated in the current period and only the
profit and loss from January 1, 2019 to January 31, 2019 were consolidated. For information on thedisposal of the subsidiary, refer to Note 31.
c. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
December 31
2020
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

- 33 -

2019$695,959
149,353
37,767$801,070
168,547
37,813$

883,079$ 1,007,430

At the end of the reporting period, the percentages of ownership and voting rights in jointly controlled
entities held by the Company were as follows:
December 31

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2020

2019

51%
55%
49%

51%
55%
49%

The Company signed a joint venture agreement with the Taikoo Company to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe majority of voting power in the board of directors to pass a motion for veto, and therefore theCompany does not have control.
To enhance the Company’s maintenance capabilities, the Company established a joint venture with the
US NORDAM Aerospace Group in December 2017, to provide thrust reversers and composite repair
services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business dispute with its cooperative partner, so
its operation was not impacted. 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.
Details of the investment income attributable to investments in jointly controlled entities were as
follows:
December 31

China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia

2020

2019

$ (136,459)(15,475)(46)$ 256,899
15,030(70)$ (151,980)$ 271,859

The Company’s shares of other comprehensive income of subsidiaries, associates and jointly controlled
entities were losses of $4,890 thousand and $85,977 thousand in 2020 and 2019, respectively.
The financial statements used as a basis of the amounts of and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2020 and 2019 were all independently audited,
except for China Aircraft Services. However, the management determined that there would have beenno significant adjustments had this investee’s financial statements been independently audited.
For details on services, major business offices and the country where the above associates and jointly
controlled entities are registered, refer to Table 6 “Names, Locations, And Other Information of
Investees Over Which the Company Exercises Significant Influence”, and Table 7 “Investments In
Mainland China”, following the notes to the financial statements.

- 34 -

14. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Buildings

FlightEquipment

Equipment
under FinanceLeasesOthersTotal

Cost
Balance at January 1,
2019
Additions
Disposals
Reclassification$

193,013-$

7,335,537
37,725(162)
10,658$ 255,579,627
2,211,321(20,698,042)
29,815,008$

25,211,677(79,866)(25,131,811)$

6,340,546
148,696(85,852)
106,257$ 294,660,400
2,397,742(20,863,922)
4,800,112$

193,013$

7,383,758$ 266,907,914

$

-

$

6,509,647$ 280,994,332

$

-

$

(3,880,602)(175,943)
162-$ (122,357,428)(18,186,434)
14,899,562(14,692,000)$ (14,074,608)(741,780)
79,866
14,736,522$(5,318,708)(284,537)
76,586(45,104)$ (145,631,346)(19,388,694)
15,056,176(582)

Balance at December 31,
2019

$

-

$

(4,056,383)$ (140,336,300)

$

-

$

(5,571,763)$ (149,964,446)

Balance at December 31,
2019, net value$

193,013$

3,327,375$ 126,571,614

$

-

$

937,884$ 131,029,886$

193,013(11,420)-$

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

$

-

$

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

181,593$

7,033,571$ 275,604,164

$

-

$

6,564,750$ 289,384,078

$

-

$

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

Balance at December 31,
2020

$

-

$

(3,867,341)$ (153,413,840)

$

-

$

(5,688,435)$ (162,969,616)

Balance at December 31,
2020, net value$

181,593$

3,166,230$ 122,190,324

$

-

$

867,315$ 126,414,462

Balance at December 31,
2019
Accumulated depreciationand impairment
Balance at January 1,
2019
Depreciation expense
Disposals
Reclassification

Cost
Balance at January 1,
2020
Additions
Disposals
Reclassification
Balance at December 31,
2020
Accumulated depreciationand impairment
Balance at January 1,
2020
Depreciation expense
Disposals
Impairment losses
Reclassification

Reclassification is mainly resulted from the transfer of prepayments for equipment.

- 35 -

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimateduseful life of the asset:
Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersFlight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

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

Regarding changes in fleet composition, current and forecasted market values, and other technical factors,
the Company recognized impairment losses on a part of aircraft equipment of $424,573 thousand in 2020.
Refer to Note 32 for the carrying amounts of aircraft equipment and right-of-use assets pledged by theCompany.
Based on the particularity of risk in the aviation industry, all of the Company’s assets such as aircraft, realestate, and movable property are adequately insured to diversify the potential risk related to operations.

15. INVESTMENT PROPERTIES
December 31

Carrying amount
Investment properties

2020

2019

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

The investment properties held by the Company were land located in Nankan, which were leased to others.
The fair value of the investment properties held by the Company was $2,456,472 thousand and $2,473,771
thousand as of December 31, 2020 and 2019, respectively. The fair value valuation was performed byindependent qualified professional valuers, and the future income evaluated by management was based onmarket transactions. All of the Company’s investment properties were held under freehold interest.

- 36 -

16. OTHER INTANGIBLE ASSETS
Computer
Software Costs

Accumulated
Amortization

Balance at January 1, 2019
Additions
Amortization expense$ 2,060,785
157,571-$ (1,081,077)(165,981)$

979,708
157,571(165,981)

Balance at December 31, 2019

$ 2,218,356$ (1,247,058)$

971,298

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

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

Balance at December 31, 2020

$ 1,547,787$$

867,453(680,334)

Net Value

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

17. OTHER ASSETS
December 31
2020

2019

Current
Temporary payments
Prepayments
Others$19,111
134,055
299,248$

94,682
1,551,113
460,404$

452,414$ 2,106,199$ 5,069,541
2,042,609
585,451
18,078$ 8,322,518
2,264,220
621,715
19,103$ 7,715,679$ 11,227,556

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

The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A321neo and B777F aircraft. For details on the A321neo and B777F aircraft purchase contracts, refer toNote 33.

- 37 -

18. BORROWINGSa. Short-term bills payable
December 31
2020
Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate2019

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

0.99%-1.00%-

b. Long-term borrowings
December 31
2020
Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discount2019$ 21,650,000
32,885,883

Less: Current portion

Interest rates$

650,000
30,435,870

29,100,000
22,046
83,613,837
14,798,442

31,300,000
59,38262,326,488
13,708,320$ 68,815,395$ 48,618,168

0.81%-1.22%

1.08%-1.46%

For information on secured bank loans which were secured by flight equipment, refer to Note 32.
Bank loans (New Taiwan dollars and U.S. dollars) are repayable quarterly, semiannually or in lumpsum upon maturity. Related information is summarized as follows:
December 31

Periods

2020

2019

2016/6/272032/6/30

2008/2/262030/4/25

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until March 2025, were used by the Company to guarantee commercial paper
which it issued. The commercial paper was issued at discount rates of 1.0263%-1.1167% in 2020 and
1.1300%-1.1680% in 2019.
In accordance with the “Regulations on Relief and Revitalization Measures for Industries andEnterprises Affected by Severe Pneumonia with Novel Pathogens” endorsed by the Ministry ofTransportation and Communications and the “Operational Guides on Relief Loan Guarantees for Ailing
Aviation Industry Affected by Severe Pneumonia with Novel Pathogens”, the Company applied for
project finance loans from financial institutions to maintain its operations; and special funds, credit
guarantees along with subsidized interest rates were provided by the government. The total amount of
the loans is $20,000,000 thousand, which shall be repaid within 2 years from the date of initial
drawdown. As of December 31, 2020, the Company had made a drawdown in the amount of$20,000,000 thousand.
- 38 -

19. BONDS PAYABLE
December 31
2020
Unsecured corporate bonds first-time issued in 2013
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Unsecured corporate bonds first-time issued in 2017
Unsecured corporate bonds second-time issued in 2017
Unsecured corporate bonds first-time issued in 2018
Unsecured corporate bonds first-time issued in 2019
Convertible bonds - sixth-time issue
Less: Current portion and put option of convertible bonds$

2,500,000
2,500,000
1,000,000
2,600,000
4,500,000
3,500,000
5,832,859
22,432,859
12,132,859

2019$

2,750,000
5,000,000
5,000,000
2,350,000
3,500,000
4,500,000
3,500,000
5,752,625
32,352,625
10,000,000$ 10,300,000$ 22,352,625

Conditions

Rate
(%)

Related issuance conditions were as follows:

Category

PeriodSeven-year private unsecured bonds - issued at
par in January 2013; repayable in January
2019 and 2020; 1.85% interest p.a., payableannually
Five-year unsecured bonds - issued at par in
May 2016; repayable in May 2020 and2021; 1.19% interest p.a., payable annually
Five-year unsecured bonds - issued at par in
September 2016; repayable in
September 2020 and 2021; 1.08% interestp.a., payable annually
Three-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.2% p.a., payable annually
Seven-year private unsecured bonds - issued at
par in May 2017; repayable on due date;interest of 1.75% p.a., payable annually
Three-year private unsecured bonds - issued at
par in October 2017; repayable on due date;interest of 1.14% p.a., payable annually
Five-year private unsecured bonds - issued at
par in October 2017; repayable in October
2021 and 2022; 1.45% interest p.a., payableannually
Five-year private unsecured bonds - issued at
par in November 2018; repayable inNovember 2022 and 2023; 1.32% interestp.a., payable annually2013.01.172020.01.17

2016.05.262021.05.26
2016.09.272021.09.27

2017.05.192020.05.19
2017.05.192024.05.19
2017.10.122020.10.12
2017.10.122022.10.12

2018.11.302023.11.30- 39 -

Principal repayable in
1.85
January of 2019 and 2020;
indicator rate; payableannually
Principal repayable in May of
1.19
2020 and 2021; interest p.a.
payable annuallyPrincipal repayable in
1.08
September of 2020 and2021; interest p.a. payableannually
Principal repayable on due
1.20date; indicator rate;
payable annuallyPrincipal repayable on due
1.75date; indicator rate;
payable annuallyPrincipal repayable on due
1.14date; indicator rate;
payable annuallyPrincipal repayable in
1.45
October of 2021 and 2022;
indicator rate; payableannually
Principal repayable in
1.32
November of 2022 and2023; indicator rate;
payable annually(Continued)

Rate
(%)

Category

PeriodConditions

Seven-year private unsecured bonds - issued at
par in November 2018; repayable inNovember 2022 and 2023; 1.45% interestp.a., payable annually
Five-year private unsecured bonds - issued at
par in June 2019; repayable in June 2023
and 2024; 1.10% interest p.a., payableannually
Seven-year private unsecured bonds - issued at
par in June 2019; repayable in June 2025
and 2026; 1.32% interest p.a., payableannually
Five-year convertible bonds - issued at
discount in January 2018; repayable in lumpsum upon maturity; 1.3821% discount rate
p.a.

2018.11.302025.11.30

Principal repayable inNovember of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable in June of2023 and 2024; indicatorrate; payable annually

1.45

2019.06.212026.06.21

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

1.32

2018.01.302023.01.30

Except for converting to sharecapital or buying back,principal repayable in
December of 2023
(Concluded)

2019.06.212024.06.21

1.10

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 Co., Ltd. and Sabre Travel Network (Taiwan)Co., Ltd., which had a face value of $150,000 thousand, and the amount was eliminated in the Company’s
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
on 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- 40 -

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.
During the period of public offerings, the stock market and the domestic capital market were volatile due toCoronavirus Pneumonia and the changes in the share price of the Company were unfavorable to the seventh
issue of the Company’s unsecured convertible bonds. After comprehensive consideration, the issuance wassuspended with the permission of the competent authority based on the best interest of the Company andthe shareholders’ equity.
The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 6, 2020. The cumulative face value of the bonds shall not exceed $6,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years.

20. LEASE AGREEMENTS
a. Right-of-use assets
December 31
2020
Carrying amounts
Land
Buildings
Flight equipment

$

2019

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

3,442,366
6,950,330
53,870,134$ 64,262,830

For the Year Ended December 31
2020
2019
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment$

2,084,799$

5,043,409$

172,757
383,898
9,399,066$

171,147
767,9399,070,855$

9,955,721$ 10,009,941

b. Lease liabilities
December 31

Carrying amounts
Current
Non-current- 41 -

2020

2019

$
842,592$ 10,055,776$
695,215$ 10,909,262

Range of discount rate for lease liabilities (include US lease hedging instruments):
December 31

Land
Buildings
Flight equipment

2020

2019

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

1.09%-1.65%
0%-3.56%
2.49%-3.16%

c. Financial liabilities under hedge accounting
The Company specifies a part of US lease contract as hedging instruments to avoid exchange rate
fluctuations is passenger revenue, and applies the accounting treatment of cash flow hedging. The lease
information is as follows:
Maturity Date
December 31, 2020

December 31, 2019

Subject

Carrying Value

2022.2.9-2028.5.15

Financial liabilities for hedging current
Financial liabilities for hedging non-current
2021.4.15-2028.5.15 Financial liabilities for hedging current
Financial liabilities for hedging non-current$

8,120,445
32,455,333
8,577,482
42,420,205

Influence of comprehensive income
Recognized in
Other
Comprehensive
IncomeFor the year ended December 31, 2020
For the year ended December 31, 2019

$ 2,099,550
1,457,058

Reclassified toIncome$352,674(24,029)d. Material leasing activities and terms
As lessee, China Airlines leased ten 777-300ER planes, fifteen A330-300 planes and fifteen 737-800
planes for operation, lease period are 8 to 12 years from February 2006 to May 2028. The rental pricing
method is partly a fixed amount of funds, and some of them are floating rents, floating rents areaccording to benchmark ratio, the rent is revised every half year. When the lease expires, the leaseagreements have no purchase rights.
The information of refundable deposits and issuance of letter of credit due to rental of planes:
December 31
2020
Refundable deposits
Credit guarantees$

438,1171,330,772

2019$

463,115
1,406,702

e. Lease agreement
The Company signed a rental contract for six A321neo with Air Lease Corporation on September 2019,
which is expected to be introduced between 2021 and 2022.
- 42 -

The Company signed a rental letter of intent for eight A321neo with CALC Lease Corporation on
October 2019, which is expected to be introduced in 2022.
The Company also signed related aircraft purchase agreement, please refer to note 33 for details.
f. Sale and leaseback
In order to revitalize assets and strengthen the financial structure, the Company sold five of its own
A330-300 aircraft to Altavair L.P. in September 2019 through sale and leaseback arrangement for$4,905,660 thousand. The lease term was 5 to 6 years and a loss of $103,775 thousand was incurred.
The lease agreement had no terms for lease renewal or offtake rights. The annual lease payments foreach aircraft are from US$5,389 thousand to US$5,437 thousand.
As lessee, the Company leased office buildings and equipment from CAL Park. Lease period is 2 years,
and the fixed payment (tax included) is $20,238 thousand per month.
g. Other lease information
The Company uses operating lease agreement for investment properties, refer to Note 15.
For the Year Ended December 31
2020
2019
Short-term and low price lease payment
Total of lease cash outflow$
16,450$ (10,528,143)$
18,144$ (11,583,349)

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

21. OTHER PAYABLES
December 31
2020
Fuel costs
Short-term employee benefits
Ground service expenses
Terminal surcharges
Repair expenses
Commission expenses
Interest expenses
Others- 43 -

2019$

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

3,419,803
1,577,322
1,178,184
914,428
1,136,588
509,520
214,089
1,942,269$

7,128,080$ 10,892,203

22. CONTRACT LIABILITIES/DEFERRED REVENUE
December 31
2020
2019
Contract
Contract
Liabilities
Liabilities
Frequent flyer programs
Advance ticket sales

Current
Non-current$

2,657,942
2,322,008$

2,884,122
17,936,476$

4,979,950$ 20,820,598$

3,218,846
1,761,104$ 18,584,287
2,236,311$

4,979,950$ 20,820,598

23. PROVISIONS
December 31
2020

2019

Operating leases - aircraft$ 13,741,244$

9,431,736

Current
Non-current$

13,741,244$

9,431,736$ 13,741,244$

9,431,736

The Company rented flight equipment under operating lease agreements. Under the contracts (some of theleased flight equipment’s lease payments are calculated monthly), when the lease expires and the equipment
is returned to the lessor, the flight equipment has to be repaired according to the expected years of use,
number of flight hours, flight cycle and the number of engine revolutions. The Company had existingobligations to recognize provisions when signing a lease or during the lease term.
Aircraft Lease
Contract
Balance at January 1, 2019
Additional provisions recognized
Usage
Effect of exchange rate changes$

7,999,015
3,616,519(1,970,226)(213,572)

Balance at December 31, 2019$

9,431,736

Balance at January 1, 2020
Additional provisions recognized
Usage
Effect of exchange rate changes$

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

Balance at December 31, 2020

$ 13,741,244- 44 -

24. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Company adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed
defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’
individual pension accounts at 6% of monthly salaries and wages.
b. Defined benefit plans
The Company adopted the defined benefit plan under the Labor Standards Law, under which pension
benefits are calculated on the basis of the length of service and average monthly salaries of the six
months before retirement. The Company contribute amounts equal to 15% of total monthly salaries andwages to a pension fund administered by the pension fund monitoring committee. Pension contributions
are deposited in the Bank of Taiwan in the committee’s name.
Before the end of each year, the Company assesses the balance in the pension fund. If the amount of thebalance in the pension fund is inadequate to pay retirement benefits for employees who conform toretirement requirements in the next year, the Company is required to fund the difference in one
appropriation that should be made before the end of March of the next year. The pension fund ismanaged by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Company has no right toinfluence the investment policy and strategy.
The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as
follows:
December 31
2020

2019

Present value of defined benefit obligation
Fair value of plan assets$ 14,458,016(6,240,621)$ 13,932,511(6,343,766)

Net defined benefit liabilities$$

8,217,395

7,588,745

Movements in net defined benefit liabilities (assets) were as follows:

Balance at January 1, 2019
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid

Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets

Net Defined
BenefitLiabilities(Assets)$ 13,117,255$ (6,184,472)$

1,187,281
118,5171,305,798(56,049)(56,049)

1,187,281
62,4681,249,749-(219,345)(219,345)

290,044491,560
781,604(1,154,724)(219,345)(1,038,624)
1,154,724

290,044491,560
562,259(1,038,624)(Continued)- 45 -

6,932,783

Direct payment to employees from theemployer
Effect of exchange rate changes
Balance at December 31, 2019
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial loss - changes in financial
assumptions
Actuarial loss - experience adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
Direct payment to employees
Effect of exchange rate changes
Balance at December 31, 2020

Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets

Net Defined
BenefitLiabilities(Assets)$$$(117,492)
70
13,932,511(6,343,766)(117,492)
70
7,588,745

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

498,254
209,705
707,959(1,294,147)(154,058)(17,232)(213,741)(933,458)
1,294,147-

498,254
209,705494,218(933,458)(154,058)(17,232)$ 14,458,016$ (6,240,621)$

8,217,395(Concluded)

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to thefollowing risks:
1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the
mandated management. Based on relevant regulations, the return generated by plan assets should
not be below the interest rate for a two-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the
future salaries of plan participants. Thus, an increase in the salaries of the plan participants will
increase the present value of the defined benefit obligations.
The actuarial valuations of the present value of the defined benefit obligation were carried out by
qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as
follows:
December 31

Discount rate
Expected rate of salary increase- 46 -

2020

2019

0.34%
1.00%

0.71%
1.00%

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

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

2020

2019

$ (318,904)$ 332,769$ (613,408)$ 653,413$ 651,673$ (610,077)$ 626,743$ (600,073)

The sensitivity analysis presented above may not be representative of the actual change in the present
value of the defined benefit obligation as it is unlikely that the change in assumptions would occur inisolation of one another as some of the assumptions may be correlated.
December 31
2020

2019

The expected contributions to the plan for the next year

$ 740,777$ 736,056

The average duration of the defined benefit obligation

9.5 years

9.6 years

25. EQUITY
a. Share capital
Ordinary shares
December 31

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

2020

2019

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

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

b. Capital surplus
December 31
2020
Income of convertible bonds in excess of par value andconversion premium
Dividends distributed to subsidiaries
Retirement of treasury shares
Difference in sale price of share of subsidiaries and book value
Expired employee share options
Long-term investments
Bonds payable equity component
Others$146,351
33,513
11,747
119,134
409,978
466,604$ 1,187,327- 47 -

2019$

315,114
3,909
33,513
1,129,080
11,747
118,962
409,978
466,604$ 2,488,907

The capital surplus from shares issued in excess of par (additional paid-in capital from issuance ofordinary shares) may be used to offset a deficit; in addition, when the Company has no deficit, suchcapital surplus may be distributed as cash dividends or transferred to capital (limited to a certain
percentage of the Company’s paid-in capital).
The capital surplus from long-term investments, employee shares options expired, dividends distributed
to subsidiaries and retirement of treasury shares may not be used for any purpose, expect for offsetting a
deficit. As for capital surplus from conversion of convertible bonds payable may not be used for any
purpose.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”),
where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes,
offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting
aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining
profit together with any undistributed retained earnings shall be used by the Company’s board of
directors as the basis for proposing a distribution plan, which is to distribute dividends and bonus noless than 50% of the remaining profit and undistributed retained earnings. The dividends and bonus
mentioned above can be distributed in the form of new shares or cash, and the cash dividends should be
no less than 30% of the total dividends.
Under the Company Act, if surplus earnings are distributed in the form of new shares, the distributionof shares shall be approved in the meeting of the board of directors; if such earnings are distributed in
the form of cash, the cash distribution shall be authorized after a resolution has been adopted by amajority vote at a meeting of the board of directors attended by two-thirds of the total number of
directors; and in addition, a report of such distribution shall be submitted to the shareholders’ meeting.
If the Company has no loss, according to laws and regulations, the Company can distribute its capitalreserve, in whole or in part, by issuing new shares or cash based on financial, business and management
considerations. If such surplus earnings is distributed in the form of new shares, it shall be approved bya meeting of the board of directors; if such surplus earning is distributed in the form of cash, it shall beauthorized after a resolution has been adopted by a majority vote at a meeting of the board of directors
attended by two-thirds of the total number of directors; and in addition thereto a report of such
distribution shall be submitted to the shareholders’ meeting.
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”) basedon the amended Company Act, where the Company made profit in a fiscal year, the profit shall be firstutilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of theremaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations,and then any remaining profit together with any undistributed retained earnings shall be used by theCompany’s board of directors as the basis for proposing a distribution plan with due consideration of
any future aircraft acquisition plans and fund demands, which should be resolved in the shareholders’meeting for the distribution of dividends and bonuses to shareholders by cash or shares (cash dividends
cannot be less than 30% of total dividends distributed). However, if the Company’s profit before tax ina fiscal year after deductions for the abovementioned items is not sufficient for earnings distribution,
retained earnings can be used as a supplement for the deficiency.
The 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.

- 48 -

The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.
1) Offsetting of deficit in 2019
On June 23, 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 Company
covered the deficit with legal reserve of $466,416 thousand, special reserve of $12,967 thousand
and capital reserve of $1,297,843 thousand.
2) Offsetting of deficit in 2020
On March 18, 2021, the board proposed to offset the accumulated deficit in 2020. The deficit
included a net income of $140,000 thousand and the beginning balance of undistributed retained
earnings of $0, negative adjustment of other retained earnings of $490,581 thousand, the remaining
amount of accumulated deficit was $350,581 thousand and was offset by capital reserve of$350,581 thousand.
d. Other equity items
The movement of other equity items is as follows:
Exchange
Differences on
Translation of
the Financial
Statements ofForeign
Operations
Balance at January 1, 2019
Exchange differences ontranslation of the financial
statements of foreign operations
Cumulative loss on changes in fairvalue of hedging instruments
Cumulative gain on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets
at FVTOCI
Share of profit or associates
accounted for using equity
methodEffects of income tax
Other comprehensive income(loss) recognized in the period
Disposal of subsidiaries
Transfers of initial carrying
amount of hedged items$

Balance at December 31, 2019$

(9,664)

Unrealized Gain
(Loss) on
Financial Assets
at FVTOCI$

42,619Gain (Loss) on
Hedging
Instruments$

25,268

Total$

58,223(59,174)--(59,174)--

1,398,296

1,398,296

-

-

9,305

9,305

-

24,490-24,490(6,072)
11,83554,902(14,854)(7,187)(281,401)

41,643(284,420)(53,411)8,368

64,538105

1,119,013-

1,130,140
8,473

-

-

(603)

(603)

107,262$ 1,143,678$ 1,196,233(54,707)$(Continued)- 49 -

Exchange
Differences on
Translation of
the Financial
Statements ofForeign
Operations
Balance at January 1, 2020
Exchange differences ontranslation of the financial
statements of 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
at FVTOCI
Share of profit or associates
accounted for using equity
methodEffects of income tax
Other comprehensive income(loss) recognized in the period
Transfers of initial carrying
amount of hedged items$

Balance at December 31, 2020$

Unrealized Gain
(Loss) on
Financial Assets
at FVTOCI

Gain (Loss) on
Hedging
Instruments

Total

107,262$ 1,143,678$ 1,196,233(101,142)--(101,142)--

1,907,401

1,907,401--(283,210)(283,210)-

39,305-39,305

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

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

1,261,992

1,146,544--

200,989

200,989

71,359$ 2,606,659$ 2,543,766(54,707)$(134,252)$(Concluded)e. Treasury shares
Treasury shares are the Company’s shares held by its subsidiaries, as of December 31, 2020 and 2019were as follows:(In Thousands of Shares)

Period of Treasury Shares

Number of
Shares,Beginning ofYear

For the year ended December 31, 2020
For the year ended December 31, 2019

Subsidiary

2,889
2,889
Shares(In Thousands)

Reduction
During the
Year
(814)
-

Number of
Shares, End of
Year
2,075
2,889

Carrying
AmountMarket Value

2,075$ 24,999$ 24,999

2,075
814

$ 18,796
7,376$ 18,796
7,376$ 26,172$ 26,172

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

- 50 -

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

26. NET INCOME
a. Revenue
For the Year Ended December 31
2020
2019
Passenger
Cargo
Others$ 20,508,133
81,692,574
4,126,416$ 96,176,865
43,406,487
6,789,049$ 106,327,123$ 146,372,401

b. Other income
For the Year Ended December 31
2020
2019
Interest income
Dividend income
Subsidy income
Others$ 208,081
8,720
29,309194,651$ 314,944
10,112
38,621
160,556$ 440,761$ 524,233

c. Other gains and losses
For the Year Ended December 31
2020
2019
Gain on disposal property, plant and equipment
Net loss on financial assets as held for trading
Gain (loss) on foreign exchange, net
Impairment loss recognized on non-current assets held for saleImpairment loss recognized on flight equipment
Gain on disposal of investment
Loss on non-current assets held for sale
Loss on sale and leaseback
Others

$

8,005
3,596
259,796(46,757)(424,573)(323,894)$ (523,827)- 51 -$

26,37725,700(262,610)
7,656(10,462)(103,775)(252,468)$ (569,582)

d. Finance costs
For the Year Ended December 31
2020
2019
Interest expense
Bonds payable
Bank loans
Interest on lease liabilities$

344,034
834,6111,601,718$ 2,780,363$

431,599703,681
1,898,892$ 3,034,172

Information about capitalized interest was as follows:
For the Year Ended December 31
2020
2019
Capitalization interest
Capitalization rate$
75,701
0.71%-1.45%$
36,404
1.01%-1.28%

e. Depreciation and amortization expenses
For the Year Ended December 31
2020
2019
Property, plant and equipment
Right-of-use assets
Intangible assets

An analysis of depreciation by function
Operating costs
Operating expenses

An analysis of amortization by function
Operating expenses$ 18,063,025
9,955,721
169,158$ 19,388,694
10,009,941
165,981$ 28,187,904$ 29,564,616$ 27,360,911
657,835$ 28,373,597
1,025,038$ 28,018,746$ 29,398,635$$

169,158

165,981f. Employee benefits expense
For the Year Ended December 31
2020
2019
Post-employment benefits
Defined contribution plans
Defined benefit plans- 52 -$

347,320
1,239,180$

373,187
1,249,749$

1,586,500$

1,622,936(Continued)

For the Year Ended December 31
2020
2019
Other employee benefits
Salary expenses
Labor and health insurance
Personnel service expenses

An analysis of employee benefits expense by function
Operating costs
Operating expenses$ 12,892,488
1,149,065
3,303,051$ 14,475,115
1,282,461
4,589,299$ 17,344,604$ 20,346,875$ 14,918,454
4,012,650$ 17,862,954
4,106,857$ 18,931,104$ 21,969,811(Concluded)

According to the Company’s articles, the Company accrues compensation of employees at rates of noless than 3% of the net profit before income tax and compensation of employees, and accrues profit
bonus at a certain rate of profit before tax on the basis of the collective agreement signed with the China
Airlines Employees Union. For the years ended December 31, 2020 and 2019, the compensation of
employees was not estimated since it was a loss before income tax.
Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date the annual financial statements are authorized for issue are adjusted in
the year that the bonus and remuneration were recognized. If there is a change in the proposed amounts
after the annual financial statements were authorized for issue, the differences are recorded as a change
in the accounting estimate.
Information on the compensation of employees and remuneration of directors and supervisors resolvedby the Company’s board of directors is available at the Market Observation Post System website of the
Taiwan Stock Exchange.

27. INCOME TAX
a. Income tax recognized in profit or loss
The major components of tax expense were as follows:
For the Year Ended December 31
2020
2019
Current tax
Current year
Prior year adjustment
Deferred tax
Current year
Adjustments to deferred tax attributable to changes in tax rates
and laws
Income tax expense recognized in profit or loss

- 53 -$ 15,676
280

$

8,836
(6,658)(67,746)(16,218)

82,88526,512$ 31,095$ 12,472

A reconciliation of accounting profit and income tax expense is as follows:
For the Year Ended December 31
2020
2019
Profit before tax$

171,095$ (1,187,326)

Income tax expense calculated at the statutory rate
Add (deduct) tax effects of:Nondeductible expenses in determining taxable income
Tax-exempt income
Overseas income tax expense
Unrecognized loss carryforwards and investment tax credits
Adjustments for prior years’ tax
Adjustments to deferred tax attributable to changes in tax rates
and laws$

34,219$

Income tax expense recognized in profit or loss$

(237,465)

369,518(334,324)
15,676(137,159)
280

17,900(347,338)
8,836
550,685(6,658)82,88526,51231,095$

12,472b. Income tax recognized in other comprehensive income
For the Year Ended December 31
2020
2019
Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Fair value revaluation of hedging instruments for cash flow
hedgesActuarial gain or loss on defined benefit plan
Fair value changes of financial assets at FVTOCI
Total income tax recognized in other comprehensive income$

20,229$11,835(365,036)
98,844
9,685(281,401)
112,452(14,854)$ (236,278)$ (171,968)

EndingBalancec. Deferred tax assets and liabilities
For the year ended December 31, 2020

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$ 1,527,211
590,694
2,063,485$$

Deferred tax assets
Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserve
Allowance for reduction of
inventory
Others294,799
280,953$ 4,757,142- 54 -

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

46,182$

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

79,691

253,209
165,051

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

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$81,778317,475$

61,322-$414,813$

143,100
732,288$399,253$

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

EndingBalance

Deferred tax liabilities
Temporary differences
Unrealized foreign exchange
gains
Others (Note)

For the year ended December 31, 2019

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$ 1,396,033
510,060
1,674,973$$

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserve
Allowance for reduction of
inventory
Others

333,653646,627

18,72680,634
388,512(38,854)(377,534)

112,452-$ 1,527,211
590,694
2,063,485

11,860294,799
280,953$ 4,561,346$

71,484$

124,312$ 4,757,142$

21,195$

81,778-$296,280$

81,778317,475$

21,195$

81,778$296,280$399,253

Deferred tax liabilities
Temporary differences
Unrealized foreign exchange
gains
Others (Note)- 55 -

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

Loss carryforwards
2021
2022
2026
2028
2029

2020

2019

495,779
1,439,287$ 2,899,496
619,799
202,699
1,519,941
760,157$ 1,935,066$ 6,002,092$ 4,479,141$ 1,097,908

$

Other

d. Unused tax loss carryforwards as of December 31, 2020 were as follows:
UnusedAmountExpiry Year
2028
2029

$

495,779
1,439,287$ 1,935,066
e. Income tax returns
The income tax returns of the Company through 2018 have been examined by the tax authorities.

28. EARNINGS PER SHARE
For the Year Ended December 31
2020
2019
Basic earnings per share
Diluted earnings per share

$
$

0.03
0.03

$ (0.22)$ (0.22)

For the Year Ended December 31
2020
2019
Earnings used in the computation of basic earnings per share
Effect of potentially dilutive ordinary shares:
Interest on convertible bonds (after tax)$

Earnings used in the computation of diluted earnings per share$- 56 -

140,000$ (1,199,798)--

140,000$ (1,199,798)

For the Year Ended December 31
2020
2019
Weighted average number of ordinary shares in computation of basic
earnings per share (in thousands)
Effect of potentially dilutive ordinary shares:
Convertible bonds (in thousands)
Weighted average number of ordinary shares used in thecomputation of diluted earnings per share (in thousands)

5,418,776

5,418,096--

5,418,776

5,418,096

If the Company offers to settle compensation or bonuses paid to employees in cash or shares, the Company
assumes 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 per share, if the effect is dilutive. Such dilutive effect of the potential
shares was included in the computation of diluted earnings per share until the number of shares to be
distributed to employees is resolved in the following year.

29. CAPITAL MANAGEMENTThe Company manages its capital to ensure that entities in the Company will be able to continue as going
concerns while maximizing the return to stakeholders through the optimization of the debt and equity
balance. The capital structure of the Company consists of net debt (borrowings offset by cash and cash
equivalents) and equity of the Company comprising issued capital, reserves, retained earnings, other equity
and non-controlling interests.
To support its operating activities and purchase of aircraft, the Company needs to maintain sufficient
capital. Therefore, the goal of capital management is to ensure financial resources and operating plan is able
to support the future working capital, capital expenditures, debt repayment and dividend expenses and otherneeds.

30. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments not measured at fair value
December 31
2020

2019

Carrying
AmountFair Value

Carrying
AmountFair Value$ 22,432,859$ 22,609,683$ 32,352,625$ 32,363,301

Financial liabilities
Bonds payable

Some long-term borrowings are floating-rate financial liabilities, so their carrying amounts are their fairvalues. The fair values of bonds payable are based on those which are traded in the stock exchange andbased on quoted market prices (Level 1).

- 57 -

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

Level 2

Level 3

Total

$

-

$

-

$

29,704
117,457$

29,704
117,457

$

-

$

-

$

147,161$

147,161

Financial assets for hedging$ 7,613,636

$

-

$

-

$ 7,613,636

Financial liabilities for hedging$ 40,575,778

$

5,794

$

-

$ 40,581,572

December 31, 2019
Level 1
Financial assets at FVTPL
Derivative instruments

Level 2

Level 3

Total

$

-

$

434

$

-

$

434

$

-

$

-

$

26,86580,991$

26,86580,991

$

-

$

-

$

107,856$

107,856

Financial liabilities at FVTPL
Derivative instruments

$

-

$

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

$

-

$

109

$

9,479

$

9,588

Financial liabilities for hedging$ 50,997,687$

28,578$3,955$ 51,030,220

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

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

- 58 -

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

Valuation Techniques and Inputs
The fair values of derivatives (except options) have been
determined based on discounted cash flow analyses using
interest yield curves applicable for the duration of thederivatives. The estimates and assumptions that the Company
used to determine the fair values are identical to those used in
the pricing of financial instruments for market participants.

5) Valuation techniques and inputs applied for Level 3 fair value measurement
The fair values of currency options and 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 currency options and fueloptions.
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 movements of Level 3 financial instruments are as follows:

Multiplicator

Liquidity
Discount

0.79-16.32
0.75-13.23

80%
80%

Derivative
Instruments

EquityInstruments

Balance at January 1, 2020
Other comprehensive income recognized during the period

$

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

Balance at December 31, 2020$-

$ 147,161

Derivative
Instruments

EquityInstruments

Balance at January 1, 2019
Recognized in other comprehensive income

$

4,901
623

$

Balance at December 31, 2019

$

5,524

$ 107,856

December 31, 2020
December 31, 201983,36624,490Because some financial instruments and nonfinancial instruments may not have their fair values
disclosed, the total fair value disclosed herein is not the total value of the Company’s collective
instruments.

- 59 -

c. Categories of financial instruments
December 31
2020

2019

Financial assets
Financial assets at FVTPL
Financial assets for hedging
Financial assets at amortized cost (Note 1)
Financial assets at FVTOCI - equity instrument investment$

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

$

434
9,588
31,214,918
107,856

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

40,581,572
148,012,657

11,74951,030,220
129,800,759

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

- 60 -

a) Foreign currency risk
The Company enters into currency option to hedge against the risks of changes in related
exchange rates, and enters into foreign exchange forward contracts to hedge against the risks ofchanges in the related exchange rates of foreign-currency assets, liabilities and commitments.
Sensitivity analysis
The Company is mainly exposed to the U.S. dollar.
The following details the Company’s sensitivity to a one dollar increase and decrease in the
New Taiwan dollar (the functional currency) against the U.S. dollar. The sensitivity amountused when reporting foreign currency risk internally to key management personnel and which
represents management’s assessment of the reasonably possible change in foreign exchange
rates is one dollar. The sensitivity analysis included only outstanding foreign currency
denominated monetary items and foreign exchange forward contracts designated as cash flow
hedges and adjusts their translation at the end of the reporting period for the New Taiwan dollar
strengthening or weakening one dollar against the U.S. dollar.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be an increase in pre-tax profit of $126,947 thousand and othercomprehensive income of $1,155,267 thousand for the year ended December 31, 2020. A
decrease in pre-tax profit of $40,775 thousand and increase in pre-tax other comprehensive
income of $1,629,223 thousand for the year ended December 31, 2019.
The Company’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the 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 Company performs a qualitative assessment of
the effectiveness, and it is expected that the value of the foreign exchange forward contracts andthe value of the corresponding hedged items will systematically change in the opposite direction
in response to movements in the underlying exchange rates.
The following table summarizes the information relating to the hedging of foreign currency risk.
For the information related to lease contract as hedging instruments, please refer to Note 20.
December 31, 2020
Hedging Instruments
Cash flow hedge
Aviation fuel - forward
exchange contracts

Currency

NTD/USD

Notional
AmountMaturity

NTD 142,045/
USD 5,000

2021.1.292021.5.28

Forward Rate

29.4-29.8

Line Item in
Balance Sheet

Financial assets forhedging - current/
liabilities for hedging current

Carrying AmountAsset
Liability

$

-

$

5,794

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (aviation fuel) was $(5,794) thousand.

- 61 -

For the year ended December 31, 2020
AmountReclassified toProfit and Lossand theAdjusted Line
Item

Hedging Gain
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aviation fuelAircraft prepayments
Maintenance cost

$

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

For the year ended December 31, 2020, the amount of hedging instruments reclassified toprepayments for equipment was $119,878 thousand.
December 31, 2019
Hedging Instruments
Cash flow hedge
Aviation fuel - forward
exchange contracts

Aircraft rentals forward exchange
contracts

Notional
AmountMaturity

Forward Rate

NTD/USD

NTD660,661/
USD22,000

2020.2.272020.11.30

29.7-30.7

NTD/USD

NTD1,411,411/
USD47,000

2020.11.4

29.6-30.5

Currency

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

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

32$ 10,193

77

18,385The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (aviation fuel and aircraft rentals in U.S. dollars) was $(10,161)
thousand and $(18,308) thousand, respectively.
For the year ended December 31, 2019

Comprehensive Income

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

Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments$ (22,214)(10,161)(17,705)$ 28,374(53)-$ (50,080)$ 28,321

Note:(Note)

Decrease in operating costs or foreign exchange loss.

For the year ended December 31, 2019, the amount of hedging instruments reclassified toprepayments for equipment was $(603) thousand.

- 62 -

b) Interest rate risk
The Company enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.
The risk is managed by the Company through maintaining an appropriate mix of fixed andfloating rate borrowings, and using interest rate swap contracts and forward interest rate
contracts.
The carrying amount of the Company’s financial liabilities with exposure to interest rates at theend of the reporting period were as follows.
December 31

Fair value interest rate risk
Cash flow interest rate risk

2020

2019

$ 63,008,637
102,601,087$ 83,350,312
73,930,965

Sensitivity analysis
The sensitivity analyses below were determined based on the Company’s exposure to interest
rates for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. One yard (25basis) increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.
Had interest rates increased by one yard (25 basis) and all other variables been held constant,
the Company’s pre-tax profit for the year ended December 31, 2020 would have decreased by$256,503 thousand.
Had interest rates increased by one yard (25 basis) and all other variables been held constant,
the Company’s pre-tax profit for the year ended December 31, 2019 would have decreased by$184,827 thousand.
c) Other price risk
The Company was exposed to fuel price risk on its purchase of aviation fuel. The Company
enters into fuel swap contracts to hedge against adverse risks on fuel price changes.
December 31, 2020
Hedging Instrument
Cash flow hedges - fueloptions

Currency
USD

Notional
AmountMaturity

Forward Rate

-

-

-

Line Item in
Balance Sheet
Financial assets forhedging - current/
liabilities for hedging current

Carrying AmountAsset
Liability
$

-

$

-

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (fuel payments) was $0.

- 63 -

For the year ended December 31, 2020

Comprehensive Income
Cash flow hedges - fuel options
Note:

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

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

Increase in operating costs.

December 31, 2019
Hedging Instrument
Cash flow hedges - fueloptions

Currency
USD

Notional
AmountNTD5,524

Maturity

Forward Rate

2020.3.312020.12.31

USD49.65USD80.75

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging - current/
liabilities for hedging current

$

9,479

$

3,955

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (fuel payments) was $5,524 thousand.
For the year ended December 31, 2019
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedges - fuel options
Note:

$

AmountReclassified toProfit and Lossand theAdjusted Line
Item

623

$ (13,597)(Note)

Increase in operating costs.

Sensitivity analysis
The sensitivity analysis below was determined based on the exposure to fuel price risks at theend of the reporting period.
For the Year Ended December 31
2020
2019
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase of5%
Fuel price decrease of
5%

$

1,479
(1,479)- 64 -

$

-

$

-

$

7,973
-

2) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Company. The Company’s credit risk, primarily comes from accounts
receivable generated from operating activities, bank deposits generated from investing activities,
fixed investment income and other financial instruments. Operation related credit risk and financial
credit risk are managed separately.
Operation - related credit risk
The Company has established procedures to management operations related credit risk to maintainthe quality of accounts receivable.
To assess individual customers, the Company consider into the financial condition of the customers,
the credit rating agency rating, the Company’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, theCompany uses certain credit enhancement tools to reduce the credit risk of specific customers.
Since the customers of the industry is dispersed and non-related, the credit risk concentration is notcritical aviation.
Financial credit risk
Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Company’s finance department. The Company’s trading partners and other parties
were well-performing banks and financial institutions, corporations, and government agencies, andso the risk of counterparties failing to discharge an obligation is low; therefore, there is no
significant credit risk.
Endorsements given by the Company on behalf of its subsidiaries can be found in Notes 31(g).
3) Liquidity risk
The objective of the Company’s management of liquidity is to maintain cash and cash equivalents
sufficient for operating purposes, marketable securities with high liquidity and loan commitmentsthat are sufficient to ensure that the Company has adequate financial flexibility.
Liquidity and interest risk rate table
The following table shows the remaining contractual maturity analysis of the Company’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Company may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.
Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Company’s liquidity analysis for its derivative financial
instruments is also shown in the following table. The table was based on the undiscounted
contractual net cash inflows and outflows on derivative instruments that settle on a net basis, andthe undiscounted gross cash inflows and outflows on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined byreference to the projected interest rates as illustrated by yield curves at the end of the reporting
period.

- 65 -

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

0.1355Less than 1Year

1 to 5 Years

Over 5 Years

$

$

$

0.91020.25412.4622915,897

2,778,984

9,929,842

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

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

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

Less than 1Year

1 to 5 Years

Over 5 Years$$

3,362,181$ 10,451,021

14,284,090
10,060,822
10,823,905

34,457,400
39,729,062
19,871,174

14,787,869
6,373,333
3,383,401$ 36,083,236$ 97,419,817$ 34,995,624

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

0.14480.9576
3.1131
2.5273

914,419

Loan commitments
December 31

Unused bank loan limit (unsecured)- 66 -

20202019$ 21,559,000$ 18,422,000

31. RELATED-PARTY TRANSACTIONS
Except for the disclosures stated in other notes, transactions between the Company and its related partiesare disclosed below:
a. Related parties’ names and relationships
Name

Relationship with the Company

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

Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate (become associate in January
2019)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Associate
Associate
Associate
Associate
Joint venture investment
Joint venture investment
Joint venture investment
Joint venture investment
Director of the Company and major
shareholder
Director, key management personnel,
chairman, general manager of theCompany, spouse and second-degree
relativeb. Operating income

Account Items
Other income

Related Party Type
Subsidiary
Major shareholder of theCompany
Associate
Joint venture investment- 67 -For the Year Ended December 31
2020
2019
$
$

696,100
5,097$ 2,577,039$
25,457$$122
22,445$$

1,239
42,457

c. Purchases
For the Year Ended December 31
2020
2019

Related Party Type
Subsidiary
Major shareholder of the Company
Associate
Joint venture investment$ 2,611,679$
11,417$ 457,005$ 516,347$ 3,915,258$
56,474$ 414,106$ 1,911,091

d. Accounts receivable - related parties (generated by operations)
December 31
Related Party Type2020

Subsidiary
Joint venture investment
Major shareholder of the Company

2019

$

99,757
1,667-$

222,038
7,760
2,588

$

101,424$

232,386

The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.
e. Accounts payable - related parties (generated by operations)
December 31
Related Party Type2020

Subsidiary
Associate
Joint venture investment
Major shareholder of the Company

2019

$

459,667
52,18776,380-$927,419
51,333484,700
5,982$

588,234$ 1,469,434

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.
f. Leases of properties (operating leases)
The Company rented out planes to Mandarin Airlines under an operating lease contract. The monthly
rent received is based on flight hours. In 2020 and 2019, the rentals received amounted to $384,080
thousand and $1,624,568 thousand, respectively.
Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots. The Company paid the rental based on
usage hours. In 2020 and 2019, the Company paid rentals of about $11,417 thousand and $56,474
thousand, respectively.
In March 2010, the Company signed a yearly renewable operating lease agreement to use the Operatingand Aviation Headquarters building of the Taiwan Taoyuan International Airport with CAL Park. In
2020 and 2019, the Company paid rentals of $207,003 and $231,288 thousand, respectively.

- 68 -

g. Endorsements and guarantees
December 31
2020

2019

Authorized
AmountActualAmount Used

Authorized
AmountActualAmount Used

$ 3,850,000
2,656,591
2,000,000$ 1,892,540
265,062
1,336,000$ 3,850,000
1,080,000
3,012,668
2,000,000$ 2,129,400
685,444
1,279,827

The Company
CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenanceh. Bonds payable - related parties
Related parties that invested in the first issue of unsecured bonds in 2016 (Note 19) are summarized asfollows:
December 31, 2020
Aggregate
Units
Par/Dollars

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

125
25

$

125,000
25,000In 2020, interest expense was $2,499 thousand. This bonds payable will be paid off in May 2021. As of
December 31, 2020 the interest payable was $1,071 thousand.
i.

Compensation of key management personnel
For the Year Ended December 31
2020
2019
Short-term employee benefits
Post-employment benefits$

33,376
2,525$

39,693
2,362$

35,901$42,055

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

32. PLEDGED ASSETS
The following assets were pledged or mortgaged as collateral for long-term bank loans, lease obligations
and business transactions:
December 31

Property, plant and equipment
Right-of-use asset- 69 -

20202019$ 30,113,171
54,555,761$ 26,956,631
64,262,830$ 84,668,932$ 91,219,461

33. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2020, except for the disclosures stated in other notes, the Company had commitments
and contingent liabilities as follows:a. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery periods of the eleven aircraft are from 2024 to 2026. As of December
31, 2020, the list price of the fourteen aircraft had been paid in the amount of US$32,578 thousand(recognized as prepayments for aircraft). In October 2019, the Company signed a contract with
International Aero Engines Company to purchase four backup engines of A321neo. The total list priceof the four engines is US$60,289 thousand. The Company also signed related aircraft rental agreement,
please refer to Note 20 for details.
b. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three
777F aircraft and exercised the option to purchase three 777F aircraft. The total list price of the six
aircraft is US$2,320,315 thousand, and the expected delivery periods are from 2020 to 2023. As of
December 31, 2020, two out of the six aircraft has been delivered, the list price had been paid in theamount of US$122,186 thousand (recognized as prepayments for aircraft), and the total list price of theremaining four aircraft is US$1,552,879.

34. IMPACT OF COVID-19
Since the outbreak of the Covid-19 in January 2020, the coronavirus has become a pandemic. The
pandemic has now spread around the world and most countries have not removed their travel restrictions.
Because the number of inbound and outbound passengers has decreased significantly, the Company adjusts
the proportion between passenger aircraft and cargo aircraft used in operations to comply with thegovernment’s epidemic prevention policy and cater to market demand. The Company reduces the frequencyof passenger air services that have been severely affected, uses the passenger aircraft to support the cargoflight arrangement and expands the function of all-cargo aircraft to maximize the opportunities from air
cargo business. Since March 2020, cargo has become the main source of revenue for the Company.
The Company continues to adjust the response measures according to the situation. In addition, to ensure
the adequate liquidity, the Company also implements measures for human resource management such as
postponing the hiring of newcomers, relaxing the application of special leave, loosening the restrictions onleave without pay, encouraging employees to take leave, adjusting working hours and salaries, etc. The
Company’s policies to control spending include suspension of non-urgent capital expenditures, reduction in
unnecessary expenses for administrative management and sales, negotiation with suppliers for a lower priceand postponement of payments.
In 2020, because of the Covid-19, the Company received subsidy of $1,251,632 thousand for the airport
landing fees and parking fees, etc. The subsidy for housing and land rental, and salary expenses was$745,820 thousand, recognized as deduction from other income and expenses.
The Company has obtained relief loan from the government. Refer to Note 18 for details on the amount ofloan and its allocation.

- 70 -

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

Exchange Rate

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

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

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

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

Exchange Rate

Carrying
Amount502,608
18,401225,078
5,531,849
371,64230.0300
33.6700
3.85950.27664.3048$ 15,093,328
619,571868,689
1,530,109
1,599,846

2,179,056
7,639
67,5295,706,141
132,62230.0300
33.6700
3.85950.27664.304865,437,049
257,211
260,630
1,578,319
570,913

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB
December 31, 2019
Foreign
Currencies(In Thousands)
Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB

- 71 -

For the years ended December 31, 2020 and 2019, the Company’s net foreign exchange (losses) gains were$259,796 thousand and $(262,610) thousand, respectively. It is impractical to disclose net foreign exchange
gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions.

36. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided: Table 1 (attached).
2) Endorsements/guarantees provided: Table 2 (attached).
3) Marketable securities held: Table 3 (attached).
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None.
5) Acquisitions of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None.
6) Disposals of individual real estates at costs or prices of at least NT$100 million or 20% of thepaid-in capital: None.
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 4 (attached).
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 5 (attached).
9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 6 (attached).
10) Derivative financial transactions: Notes 7 and 30.
b. Investment in mainland China: Table 7 (attached).
c. Information of major shareholders: Table 8 (attached).

37. SEGMENT INFORMATIONThe Company mainly engages in air transportation services for passengers, cargo and others. The major
revenue-generating asset is the fleet, which is jointly used for passenger and cargo services. Thus, theCompany’s sole reportable segment is the flight segment. For operating segment reporting in the financial
statements, the Company’s reportable segment comprises the flight and the non-flight businessdepartments.

- 72 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESFINANCING PROVIDED TO OTHERSFOR THE YEAR ENDED DECEMBER 31, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)No.

Lender1

Cal-Dynasty International

Borrower

Financial
Statement
Account

Dynasty Hotel of Notes receivable
Hawaii, Inc.

RelatedParty

HighestBalance for
the PeriodY$ 103,244

EndingBalance$

99,432

ActualBorrowingAmount
$28,409Interest Rate
(%)

2.25

Nature ofFinancing

Short-term
financingfacility isnecessary

Note 1:

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

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

- 73 -

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

Allowance for
Impairment
Loss
$

-

Collateral
Item

Value

$

-

Financing
Limit for
Each
Borrower

Aggregate
FinancingLimit$ 144,128$ 288,256

NoteTABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counterparty
Endorsement/
Guarantee
Provider

No.

0

Name

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

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

Nature of Relationship100% subsidiary
75.86% subsidiary bydirect and indirect
holdings
100% subsidiary

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

ActualBorrowingAmount$ 11,511,896
11,511,896$ 3,850,000
3,038,197$ 3,850,000
2,656,591$ 1,892,540
265,062

11,511,896

2,000,000

2,000,000

1,336,000

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

Note 1:

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

Note 2:

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

- 74 -

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

-

6.69
4.62

$ 28,779,741
28,779,741

Y
Y

N
N

N
N

-

3.47

28,779,741

Y

N

N

TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDDECEMBER 31, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name

Marketable Security Type and Issuer/Name

China Airlines (“Parent company”)

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

Mandarin Airlines

Cal-Asia Investment

Sabre Travel Network (Taiwan)

Taiwan Airport Services

Dynasty Aerotech International Corp.

Kaohsiung Catering Services

SharesChina Airlines

Relationshipwith the Holding
Company-

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

Number of
Shares/Units

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

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

Parent company Financial assets at FVTOCI - non-current$

106,779
10,67829,704
-

13.59
11.00
15.00
0.02

2,074,628

24,999-24,999--16,5852.59
5.45

16,585Note 2
Note 2-

42,24755,411-

SharesTaikoo (Xiamen) Landing Gear Services
HAECO Composite Structures (Jinjiang)-

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

Beneficiary certificatesFranklin Templeton SinoAm Money Market FundFSITC Money Market Fund-

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

4,051,153
308,094

42,24755,411

SharesTransAsia Airways-

Financial assets at FVTPL - current

2,277,786-

Beneficiary certificates
Taishin 1699 Money Market Fund-

Financial assets at FVTPL - current

349,523

4,771

Beneficiary 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

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

86,281
70,94915,103Note 1: The subsidiary’s net asset value was $117,457 thousand, which included ordinary shares and preference shares as of and for the year ended December 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 in accordance with IFRS 9.

- 75 -

0.40$

117,457

Note

Note 1

29,704
-

-

-

-

4,771

-

-

86,281
70,94915,103-

TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESTOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

Nature of Relationship

Purchase/
Sale$

Amount% of
Total

Payment Terms

Unit Price

659,596
107,482(221,527)(240,768)
1,043,264
352,214
209,701(139,335)
388,451
473,460

0.69
0.11(0.21)(0.23)
1.10
0.37
0.22
(0.13)
0.41
0.50

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

Taiwan Air Cargo Terminal
Taiwan Airport Services
Mandarin Airlines
Tigerair Taiwan
Taoyuan International Airport Service
Dynasty Aerotech International Corp.
CAL Park
Global Sky Express
Eastern United International Logistics
China Pacific Catering Services

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

Purchase
Purchase
Sale
Sale
Purchase
Purchase
Purchase
Sale
Purchase
Purchase

Mandarin Airlines

Taiwan Airport Services
Tigerair Taiwan

Same parent company
Same parent company

Purchase
Purchase

152,475
149,048

4.14
4.05

Cal Hotel

CAL Park

Same parent company

Purchase

102,220

48.59- 76 -

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

Abnormal Transaction

-

-

-

1 month
1 month
1 month$Note(3.39)(0.76)
0.71
0.12(12.56)(2.86)
0.08(2.43)(4.18)--(67,465)(13,046)
69,17912,008(215,542)(49,108)
8,180(41,725)(71,674)--(22,407)(11,711)(5.58)(2.92)

-

-

-

(76)

(0.25)--TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

Mandarin Airlines

China Airlines

Parent company$ 101,725

NoteTaoyuan International Airport Service

China Airlines

Parent company

215,542

3.71

Note:

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

- 77 -

Action Taken
-

-

-

-

Amounts Received
in Subsequent
Period$56,870215,542

Allowance for
Bad Debts$-

TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2020
(In Thousands of New Taiwan Dollars and Foreign Currencies in Thousands, Unless Stated Otherwise)

Investment Amount
Investor Company

Investee Company

Location

Main Business and Product

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

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

Dynasty Aerotech International Corp.

Taoyuan, Taiwan

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

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

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

Aircraft maintenance

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation and maintenance of aircraft
Airport services

CAL-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Kaohsiung Catering
Services

Delica International Co., Ltd.

Kaohsiung, Taiwan

Catering business

China Airlines, Ltd.

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

Note 2:

Represents the 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 caused by acquisition.

December 31,
2020

December 31,
2019

$

$

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500

77,27077,270100.00136,630

33,98633,967 Note 426,265
20,4002,500
1,272,063
1,350,000

1,600,000
160
250,000
212,420,046
135,000,000

100.00
20.00
25.00
75.86
100.0010,2705,237
7,643
2,304,113
699,793(15,067)(23,701)
7,796(1,371,056)(222,223)(14,998) Note 4(4,740)1,949(956,008) Note 4(222,196)-

37,9752,450

3,797,500

49.00

37,767

(93)

(46)

-

154,330
11,658154,330
11,65815,433,000
469,755

5.51
1.08

167,400
4,567(1,371,056)(156,739)(104,501)(1,688)

-

HK$

3,329

1,050,000

35.00

51,11639,82913,940

-

US$

5,877

-

100.00373,442

22,35522,355 Note 3

10,2001,020,000

51.00

7,871

4

10,200- 78 -$

9,350 $
(376,255)
318,494(21,960)(267,566)(258,894)
45,068(49,995)(513,790)(156,739)
9,129(73,586)(28,137)Note

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.0055.00

JPY

1,605,033
1,223,259
1,556,133
1,188,110
695,959
602,688469,979
232,883
277,234
200,794
512,926
405,353
149,353

Investment
Income (Loss)

150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
7,172,346
13,021,042
28,400,000
20,626,644
21,494,637
46,500,000
13,750,000

26,2658,000
2,500
3,109,907
1,350,000$

Net Income(Loss) of theInvestee

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500

77,270JPY

Balance as of December 31, 2020
Percentage
Number ofof
Carrying
Shares/Units Ownership
Amount
(%)

53,770 Note 4(353,642) Notes 1 and 4
172,017(20,542) Note 2(136,459)(126,858)
45,068(46,951)(102,758)(74,214)(8,309) Note 5(73,906) Note 4(15,475)-

2-

TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2020
(In Thousands of New Taiwan Dollars/Renminbi/U.S. Dollars, Unless Stated Otherwise)

China Airlines

Investee Company Name

Main Business andProduct

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2020

Investment Flow

Outflow

Inflow

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

Forwarding and storage $ 1,105,474
of air cargo(RMB 254,480)

Indirect(Note 1)$
118,920 $(US$4,186)

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

Forwarding and storage60,817of air cargo(RMB 14,000)

Indirect(Note 1)

55,325
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,360,511
maintenance services (US$ 83,090)

Indirect(Note 1)

61,1142,151)-(US$HAECO Composite
Structures (Jinjiang)

Composite material

Indirect(Note 1)

18,068
636)

-

(US$

(US$

331,335
11,663)

Accumulated Investment in
Mainland China as ofDecember 31, 2020

Investment Amount
Authorized by Investment
Commission, MOEA

Limit on Investment$253,427(US$8,920)$618,216 (Note 3)$34,535,690 (Note 4)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2020

-

$

-

% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

Carrying
Amountas ofDecember 31,
2020

Investment
Gain (Loss)$
118,920 $91,311(US$4,186) (RMB 21,367)

14.00

55,32568,272
1,947) (RMB 15,976)

14.00

(US$

61,1142,151)

-

2.589

-

(US$

18,068
636)

-

5.45

-

(US$

-

-

-

Accumulated
InwardRemittance ofEarnings as ofDecember 31,
2020$
12,794 $
238,717 $
100,470(RMB 2,991) (RMB 54,953) (US$3,537)(Note 2)

(RMB

9,566
134,918
2,237) (RMB 31,058) (US$

-

(RMB

44,333
1,561)(Note 2)-

16,585
3,818) (US$10,128357)(Continued)- 79 -

Taiwan Airport Services

Investee Company

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2020

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

Forwarding and storage $ 1,105,474 Indirectof air cargo(RMB 254,480 ) (Note 5)$
114,158 $(US$
4,018)

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

Forwarding and storageof air cargo
(RMB

(US$

60,817 Indirect
14,000 ) (Note 5)

Remittance of Funds

Outward

Inward-54,737
1,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2020

$

-

-

$
114,158 $
91,311(US$
4,018) (RMB 21,367)

14.00

54,737
68,272
1,927) (RMB 15,976)

14.00

(US$

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

Investment Amounts Authorized by
Investment Commission, MOEA

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

$168,895(US$5,945)$168,895(US$5,945)$254,438(Note 6)Net Income(Loss) of theInvestee% Ownershipof Direct orIndirect
Investment

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2020

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2020$
12,784 $237,502 $129,010(RMB 2,991) (RMB 54,673) (US$4,541)(RMB

9,558
135,128
2,237) (RMB 31,107) (US$59,426
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: The inward remittance of earnings in 2020 amounted to US$3,536,561 and US$1,560,538.
Note 3: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.
Note 4: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjustment Rule,” 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 for the reporting period.
(Concluded)- 80 -TABLE 8

CHINA AIRLINES, LTD.
INFORMATION OF MAJOR STOCKHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 2020

SharesNumber ofPercentage ofSharesOwnership (%)

Name of Major Shareholder

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

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

34.44
9.59

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

- 81 -