China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theNine Months Ended September 30, 2020 and 2019 andIndependent Auditors’ Review ReportINDEPENDENT AUDITORS’ REVIEW REPORTThe Board of Directors and the Shareholders
China Airlines, Ltd.
Introduction
We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. and its
subsidiaries (the “Group”) as of September 30, 2020 and 2019, the related consolidated statements ofcomprehensive income for the three months ended September 30, 2020 and 2019 and for the nine months
ended September 30, 2020 and 2019, the consolidated statements of changes in equity and cash flows forthe nine month then ended, and the related notes to the consolidated financial statements, including asummary of significant accounting policies (collectively referred to as the “consolidated financial
statements”). Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with the Regulations Governing the Preparation of Financial Reports
by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed
and issued into effect by the Financial Supervisory Commission of the Republic of China. Our
responsibility is to express a conclusion on the consolidated financial statements based on our reviews.
We did not review the financial statements of some subsidiaries included in the consolidated financial
statements of the Group, but such statements were reviewed by other auditors. Our conclusion, insofar as
it relates to the amounts included in the consolidated financial statements for these subsidiaries, is based
solely on the report of other auditors. The total assets of these subsidiaries were NT$11,025,331 thousand
and NT$13,644,652 thousand, which constituted 3.88% and 4.57% of the consolidated total assets as of
September 30, 2020 and 2019, and the total revenue was NT$175,653 thousand, NT$2,501,275 thousand,
NT$1,813,945 thousand and NT$7,406,331 thousand, which constituted 0.66%, 5.82%, 2.12% and 5.86%of the consolidated total revenues for the three months ended September 30, 2020 and 2019 and for thenine months ended September 30, 2020 and 2019.
Scope of Review
Except as explained in the following paragraph, we conducted our reviews in accordance with theStatement of Auditing Standard No. 65 “Review of Financial Information Performed by the Independent
Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and otherreview procedures. A review is substantially less in scope than an audit and consequently does not enable
us to obtain assurance that we would become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Basis for Qualified Conclusion
As disclosed in Notes 13 and 14 to the consolidated financial statements, the financial statements of somenon-significant subsidiaries included in the consolidated financial statements referred to in the firstparagraph and some investments accounted for using the equity method were not reviewed. As of
September 30, 2020 and 2019, the combined total assets of these non-significant subsidiaries were
NT$21,447,628 thousand and NT$22,460,780 thousand, respectively, representing 7.55% and 7.53%,
respectively, of the consolidated total assets, and combined total liabilities of these non-significant-1-subsidiaries were NT$11,453,273 thousand and NT$11,665,344 thousand, respectively, representing
5.07% and 4.89%, respectively, of the consolidated total liabilities; for the three months ended September
30, 2020 and 2019 and for the nine months ended September 30, 2020 and 2019, the amounts of the
combined comprehensive income of these non-significant subsidiaries were NT$(126,107) thousand,
NT$297,334 thousand, NT$(481,583) thousand and NT$855,151 thousand, respectively, representing
37.52%, 59.93%, 28.41% and (412.73%), respectively, of the consolidated total comprehensive income.
As of September 30, 2020 and 2019, the aforementioned investments accounted for using the equity
method were NT$2,009,318 thousand and NT$2,186,140 thousand, respectively; and for the three months
ended and for the nine months ended September 30, 2020 and 2019, the amounts of the Group’s share of
the profit of such investments accounted for using the equity method were NT$(57,013) thousand,
NT$77,114 thousand, NT$(176,235) thousand and NT$234,913 thousand, respectively.
Qualified Conclusion
Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary
had the financial statements of the non-significant subsidiaries and investments accounted for by using
the equity method as described in the preceding paragraph been reviewed, nothing has come to ourattention that caused us to believe that the accompanying consolidated financial statements do not present
fairly, in all material respects, the consolidated financial position of the Group as of September 30, 2020
and 2019, its consolidated financial performance for the three months ended September 30, 2020 and2019 and for the nine-month periods ended September 30, 2020 and 2019, and its consolidated cash flows
for the nine months then ended in accordance with the Regulations Governing the Preparation of
Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial
Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic ofChina.
The engagement partners on the reviews resulting in this independent auditors’ review report are Huang,
Jui Chan and Cheng, Shiuh Ran.

Deloitte & Touche
Taipei, Taiwan
Republic of China
November 5, 2020

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

-2-

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

September 30, 2020
(Reviewed)
Amount%ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 32)
Financial assets at fair value through profit or loss - current (Notes 4, 7 and 32)
Financial assets at amortized cost - current (Notes 4, 9 and 32)
Financial assets for hedging - current (Notes 4, 6 and 32)
Notes and accounts receivable, net (Notes 4, 5, 10 and 32)
Notes and accounts receivable - related parties (Notes 32 and 33)
Other receivables (Note 32)
Current tax assets (Notes 4 and 28)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4, 5 and 12)
Other assets - current (Note 18)

September 30, 2019
(Reviewed)
Amount%$ 26,638,850
491,2715,458,047
9,505,860
8,418,269
1,537
640,205
66,991
8,048,111
79,143
1,864,090

10
2
3
3
3
1

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

10
1
3
3
1

$ 28,831,065
374,123
1,079,048
12,3609,255,225
10,5691,366,847
59,664
8,762,322
1,738,484

10
3
3
1

61,212,374

22

51,822,342

18

51,489,707

17

122,512388,2702,009,318
134,897,356
62,866,981
2,074,864
1,088,194
5,678,175
13,686,945

1
47
22
1
2
5

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

1
50
24
1
2
4

126,069
2,186,140
149,644,024
74,143,766
2,075,135
1,211,693
5,211,294
12,346,491

1
50
25
1
2
4

222,812,615

78

241,225,637

82

246,944,612

83$ 284,024,989

100$ 293,047,979

100$ 298,434,319

100

Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4, 8 and 32)
Financial assets at amortized cost - non-current (Notes 4, 9 and 32)
Investments accounted for using the equity method (Notes 4 and 14)
Property, plant and equipment (Notes 4, 5, 15 and 34)
Right-of-use assets (Notes 4, 21 and 34)
Investment properties (Notes 4 and 16)
Other intangible assets (Notes 4 and 17)
Deferred income tax asset (Notes 4, 5 and 28)
Other assets - non-current (Notes 18, 21, 32, 33 and 34)
Total non-current assets
TOTAL

December 31, 2019
(Audited)
Amount%LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Notes 19 and 32)
Short-term bills payable (Note 19)
Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 32)
Financial liabilities for hedging - current (Notes 4, 21 and 32)
Notes and accounts payable (Note 32)
Notes and accounts payable - related parties (Notes 32 and 33)
Other payables (Notes 22 and 32)
Current tax liabilities (Notes 4 and 28)
Lease liabilities - current (Notes 4 and 21)
Contract liabilities - current (Notes 4, 5 and 23)
Provisions - current (Notes 4, 24 and 32)
Bonds payable and put options of convertible bonds - current portion (Notes 4, 20 and 32)
Loans and debts - current portion (Notes 19, 32 and 34)
Other current liabilities (Note 32)$

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

3
1
5
1
7
3
5
1

23

76,351,527

35,774,370
11,600,000
72,681,739
1,998,350
13,565,971
823,805
13,530,522
9,308,126
572,000

13
4
26
1
5
5
3
-

Total non-current liabilities

159,854,883

Total liabilities

Total current liabilities
NON-CURRENT LIABILITIES
Derivative financial liabilities for hedging - non-current (Notes 4, 21 and 32)
Bonds payable - non-current (Notes 4, 20 and 32)
Loans and debts - non-current (Notes 19, 32 and 34)
Contract liabilities - non-current (Notes 4 and 23)
Provisions - non-current (Notes 4, 24 and 32)
Deferred tax liabilities (Notes 4 and 28)
Lease liabilities - non-current (Notes 4 and 21)
Accrued pension costs (Notes 4, 5 and 25)
Other non-current liabilities (Note 32)

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

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated November 5, 2020)-3-

1,932,000
8,468,278
8,516,507
2,072,167
109,953
8,480,982
178,279
2,499,005
4,394,318
221,320
11,562,586
16,468,455
1,197,423

1
3
3
1
3
1
1
4
6
-

66,101,273$$

10,0002,115
8,883,631
1,675,597
550,376
13,257,560
336,9712,486,709
20,836,928
53,326
9,100,000
9,775,624
4,595,396

3
1
4
1
7
3
3
2

26

71,564,233

24

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

15
8
18
1
3
5
3
-

46,107,551
22,932,632
59,560,240
2,155,198
10,061,365
204,421
16,620,938
8,665,398
487,138

15
8
20
1
3
6
3
-

57

156,564,335

53

166,794,881

56

225,956,156

80

232,915,862

79

238,359,114

80

54,209,846
1,187,327

19-

54,209,846
2,488,907

19
1

54,209,846
2,448,22018
1(2,023,555)(2,023,555)
1,876,805(30,875)

(1)
(1)
1
-

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

466,416
12,967(346,425)
132,958(193,441)(43,372)-

55,219,548

1956,553,772

20

56,554,211

19

2,849,285

1

3,578,345

1

3,520,994

1

58,068,833

20

60,132,117

21

60,075,205

20$ 284,024,989

100$ 293,047,979

100$ 298,434,319

100

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

For the Three Months Ended September 30
2020
2019
Amount%Amount%REVENUE (Notes 4, 27 and 34)

26,611,698

100

43,004,648

100

85,484,350

100$ 126,302,308

100

COSTS (Notes 4, 11, 17, 21, 24,
25, 27, 34 and 36)

25,408,645

95

37,878,124

88

79,395,609

93

112,665,810

89

GROSS PROFIT

1,203,053

5

5,126,524

12

6,088,741

7

13,636,498

11

OPERATING EXPENSES(Notes 4, 25 and 27)

1,560,622

6

3,664,622

9

6,669,400

8

10,840,603

9

OPERATING (LOSS) PROFIT(357,569)(1 )

1,461,902

3(580,659)(1 )

2,795,895

2

182,5031

190,2451

545,7071

516,124-

89,695-(254,192)(1 )19,407-(491,067)-(750,676)(3 )(803,383)(2 )(2,367,841)(3 )(2,523,631)(2 )(57,013)-

77,114-(176,235)-

234,913-(535,491)(2 )(790,216)(2 )(1,978,962)(2 )(2,263,661)(2 )(LOSS) PROFIT BEFOREINCOME TAX(893,060)(3 )

671,6861(2,559,621)(3 )532,234-

INCOME TAX (BENEFIT)
EXPENSE (Notes 4 and 28)(75,767)-

176,171-(184,376)-

474,485-

NET (LOSS) INCOME FOR
THE PERIOD(817,293)(3 )

495,5151(2,375,245)(3 )57,749-(213,217)

(1 )

603

-

(224,034)

-

603

-

(11,473)-(2,939)-(85,280)-(5,004)-44,939(179,751)(1 )

25(2,311)-60,960(248,354)-

876(3,525)-

NON-OPERATING EXPENSES
Other income (Note 27)
Other gains and losses(Notes 12, 15 and 27)
Finance costs (Notes 27
and 33)
Share of the profit (loss) of
associates and joint ventures(Note 14)
Total non-operating
income and expenses

OTHER COMPREHENSIVEINCOME (LOSS)
Items that will not bereclassified subsequently to
profit or loss：
Gain (loss) on hedging
instruments subject tobasis adjustment
Unrealized loss on
investments in equity
instruments designated as
at fair value through othercomprehensive income
Income tax relating to items
that will not bereclassified subsequently
to profit or loss (Note 28)$$

For the Nine Months Ended September 30
2020
2019
Amount%Amount%$(Continued)-4-CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)(Reviewed, Not Audited)

For the Three Months Ended September 30
2020
2019
Amount%Amount%Items that may be reclassified
subsequently to profit orloss:
Exchange differences ontranslating foreign
operations (Notes 4
and 26)
Gain (loss) on hedging
instruments not subject tobasis adjustment (Notes 4,
21, 26 and 33)
Income tax relating to items
that may be reclassified
subsequently to profit orloss (Note 28)$(32,457)-(70,055)-

3

39,897-1,231,041(164,068)
660,943

3(4,510)2,930-

481,192

2

619

-

$

(336,101)(1 )$

496,134

1$(707,937)(109,356)

(3 )
-

$

340,038
155,477$(817,293)

(3 )

$

$

(229,105)(106,996)

(1 )
-

$

(336,101)(1 )Other comprehensive
income (loss) for theperiod, net of income
tax
TOTAL COMPREHENSIVEINCOME (LOSS) FOR THE
PERIODNET INCOME (LOSS)ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests

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

EARNINGS (LOSS) PER
SHARE (NEW TAIWANDOLLARS; Note 29)
Basic
Diluted$$(13,055)-

838,066(0.13)(0.13)$For the Nine Months Ended September 30
2020
2019
Amount%Amount%(6,411)-

1(318,338)-(232,713)
928,2731

63,332(261,417)-

679,9191(264,942)-$(1,695,326)

(2 )

$

(207,193)

-

1
-

$

(2,021,822)(353,423)

(2 )
(1 )

$

(346,425)
404,174-495,5151$(2,375,245)

(3 )

$

57,749-$347,814148,320

1-$(1,341,250)(354,076)

(2 )
-

$

(605,959)
398,766-$

496,134

1$(1,695,326)

(2 )

$

(207,193)

-

$
$

0.06
0.06

$

$
$

(0.37)(0.37)$$$(0.06)(0.06)

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

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

Equity Attributable to Owners of the Company

Retained Earnings

BALANCE AT JANUARY 1, 2019

Share Capital

Capital Surplus

Legal Reserve

Special Reserve

UnappropriatedEarnings(Accumulated
Deficits)$ 54,209,846

$

$

$

$

1,241,214

351,923

118,810

1,144,928

Exchange
Differences on
Translating
Foreign
Operations

Other Equity
Unrealized Gain
(Loss) on
Financial Assets
at Fair Value
Through Other
Comprehensive
Income$$(9,664)42,619Gain (Loss) on
Hedging
Instruments$

25,268Treasury Shares
$

Total

(43,372)$ 57,081,572

Non-controlling
Interests

Total Equity$

2,965,512$ 60,047,084

Basis adjustment to gain on hedging instruments

-

-

-

-

-

-

-

(603)

-

(603)

-

(603)

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

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

-

-

-

-

(1,136,278)-(1,136,278)

Actual disposal of interests in subsidiaries-

1,207,006

-

-

-

-

-

-

-

1,207,006

7,302

1,214,308

Net profit (loss) for the nine months ended September 30, 2019

-

-

-

-

(346,425)

-

-

-

-

(346,425)

404,174

57,749Other comprehensive income for the nine months ended September 30,
2019, net of income tax

-

-

-

-

-

(2,616)(4,128)(252,790)-(259,534)(5,408)(264,942)

Total comprehensive income (loss) for the nine months ended
September 30, 2019

-

-

-

-

(346,425)(2,616)(4,128)(252,790)-(605,959)

398,766(207,193)

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(416,438)(416,438)

Non-controlling interests arising from acquisition of subsidiaries

-

-

-

-

-

-

-

-

-

-

590,809590,809

Loss of control of subsidiaries

-

-

-

-

-

8,368

105

-

-

8,473

(24,957)(16,484)

BALANCE AT SEPTEMBER 30, 2019

$ 54,209,846$

2,448,220$

466,416$

12,967$(346,425)$(3,912)$

38,596$(228,125)$(43,372)$ 56,554,211$

3,520,994$ 60,075,205

BALANCE AT JANUARY 1, 2020

$ 54,209,846$

2,488,907$

466,416$

12,967$ (1,777,225)$(54,707)$107,262$

1,143,678$(43,372)$ 56,553,772$

3,578,345$ 60,132,117

Issuance of employee share options by subsidiaries

-

172

-

-

-

-

-

-

-

172

52

224

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 loss for the nine months ended September 30, 2020

-

-

-

-

(2,021,822)

-

-

-

-

(2,021,822)(353,423)(2,375,245)

Other comprehensive income (loss) for the nine months ended
September 30, 2020, net of income tax

-

-

-

-

-

(55,231)(69,127)804,930-

680,572(653)

679,919

Total comprehensive income (loss) for the nine months ended
September 30, 2020

-

-

-

-

(2,021,822)(55,231)(69,127)804,930-(1,341,250)(354,076)(1,695,326)

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

12,497

6,854

-

6,854

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(375,036)(375,036)-$ (2,023,555)(30,875)$ 55,219,548

2,849,285$ 58,068,833

BALANCE AT SEPTEMBER 30, 2020

$ 54,209,846$

1,187,327$-$

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated November 5, 2020)-6-$(109,938)$

38,135$

1,948,608$$

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

For the Nine Months Ended
September 30
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES(Loss) income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Expected credit loss recognized on trade receivables
Net gain on fair value changes of financial assets and liabilities held
for trading
Interest income
Dividend income
Share of loss (profit) of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on disposal of non-current assets held for sale
Gain on disposal of investments
Loss on disposal of inventory and property, plant and equipment
Compensation costs of employee share options
Finance costs
Net (gain) loss on foreign currency exchange
Loss on sale-leasebacks
Recognition of provisions
OthersChanges in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities classified as at fair value through profit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash generated from operations
Interest received
Dividends received-7-$ (2,559,621)$

532,234

23,898,705
152,758
5,791

24,582,494
149,150
20,434(2,234)(242,761)(22,516)
176,235(13,466)
388,460
224
2,367,841(621,249)
4,730,275
3,533(43,641)(287,238)(18,009)(234,913)(25,280)
10,462(7,656)502,317
2,523,631
516,116
103,775
3,293,355(2,063)23,905(11,749)(140,637)
867,396
110,725
663,251
1,528,637
61,595(1,073,199)(4,520,964)(16,904,416)(962,948)(2,628,167)(126,909)(33,033)
5,115,462
232,156
63,817(124,447)
1,894
701,910(140,527)(127,624)(294,431)
1,878,230
173,523
150,336(822,899)
1,543,090(2,051,888)
649,837(137,886)
1,102
33,015,388
272,090
260,714(Continued)

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

For the Nine Months Ended
September 30
2020
2019
Interest paid
Income tax paid

$ (2,477,852)(191,653)$ (2,483,505)(356,524)

2,741,930

30,708,163(5,398,640)
1,694,234(9,667,026)(858,411)
39,076(63,471)
100,018(3,983,167)(57,715)(52,410)(1,389,615)
3,718,702
35,692(4,075,360)
66,784(347,289)
141,930(12,864,504)(152,548)
453-

1,505,664(17,413)(18,247,512)(13,377,504)

1,552,000
8,068,279(8,950,000)
65,830,527(43,944,169)(8,153,315)
92,983(137,738)(375,036)
6,854

10,0003,500,000(4,445,900)
7,532,213(14,629,858)(8,624,846)
122,618(104,852)
4,905,660(1,136,278)(416,438)-

Net cash generated from (used in) financing activities

13,990,385(13,287,681)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES(305,481)(149,450)(Continued)

Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of financial assets at amortized cost
Disposal of financial assets amortized cost
Payments to acquire financial assets for hedging
Proceeds from disposal of noncurrent assets held for sale
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software costs(Increase) decrease in restricted assets
Proceeds from disposal of associates accounted for using the equity
methodNet cash outflow on disposal of subsidiaries (Note 31)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term debts
Increase in short-term bill payable
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds of long-term debts
Repayments of long-term debts
Repayments of the principal portion of lease liabilities
Proceeds of guarantee deposits received
Refunds of guarantee deposits received
Proceeds from sale-leasebacks
Dividends paid to owners of the Company
Cash dividends paid to non-controlling interests
Proceeds from disposal of treasury shares-8-

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

For the Nine Months Ended
September 30
2020
2019
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS$ (1,820,678)$

3,893,528

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
PERIOD

28,459,528

24,937,537

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD$ 26,638,850$ 28,831,065

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated November 5, 2020)-9-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)(Reviewed, Not Audited)

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its shares have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company is primarily involved in (a) air transport services
for passengers, cargo and mail; (b) ground services and routine aircraft maintenance; (c) major maintenanceof flight equipment; (d) communications and data processing services to other airlines; (e) the sale ofaircraft parts and aviation equipment; and (f) the sale and leasing of aircraft.
The major shareholders of the Company are the China Aviation Development Foundation (“CADF”) andthe National Development Fund (“NDF”), Executive Yuan. As of September 30, 2020, December 31, 2019
and September 30, 2019, CADF and NDF held a combined 44.03% of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiaries (collectively referred to as the“Group”) were approved by the board of directors and authorized for issue on November 5, 2020.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports
by Securities Issuers and the International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), 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 amendments to the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by
the FSC did not have any material impact on the Group’s accounting policies:
Amendment to IFRS 16 “Covid-19 - Related Rent Concessions”
The Group elected to apply the practical expedient provided in the amendment to IFRS 16 with respect
to rent concessions negotiated with the lessor as a direct consequence of the COVID-19. The related
accounting policies are stated in Note 4. Before the application of the amendment, the Group was
required to determine whether the abovementioned rent concessions are lease modifications and thus
have to be accounted for as lease modifications.
The Group applied the amendment from January 1, 2020. Retrospective application of the amendment
has no impact on the retained earnings as of January 1, 2020.

- 10 -

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date Announced by
IASB (Note 1)

New IFRSs“Annual Improvements to IFRS Standards 2018-2020”
Amendments to IFRS 3 “Reference to the Conceptual Framework”
Amendments to IFRS 4 “Extension of the Temporary Exemption from
Applying IFRS 9”
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16“Interest Rate Benchmark Reform - Phase 2”
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 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)
Effective immediately uponpromulgation by the IASB
January 1, 2021
To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
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 first 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.
Except for the above impact, as of the date the consolidated financial statements were authorized for
issue, the Group is continuously assessing the possible impact that the application of other standards
and interpretations will have on the Group’s financial position and financial performance and will
disclose the relevant impact when the assessment is completed.

- 11 -

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESExcept for the policies listed below, the accounting policies adopted for these consolidated financial
statements are the same as those of for the consolidated financial statements for the year ended December
31, 2019.
Statement of Compliance
These interim consolidated financial statements have been prepared in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial
Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in these interim
consolidated financial statements is less than the disclosures required in a full set of annual consolidated
financial statements.
Basis of Consolidation
The reporting principles of these consolidated financial statements are the same as those of the consolidated
financial statements for the year ended December 31, 2019.
Employee Benefits
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determinedpension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since thattime and for significant plan amendments, settlements, or other significant one-off events.
Income Tax
Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income
taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income thetax rate that would be applicable to expected total annual earnings.
Business Combinations
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control
over the subsidiaries are accounted for as equity transactions. Any difference between the Group’s carrying
amounts of the interests and the fair value of the consideration paid or received is recognized directly inequity.
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated
as the difference between (i) the aggregate of the fair value of the consideration received and any
investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the
assets (including any goodwill) and liabilities and any non-controlling interests of the former subsidiary attheir carrying amounts at the date when control is lost. The Group accounts for all amounts recognized inother comprehensive income in relation to that subsidiary on the same basis as would be required had theGroup directly disposed of the related assets or liabilities.
Lease
The Group negotiates with the lessor for rent concessions as a direct consequence of the Covid-19 tochange the lease payments originally due by June 30, 2021, that results in the revised consideration for thelease substantially the same as, or less than, the consideration for the lease immediately preceding thechange. There is no substantive change to other terms and conditions. The Group elects to apply thepractical expedient to rent concessions for the abovementioned lease contracts, and therefore, does notassess whether the rent concessions are lease modifications. Instead, the Group recognizes the reduction inlease payment in profit or loss in the period in which the events or conditions that trigger the concession
occurs, and makes a corresponding adjustment to the lease liability.
- 12 -

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.
Government Grants
Government grants are not recognized until there is reasonable assurance that the Group will comply withthe 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 theGroup 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 Group with no future related costs are recognized in
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.

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

6. CASH AND CASH EQUIVALENTS

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

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

102,243
12,480,737

483,951
7,206,938

152,002
10,061,172

7,147,612
6,908,258

16,565,821
4,202,818

15,998,451
2,619,440$ 26,638,850$ 28,459,528$ 28,831,065

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

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

September 30,
2020

December 31,
2019

September 30,
2019

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

0.28%-2.20%
0.28%-0.65%

0.59%-3.55%
0.47%-0.70%

0.59%-3.50%
0.51%-2.80%- 13 -

The Group 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:
Carrying
Maturity Date
Subject
Value
September 30, 2020

2020.10.8-2020.12.16

Financial assets for hedging - current$ 9,505,814

Impact on comprehensive income (loss)
Recognized in
Other
Comprehensive
Income (Loss)
For the nine months ended September 30, 2020
For the three months ended September 30, 2020

$ (161,211)(161,211)

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
September 30,
2020

December 31,
2019

September 30,
2019

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

$

-

$

434

$

16,864491,271

511,758

357,259$ 491,271$ 512,192$ 374,123$$$

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

11,7492,115

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

NTD570,571/USD19,000

NTD/USD

2019.10.1-2020.7.31

NTD1,009,317/USD32,500

December 31, 2019
Buy forward contracts
September 30, 2019
Buy forward contracts- 14 -

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Investments in Equity Instruments
September 30,
2020

December 31,
2019

September 30,
2019$ 100,161$ 182,356$ 104,952

22,351

26,865

21,117$ 122,512$ 209,221$ 126,069

Non-current
Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

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

9. FINANCIAL ASSETS AT AMORTIZED COST
September 30,
2020

December 31,
2019

September 30,
2019$ 5,458,047-$ 2,354,794
301$ 1,079,048-$ 5,458,047$ 2,355,095$ 1,079,048

$

$

$

Current
Time deposits with original maturities of morethan 3 months
Government bonds

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

388,270

105,586-

The range of interest rates for time deposits with original maturities of more than 3 months wasapproximately 0.40%-2.75%, 0.60%-2.75% and 0.40%-2.80% per annum as of September 30, 2020,
December 31, 2019 and September 30, 2019, respectively.

- 15 -

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE, NET

Notes receivable

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

14,711

299,245

480,343

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

8,615,272(211,714)
8,403,558

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

8,987,872(212,990)
8,774,882$ 8,418,269$ 8,520,834$ 9,255,225

The average credit period of sales to customers was 7 to 55 days. In determining the recoverability of aaccounts receivable, the Group considered any change in the credit quality of the receivables since the datecredit was initially granted to the end of the reporting period, and any allowance for impairment loss was
based on the estimated irrecoverable amounts determined by reference to the Group’s past default
experience with the counterparty and an analysis of the counterparty’s current financial position. The Group
adopted a policy of only dealing with entities that are rated the equivalent of investment grade or higher andobtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss fromdefaults. Credit rating information is obtained from independent rating agencies where available or, if notavailable, the Group uses other publicly available financial information or its own trading records to rate its
major customers. The Group’s exposure and the credit ratings of its counterparties are continuously
monitored 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 Group applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all accounts receivable. The expected credit
losses on accounts receivable are estimated using a provision matrix prepared 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 aswell as the forecasted direction of economic conditions at the reporting date. As the Group’s historicalcredit 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 the Group’s customer base.
The Group writes off accounts receivable when there is information indicating that the debtor isexperiencing severe financial difficulty and there is no realistic prospect of recovery. For accounts
receivable that have been written off, the Group continues to engage in enforcement activity to attempt torecover the past due receivables. Where recoveries are made, these are recognized in profit or loss.

- 16 -

The following table details the loss allowance of accounts receivable based on the Group’s provision
matrix:
September 30, 2020
Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.04%

0.38%

8.26%

67.05%

95.51%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,946,934

Amortized cost

$ 7,943,533$

Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.12%

0.15%

6.16%

15.25%

97.18%

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

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

Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Total

Expected credit loss rate

0.02%

0.41%

1.02%

23.44%

98.95%-

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 6,980,406$ 1,401,461(1,368)(5,728)

Amortized cost

$ 6,979,038$ 1,395,733$

314,390(3,401)$(1,195)313,195

137,376$(11,342)$

126,034

38,874$(26,063)$

12,811

Total

177,698$ 8,615,272(169,713)(211,714)

7,985$ 8,403,558$

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

96,376

Total

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

5,374$ 8,221,589$

September 30, 2019$332,956$(3,404)$

329,552

89,657$(21,015)$

68,642

183,392$ 8,987,872(181,475)(212,990)

1,917$ 8,774,882$

The movements of the loss allowance of accounts receivable were as follows:
For the Nine Months Ended
September 30
2020
2019
Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses
Loss of control of subsidiaries$ 218,665
5,791(12,735)(7)-$ 227,306
20,434(34,734)
1(17)

Balance at September 30$ 211,714$ 212,990- 17 -

11. INVENTORIES, NET

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

September 30,
2020

December 31,
2019

September 30,
2019$ 7,263,449
624,082
133,597
26,983$ 7,578,125
571,601
283,933
36,454$ 7,569,585
570,877
591,656
30,204$ 8,048,111$ 8,470,113$ 8,762,322

The operating costs recognized for the nine months ended September 30, 2020 and 2019 included loss oninventory write-downs of $196,286 thousand and $302,420 thousand, respectively. And the operating costs
for the three months ended September 30, 2020 and 2019 included (reversal of loss) loss on inventory
write-downs of $(933) thousand and $36,368 thousand, respectively.

12. NON-CURRENT ASSETS HELD FOR SALE
September 30,
2020
Aircraft held for sale

$ 79,143

December 31,
2019$

September 30,
2019

-

$

-

To enhance its competitiveness, the Company plans to introduce new type of aircraft and retire old aircraft
according to a planned schedule. The old aircraft classified as non-current assets held for sale had original
carrying amounts exceeded their expected sale prices which gave rise to an impairment loss. The Company
will continuously assess for any indications of impairment in subsequent periods. However, the actual
amount of loss shall be subject to the actual sales price.
The Company recognized an impairment loss of $0 for the nine months ended September 30, 2020 and2019. Some aircraft had completed the planned disposal procedures, and the Company recognized a loss on
disposal of $10,462 thousand for the three months ended March 31, 2019.
The fair value measurement is classified as Level 3, and the fair value was determined according to similartransactions of the related markets and the proposed sale prices were based on the current status of theaircraft.

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

Investor Company
China Airlines, Ltd.

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

Main Businesses and Products
A holding company, real estate andhotel services
General investment
Cleaning of aircraft and maintenance ofmachine and equipment
Travel business
Real estate lease and international trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft

Proportion of Ownership (%)
September 30,
December 31,
September 30,
2020
2019
2019
100

100

100

100
100

100
100

100
100

100
100
100
94

100
100
100
94

100
100
100
94

94

94

94

(Continued)- 18 -

Investor Company

Cal-Dynasty International
Taiwan Airport Services

Investee Company
Taiwan Air Cargo Terminal (Note)
Taoyuan International Airport Services
Taiwan Airport Services (Note)
Global Sky Express
Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance And
Engineering Co., Ltd.
Kaohsiung Catering Services, Ltd.
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)

Main Businesses and Products

Proportion of Ownership (%)
September 30,
December 31,
September 30,
2020
2019
2019

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

59
49
48
25
77
100

59
49
48
25
77
100

59
49
48
25
78
100

In-flight catering
Real estate management
Hotel businessAirport supporting service andinvestment

54
100
100
100

54
100
100
100

54
100
100
100

(Concluded)
Note:

Proportion of ownership is based on the Group’s shareholding.

The Company has substantial control over Taoyuan International Airport Service, Taiwan Airport Service
and Global Sky Express, while the rest of investees have more than 50% of their voting shares owned by
the Company. The above financial information for the nine months ended September 30, 2020 and 2019 ofthese subsidiaries was not reviewed by independent auditors, except for Mandarin Airlines and Tigerair
Taiwan Co., Ltd.
In order to prepare for the listing of Tigerair Taiwan Co., Ltd. and to comply with the requirements relating
to the review process of public listing criteria, the release of the shares of Tigerair Taiwan Co., Ltd. held by
the Company and Mandarin Airlines was resolved in the shareholders’ meeting of the Company on June 25,
2019 and in the shareholders’ meeting of Mandarin Airlines on June 27, 2019. The shares shall be
subscribed by all shareholders of the Company and Mandarin Airlines on the basis of the percentage ofshareholdings. For those shares waived by the shareholders or the undersubscribed portion, the chairman
was authorized to designate a specific person to subscribe for the shares. The subscription price was set at$41 per share. In October and December 2019, the issued shares were fully paid-up and were completely
delivered and transferred. A total of 45,661,000 shares had been disposed of in which the proportion ofownership decreased to 77%. The proceeds from disposal amounted to $1,866,474 thousand. Since theCompany did not lose control of the subsidiary, the related gain on disposal amounted to $1,254,633
thousand was recognized in the capital surplus account.
The board of directors of Tigerair Taiwan Co., Ltd. approved the plan to issue ordinary shares for cash on
August 10, 2020. The Company plans to issue 80,000 thousand shares at $25 per share and the total amountof the transaction is $2,000,000 thousand. The contribution to employee stock options from cash capitalincrease recognized as compensation cost amounted to $224 thousand, of which $172 thousand wasrecognized as capital surplus and $52 thousand was attributed to non-controlling interests.
The board of directors of Tigerair Taiwan Co., Ltd. approved the abovementioned issuance of listed
ordinary shares for cash on August 6, 2020. The total amount of the transaction is capped at $2,000,000
thousand.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

September 30,
2020

December 31,
2019

September 30,
2019$ 1,137,076
872,242$ 1,208,495
1,015,298$ 1,261,309
924,831$ 2,009,318$ 2,223,793$ 2,186,140- 19 -

a. Investments in associates
The investments in associates were as follows:
September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

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

365,387
7,725
461,308
259,765

461,263
10,004446,161
248,350

511,627
10,685445,444245,663

42,891

42,71747,890$ 1,137,076$ 1,208,495$ 1,261,309

At the end of the reporting period, the proportion of ownership and voting rights of associates held by
the Group was as follows:
Proportion of Ownership and Voting Rights
September 30,
December 31,
September 30,
2020
2019
2019

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

20%
20%
28%
28%

20%
20%
28%
28%

20%
20%
28%
28%

35%

35%

35%

The recognized investment income of associates accounted for using the equity method is as follows:
For the Three Months Ended
September 30
2020
2019
China Aircraft Services
Dynasty Holidays
Airport Air Cargo Terminal(Xiamen)
Airport Air Cargo Service(Xiamen)Eastern United International
Logistics (Holdings) Ltd.

$ (12,550)
(682)

$

For the Nine Months Ended
September 30
2020
2019

3,350
(307)

$ (73,782)(2,326)$ 10,259
297

5,347

4,623

19,247

15,131

4,637

5,925

13,751

19,323

1,838

1,756

3,288

5,090

$ (1,410)$ 15,347$ (39,822)$ 50,100

The investments accounted for using the equity method and the share of profit or loss and othercomprehensive income of those investments were based on the associates’ financial statements whichhave not been reviewed. However, the management determined that there would be no significant
adjustments to the related information presented in these consolidated financial statements had theseinvestee’s financial statements been independently reviewed.

- 20 -

The 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 Group’s shareholding of the issued share capital decreased
from 51% to 20%. Dynasty Holidays was classified as an associate since the Group lost control of thesubsidiary. Therefore, the relevant assets and liabilities were not consolidated in the current period andonly the profit and loss from January 1, 2019 to January 31, 2019 were consolidated. For informationon the disposal of the subsidiary, refer to Note 30.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:

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

September 30,
2020

December 31,
2019

September 30,
2019$680,527
146,027
37,8207,868$

801,071
168,547
37,813
7,867$

748,584
166,019
2,358
7,870

$

872,242$ 1,015,298$

924,831

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled
entities held by the Group was as follows:
Proportion of Ownership and Voting Rights
September 30,
December 31,
September 30,
2020
2019
2019
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

51%
55%
49%
51%

51%
55%
49%
51%

51%
55%
49%
51%

The Group entered into a joint venture agreement with Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe right to veto major proposals on the board of directors, and therefore, the Group does not havecontrol.
To enhance the Group’s maintenance capabilities, the Company established a joint venture with the USNORDAM Aerospace Group in December 2017, with a plan 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 settle the disputes with its business partners, which
would not have an impact on its operations. As a result, NORDAM Asia suspended its operations from
October 5, 2018 to October 4, 2019 and resumed business on October 4, 2019. The Company increased
the capital of NORDAM Asia by $35,525 thousand in November 2019.
To expand the Group’s catering business, Kaohsiung Catering entered into a joint venture agreementwith a Japanese brand company to invest in Delica International Co, Ltd., with the Japanese brandcompany having the right to make decisions on operations, and therefore, the Group does not havecontrol.

- 21 -

The recognized investment income of jointly controlled entitles accounted for using the equity method
are as follows:

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

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$ (48,653)(6,949)(1)-$

56,6095,158-$ (120,543)(15,877)
7-$ 172,579
12,234-$ (55,603)$

61,767$ (136,413)$ 184,813

The investments accounted for using the equity method and the share of profit or loss and othercomprehensive income of those investments were based on the jointly controlled entities’ financial
statements which have not been reviewed. However, the management determined that there would be
no significant adjustments had this investee’s financial statements been independently reviewed.
For information on the major businesses and products and the locations of registration for the major
business offices of the above entities, refer to Tables 6 and 7 (names, locations, and related informationof investees on which the Company exercises significant influence and investment in mainland China)
following the notes to the consolidated financial statements.

15. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Equipment
under FinanceLeasesBuildings

FlightEquipment

13,993,585
166,759(896)
1,903,479
8,987$ 259,695,130
3,291,168(20,386,082)
28,797,237---

OthersTotal

Cost
Balance at January 1,
2019
Additions
Disposals
Reclassification
Net exchange differences
Loss of control ofsubsidiaries
Balance at September 30,
2019, net$

1,015,564
5,067

$

-

$

25,805,008(668,721)(25,131,813)-$(4,474)-$

17,917,780
617,433(260,493)(1,592,848)
49,188$ 318,427,067
4,075,360(21,316,192)
3,976,055
63,242(2,158)(6,632)

16,728,902$ 305,218,900$

1,020,631$

16,071,914$ 271,397,453

$

$

-

$

(6,574,873)(343,162)
896(4,459)$ (123,507,657 )(14,082,491)
14,639,276(14,621,264)-$ (14,634,822)(671,116)
638,039
14,665,787-$ (10,601,997)(701,853)
252,190(26,300)(4,909)$ (155,319,349)(15,798,622)
15,530,401
18,223(9,368)

-

-

2,112

1,727

3,839

$ (155,574,876)

Accumulated depreciationand impairment
Balance at January 1,
2019
Depreciation expenses
Disposals
Reclassification
Net exchange differences
Loss of control ofsubsidiaries-

Balance at September 30,
2019

$

-

$

(6,921,598)$ (137,572,136 )$-$ (11,081,142)

Balance at September 30,
2019, net$

1,020,631$

9,150,316$ 133,825,317

$

-

$

5,647,760$ 149,644,024(Continued)- 22 -

Freehold Land

Buildings

FlightEquipment

Equipment
under FinanceLeasesOthersTotal

Cost
Balance at January 1,
2020
Additions
Disposals
Reclassification
Net exchange differences$

1,002,499(15,205)(16,972)$

16,084,063
31,375(372,712)
303(30,991)$ 272,077,692
448,356(2,873,953)
1,485,746
-

$

-

$

16,846,835
378,680(195,126)
22,295(3,326)$ 306,011,089
858,411(3,456,996)
1,508,344(51,289)$

970,322$

15,712,038$ 271,137,841

$

-

$

17,049,358$ 304,869,559

$

-

$

(7,028,540)(368,318)
370,829
16,330$ (141,886,170 )(13,546,525)
2,691,178
1,489,158-$-$ (11,209,408)(693,661)
188,919
5,564(1,559)$ (160,124,118)(14,608,504)
3,250,926
1,494,722
14,771

Balance at September 30,
2020

$

-

$

(7,009,699)$ (151,252,359)$-$ (11,710,145)$ (169,972,203)

Balance at September 30,
2020, net$

970,322$

8,702,339$ 119,885,482

$

-

$

Balance at September 30,
2020, net
Accumulated depreciationand impairment
Balance at January 1,
2020
Depreciation expenses
Disposals
Reclassification
Net exchange differences

5,339,213$ 134,897,356(Concluded)
The reclassification mostly resulted from the transfer of prepayments for equipment and leased aircraft
buybacks.
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theassets as follows:
Buildings
Main buildings
Others
Machinery equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

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

Refer to Note 34 for the carrying amounts of property, plant and equipment pledged by the Group.

- 23 -

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

16. INVESTMENT PROPERTIES
September 30,
2020

December 31,
2019

September 30,
2019$ 2,074,864$ 2,075,068$ 2,075,135

Carrying amount
Investment properties

The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to other parties. The buildings are depreciated on a straight-line basis over 55 years.
The fair values of the investment properties held by the Group were $2,488,931 thousand, $2,506,230
thousand and $2,506,230 thousand as of September 30, 2020, December 31, 2019 and September 30, 2019,respectively. The fair value valuations were performed by independent qualified professional valuers andmanagement’s assessment based on similar market transactions.
All of the Group’s investment properties were held under freehold interests.

17. OTHER INTANGIBLE ASSETS

Computer
Software Cost

Relationship
Between
Clients

Accumulated
Amortization

Net Value

Balance at January 1, 2019
Additions
Amortization expenses
Disposal of subsidiaries$ 2,237,382
152,548(3,858)$186,197-$ (1,212,783)(149,150)
1,357$ 1,210,796
152,548(149,150)(2,501)

Balance at September 30, 2019

$ 2,386,072$

186,197$ (1,360,576)$ 1,211,693

Balance at January 1, 2020
Additions
Reclassification
Amortization expenses
Effects of exchange rate changes$ 2,406,163
57,717549-$

186,197-$ (1,409,668)--(152,758)(6)$ 1,182,692
57,717549(152,758)(6)

Balance at September 30, 2020

$ 2,464,429$

186,197$ (1,562,432)$ 1,088,194

The above other intangible assets are amortized on a straight-line basis over 2-16 years.

- 24 -

18. OTHER ASSETS
September 30,
2020

December 31,
2019

September 30,
2019$278,196
1,246,722
11,710327,462$

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

589,714573,104
17,418558,248$

1,864,090$

2,655,711$

1,738,484$

9,845,883
2,501,818
1,166,081
130,540
18,292
24,331$

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

7,968,038
2,868,813
1,257,502
99,224
6,956
145,958

Current
Temporary payments
Prepayments
Restricted assets
OthersNon-current
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
Others$ 13,686,945$ 13,171,063$ 12,346,491

The prepayments for aircraft are comprised of prepaid deposits and capitalized interest from the purchase of
ATR72-600, A321neo, A320neo and 777F aircraft. For details of the contract for the purchase of theaircraft, refer to Note 35.

19. BORROWINGSa. Short-term loans
September 30,
2020

December 31,
2019

September 30,
2019

Bank loans - unsecured$ 1,932,000$$Interest rates

0.92%-1.28%

0.95%-1.07%-

September 30,
2020

December 31,
2019

September 30,
2019$ 8,500,000
31,722$-$

10,000-$ 8,468,278

$

-

$

10,000380,000-

b. Short-term bills payable

Commercial paper
Less: Unamortized discount on bills payable

Annual discount rate

0.99%-1.23%- 25 --

0.53%

c. Long-term borrowings

Unsecured bank loans
Secured bank loans
Commercial papers
Proceeds from issueance
Less: Unamortized discounts

September 30,
2020

December 31,
2019

September 30,
2019$ 14,114,500
40,862,328$$

1,560,500
35,267,656

34,200,000
26,63489,150,194
16,468,455

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

32,561,667
53,95969,335,864
9,775,624$ 72,681,739$ 53,514,891$ 59,560,240

0.81%-1.63%

1.08%-1.79%

1.07%-1.46%

Less: Current portion

Interest rates

1,929,827
34,064,099

Bank loans are secured by flight equipment, buildings, and other equipment, refer to Note 34.
Bank loans (denominated in New Taiwan dollars and U.S. dollars) are repayable quarterly,
semiannually or in lump sum upon maturity. The related information is summarized as follows:
September 30,
2020

December 31,
2019

September 30,
2019

2009.2.42032.6.30

2008.2.262030.4.25

2008.2.262030.4.25

Periods

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until March 2025, were used by the Group to guarantee the commercial papers
issued. As of September 30, 2020, December 31, 2019 and September 30, 2019, such commercial
papers were issued at discount rates of 1.0310%-1.1310%, 1.1300%-1.3380% and 1.1273%-1.1680%,
respectively.
In accordance with the “Regulations on Relief and Revitalization Measures for Industries andEnterprises Affected by Severe Pneumonia with Novel Pathogens” endorsed by the Ministry ofTransportation and Communications and the “Operational Guides on Relief Loan Guarantees for Ailing
Aviation Industry Affected by Severe Pneumonia with Novel Pathogens”, the Group 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$24,390,000 thousand, which shall be repaid within 2 years from the date of initial drawdown. As of
September 30, 2020, the Group had made a drawdown in the amount of $13,310,000 thousand.

20. BONDS PAYABLE

Unsecured corporate bonds first-time issued in2013
Unsecured corporate bonds first-time issued in
2016

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

2,350,000- 26 -

2,750,000
4,700,000

2,750,000
4,700,000(Continued)

Unsecured corporate bonds second-time issued in2016
Unsecured corporate bonds first-time issued in2017
Unsecured corporate bonds second-time issued in2017
Unsecured corporate bonds first-time issued in2018
Unsecured corporate bonds first-time issued in2019
Convertible bonds issued the sixth time

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

2,500,000

5,000,000

5,000,000

1,000,000

2,350,000

2,350,000

3,500,000

3,500,000

3,500,000

4,500,000

4,500,000

4,500,000

3,500,000
5,812,586
23,162,586

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

3,500,000
5,732,632
32,032,632

11,562,586

10,000,000

9,100,000$ 11,600,000$ 22,052,625$ 22,932,632(Concluded)

Conditions

Rate (%)

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

1.85

2016.9.27-2021.9.27

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

1.08

2017.5.19-2020.5.19

Principal repayable on due date;indicator rate; payable annually

1.20

2017.5.19-2024.5.19

Principal repayable on due date;indicator rate; payable annually

1.75

2017.10.12-2020.10.12

Principal repayable on due date;indicator rate; payable annually

1.14

2017.10.12-2022.10.12

Principal repayable in October 2021
and 2022; indicator rate; payableannually
Principal repayable in November 2022
and 2023; indicator rate; payableannually
Principal repayable in November 2024
and 2025; indicator rate; payableannually
Principal repayable in June 2023 and2024; indicator rate; payableannually
Principal repayable in June 2025 and2026; indicator rate; payableannually
Unless bonds are converted to sharecapital or redeemed, principal
repayable one time in January 2023;
1.3821 discount rate p.a.

1.45

Less: Current portion and put option of
convertible bonds

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

Period2013.1.17-2020.1.17

2016.5.26-2021.5.26

2018.11.30-2023.11.30

2018.11.30-2025.11.30

2019.06.21-2024.06.21

2019.06.21-2026.06.21

2018.01.30-2023.01.30- 27 -

1.19

1.32

1.45

1.10

1.32

-

The Company issued its 2016 first unsecured corporate bonds with a face value of $5,000,000 thousand,and the purchasers of the bonds included Mandarin Airlines and Sabre Travel Network (Taiwan), who held
a cumulative face value of $150,000 thousand which was eliminated on the consolidated financial
statements.
The Company issued the sixth unsecured convertible bonds, and the issuance conditions are as follows:a. The holders may demand a lump-sum payment for the bonds upon maturity.
b. The holders can request that the Company repurchase their bonds at face value on the third anniversaryof the offering date. The holders can exercise the right to sell on January 30, 2021.
c. The Company may redeem the bonds at face value between April 30, 2018 and December 20, 2022
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$13.2, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 29, 2019, the conversion price was adjusted to NT$12.6.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,012,000(409,978)Liability component at the date of issuance$ 5,602,022

The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 7, 2019. The cumulative face value of the bonds shall not exceed $3,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years.
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.

- 28 -

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

Carrying amounts
Land
Buildings
Flight equipment
Other equipment

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

7,950,003
1,271,880
53,643,107
1,991$ 62,866,981

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

7,877,463
965,033
65,300,533
737$ 74,143,766

For the Nine Months Ended
September 30
2020
2019
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment$ 2,113,026$ 5,906,832$$

363,649
589,586
8,335,550
1,213

326,452
556,247
7,899,367
1,596$ 9,289,998$ 8,783,662

September 30,
2020

December 31,
2019

September 30,
2019$ 2,499,005$ 13,530,522$ 2,340,873$ 15,801,724$ 2,486,709$ 16,620,938

b. Lease liabilities

Carrying amounts
Current
Non-current

Range of discount rate for lease liabilities (included hedging instruments for leases denominated in U.S.
dollars) is as follows:Land
Buildings
Flight equipment
Other equipment

September 30,
2020

December 31,
2019

September 30,
2019

0%-1.8%0%-2.98%
0.68%-3.34%
1.058%

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

0%-2.87%0%-3.56%
2.00%-3.34%
1.06%-1.73%- 29 -

c. Financial liabilities under hedge accounting
The Group designated some USD-denominated lease contracts as hedging instruments to avoid
exchange rate fluctuations in passenger revenue by applying cash flow hedge accounting. The lease
information is as follows:
Maturity Date
September 30, 2020

December 31, 2019

September 30, 2019

Subject

Carrying Value

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

8,390,296
35,774,370
8,577,482
42,420,205
8,877,961
46,107,551

Impact on comprehensive income
Recognized in
Other
Comprehensive
IncomeFor the nine months ended September 30, 2020
For the three months ended September 30, 2020
For the nine months ended September 30, 2019
For the three months ended September 30, 2019

$ 1,262,985
832,399(292,684)
68,517

Reclassified toIncome$219,942
93,174(41,438)(22,392)

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

Refundable deposits
Credit guarantees

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

741,998
1,797,508

737,895
1,717,953

871,324
1,776,641

CAL Park, and Taoyuan International Airport Service signed a BOT contract with a land leaseagreement, refer to Note 35. The lease includes an option to extend the lease, as it is not possible toextend the lease, the amount of the lease related to the period covered by the option is not included in
the lease liability. If the amount of the extended lease period was included in the lease liability, thelease liability would have increased by $882,702 thousand, $873,293 thousand and $870,977 thousandon September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

- 30 -

Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 35.
e. In September 2019, the Company signed a rental letter of intent for six A321neo with Air Lease
Corporation, which is expected to be delivered between 2021 and 2022.
In October 2019, the Company signed a rental letter of intent for eight A321neo with CALC Lease
Corporation, which is expected to be delivered in 2022.
In September 2019, Tigerair Taiwan Co., Ltd. signed a rental letter of intent for eight A321neo withICBC Lease Corporation, which is expected to be delivered between 2021 and 2024.
f. Other lease information
The Group uses operating lease agreement for investment properties, refer to Note 16.

Payment for short-term and low
price lease
Total of lease cash outflow

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$
6,994
$ (3,183,943)$
19,117$ (9,581,731)$
9,312$ (4,327,016)$
30,287$ (10,302,544)

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

22. OTHER PAYABLES

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

September 30,
2020

December 31,
2019

September 30,
2019$

1,341,930
857,837
491,382
173,278
2,197,375
451,174
317,156
2,650,850$$$

8,480,982$ 13,187,972- 31 -

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

3,510,835
1,241,298
1,370,331
238,784
1,961,213
888,168
417,058
3,629,873$ 13,257,560

23. CONTRACT LIABILITIES
September 30,
2020

December 31,
2019

September 30,
2019$2,789,328
3,603,340$$$

6,392,668$ 23,297,084$ 22,992,126$

4,394,318
1,998,350$ 21,060,773
2,236,311$ 20,836,928
2,155,198$

6,392,668$ 23,297,084$ 22,992,126

September 30,
2020

December 31,
2019

September 30,
2019

Operating leases - aircraft$ 13,787,291$ 10,371,857$ 10,114,691

Current
Non-current

$

$

$

Frequent flyer program
Advance ticket sales

Current
Non-current

2,895,535
20,401,549

2,794,251
20,197,875

24. PROVISIONS

221,320
13,565,971$ 13,787,291

360,393
10,011,464$ 10,371,857

53,326
10,061,365$ 10,114,691
Aircraft Lease
Contracts

Balance at January 1, 2019
Additional provisions recognized
Usage
Effects of exchange rate changes$

8,794,539
3,293,355(2,051,888)
78,685

Balance at September 30, 2019

$ 10,114,691

Balance at January 1, 2020
Additional provisions recognized
Usage
Effects of exchange rate changes$ 10,371,857
4,730,275(962,948)(351,893)

Balance at September 30, 2020

$ 13,787,291

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

- 32 -

25. RETIREMENT BENEFIT PLANS
Employee benefits expense in respect of the Group’s defined benefit retirement plan was calculated using
the actuarially determined pension cost discount rate as of December 31, 2019 and 2018.

Operating costs
Operating expenses

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

222,901
91,616$245,848
98,085$$314,517$

343,933$ 1,014,133$ 1,060,543

September 30,
2020

December 31,
2019

September 30,
2019

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

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

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

September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

709,999
304,134$

737,617
322,926

26. EQUITY
a. Share capital
Ordinary shares

Number of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued
b. Capital surplus

Issuance of shares in excess of par value andconversion premium
Gain on sale of treasury shares held bysubsidiaries
Retirement of treasury shares
Employee share options expired
Long-term investments
Bonds payable - equity component
Difference in sale price of shares ofsubsidiaries and book value
Others146,351

315,114315,11433,513
11,747
119,134
409,978

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

3,303
33,513
11,747
115,149
409,978

466,604

1,129,080
466,604

1,092,812
466,604$ 1,187,327$ 2,488,907$ 2,448,220

The capital surplus from share issued in excess of par (including additional paid-in capital from theissuance of ordinary shares and treasury share transactions) and the difference in sale price of shares ofsubsidiaries and book value may be used to offset deficits; in addition, when the Group has no deficit,
such capital surplus may be distributed as cash dividends or transferred to capital (but limited to acertain percentage of the Group’s paid-in capital on a yearly basis).
The capital surplus arising from long-term investments, employee share options and the distribution of
cash dividends to treasury share held by subsidiaries may not be used for other purposes but to offset
deficits. The capital surplus arising from share options for employees and convertible bonds cannot beused.
- 33 -

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

- 34 -

The appropriations and dividends per share are as follows:
Appropriationof Earnings
Legal reserve
Cash dividends$

Dividends Per
Share (NT$)

114,493
1,136,278$0.20960737

The special surplus reserve amounted to $105,843 thousand.
2) Offsetting deficit in 2019
On June 23, 2020, the board proposed to offset the accumulated deficit of 2019. The deficit
included a net loss of $1,199,978 thousand and negative adjustment to other retained earnings of$577,427 thousand, of which the remaining amount of accumulated deficit was $1,777,225
thousand. The deficit was offset by $466,416 thousand of legal reserve, $12,967 thousand of special
reserve and $1,297,843 of capital reserve.
d. Other equity items
The movements of other equity items were as follows:

Exchange
Differences on
Translating
Foreign
Operations

Unrealized
Gain (Loss) on
Financial
Assets at Fair
Value Through
Other
Comprehensive
IncomeGain (Loss) on
Hedging
Instruments

Balance on January 1, 2019
Exchange differences on translating foreign operations
Cumulative loss on changes in fair value of hedging instruments
Cumulative gain on changes in fair value of hedging instruments
reclassified to profit or loss
Unrealized loss on financial assets at fair value through othercomprehensive income
Effects of change in tax rate
Effects of income tax
Other comprehensive income recognized in the period
Disposal of subsidiaries
Transfers of initial carrying amount of hedged items

$

$

$

Balance on September 30, 2019$

(3,912)$

38,596$

Balance on January 1, 2020
Exchange differences on translating foreign operations
Cumulative gain on changes in fair value of hedging instruments
Cumulative loss on changes in fair value of hedging instruments
reclassified to profit or loss
Unrealized loss on financial assets at fair value through othercomprehensive income
Effects of income tax
Other comprehensive income recognized in the period$(54,707)(68,728)-$

107,262-$ 1,143,678
1,185,753$ 1,196,233(68,728)
1,185,753--(179,589)(179,589)

13,497(55,231)(85,280)
16,153(69,127)(201,234)
804,930(85,280)(171,584)
680,572

Balance on September 30, 2020$

38,135$ 1,948,608$ 1,876,805- 35 -(9,664)(2,188)-42,619-25,268(322,550)

Total$

58,223(2,188)(322,550)

-

-

6,000

6,000

(428)
(2,616)
8,368-(5,004)876(4,128)105-

63,760(252,790)(603)(5,004)64,208(259,534)
8,473
(603)

(109,938)$(228,125)$(193,441)

e. Non-controlling interests
For the Nine Months Ended
September 30
2020
2019
Beginning balance
Net (loss) income attributable to non-controlling interests
Exchange differences on translating the financial statements offoreign operations
Loss on hedging instruments
Cumulative gain (loss) on changes in fair value of hedging
instruments reclassified to profit or loss
Effects of change in tax rate

$ 3,578,345(353,423)$ 2,965,512
404,174(1,327)(855)(4,223)
(695)

1,698
(169)
(653)
52
(375,036)(490)(5,408)(24,957)
598,111(416,438)$ 2,849,285$ 3,520,994

Disposal of subsidiaries
Disposal of equity portion of subsidiaries
Non-controlling interests arising from acquisition of subsidiaries
Dividends paid by subsidiaries
Ending balance
f. Treasury shares(In Thousands of Shares)

Period of Treasury Shares

Number of
Shares,Beginningof Year

Reduction
Duringthe Year

Number of
Shares,Endof Year

2,889
2,889

(814)
-

2,075
2,889

For the nine months ended September 30, 2020
For the nine months ended September 30, 2019

Treasury shares are the Company’s shares held by its subsidiaries as of September 30, 2020 and 2019
and were as follows:

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value

2,075$ 17,178$ 17,178

2,075
814

$ 18,796
7,376$ 18,796
7,376$ 26,172$ 26,172(Continued)

September 30, 2020
Mandarin Airlines
December 31, 2019
Mandarin Airlines
Dynasty Aerotech International Corp.

- 36 -

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value

2,075
814

$ 18,838
7,393$ 18,838
7,393$ 26,231$ 26,231(Concluded)

September 30, 2019
Mandarin Airlines
Dynasty Aerotech International Corp.

The above acquisitions of the Company’s shares by its subsidiaries in previous years were 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 between
January 1, 2020 and September 30, 2020. The disposal price was $6,854 thousand.

27. NET INCOME
a. Revenue
For the Three Months Ended
September 30
2020
2019
Passenger
Cargo
Others$For the Nine Months Ended
September 30
2020
2019

3,241,277
21,508,899
1,861,522$ 29,095,844
10,681,772
3,227,032$ 23,482,646
56,046,312
5,955,392$ 84,552,133
31,799,790
9,950,385$ 26,611,698$ 43,004,648$ 85,484,350$ 126,302,308

Refer to Note 23 for the balance of contract liabilities related to customer contracts.
b. Other income

Interest income
Subsidy income
Dividend income
OthersFor the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

92,80811,30986,128$ 242,761
18,92722,516
261,503$ 287,238
16,72818,009194,149$ 190,245$ 545,707$ 516,124

62,650420
15,099104,334$ 182,503- 37 -$

c. Other gains and losses
For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

$

Gain on disposal of property,
plant and equipment
Loss on disposal of non-current
assets held for saleNet gain on financial assets
classified as held for sale
Gain on disposal of investments
Gain or loss on foreignexchange, net
Loss on sale and leaseback
Others

6,586$

19,822

13,466$25,280---(10,462)304-

20,599-2,234-

43,641
7,656

161,378(78,573)(108,675)(138,335)(103,775)(82,163)

212,336(208,629)(255,559)(103,775)(197,848)

89,695$ (254,192)

19,407$ (491,067)$$

d. Finance costs

Interest expense
Bonds payable
Bank loans
Interest on lease liabilities

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

99,399193,212458,065$

107,329
167,255
528,799$$

750,676$

803,383$ 2,367,841$ 2,523,631

0.709%1.917%

1.248%1.622%

Capitalization rate

Capitalization interest

0.780%1.548%$

18,5591.258%1.622%$

14,836$

242,546
715,996
1,409,299

64,708$$308,320594,339
1,620,972

17,217e. Depreciation and amortization expenses

Property, plant, equipment
Right-of-use assets
Investment properties
Intangible assets
Depreciation and amortization
expenses

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

4,835,632
3,041,624
67
47,201$

5,134,435
2,957,607
70
47,617$ 14,608,504
9,289,998
203
152,758$ 15,798,622
8,783,662
210
149,150$

7,924,524$

8,139,729$ 24,051,463$ 24,731,644(Continued)- 38 -

An analysis of depreciation byfunction
Operating costs
Operating expenses

An analysis of amortization byfunction
Operating costs
Operating expenses

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

7,649,024
228,299$

7,672,019
420,093$ 22,858,093
1,040,612$ 23,355,539
1,226,955$

7,877,323$

8,092,112$ 23,898,705$ 24,582,494

$

3,561
43,640$3,026
44,591$

10,467142,111$

9,359
139,791$

47,201$

47,617$

152,758$

149,150(Concluded)

f. Employment benefits expense

Post-employment benefits
Defined contribution plans
Defined benefit plans

Other employee benefits
Salary expenses
Personnel service expenses

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

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

153,738
314,517$

144,664
343,933$

437,6201,014,133$

426,917
1,060,543$

468,255$

488,597$

1,451,753$

1,487,460$

4,534,209
852,518$

5,174,355
1,658,510$ 13,599,526
3,267,290$ 15,620,713
5,071,061$

5,386,727$

6,832,865$ 16,866,816$ 20,691,774$

4,823,825
1,031,157$

6,079,205
1,242,257$ 14,827,517
3,491,052$ 18,217,140
3,962,094$

5,854,982$

7,321,462$ 18,318,569$ 22,179,234

To be in compliance with the amended Company Act, the Articles stipulate the distribution of
employees’ compensation at rates of no less than 3% of the net profit before income tax and employees’
compensation. For the three months ended September 30, 2020 and 2019 and the nine months ended
September 30, 2020 and 2019, the Company has experienced a deficit, and therefore, no employees’
compensation is estimated.
Significant differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date the annual consolidated financial statements are authorized for issue areadjusted in the year when the compensation and remuneration are recognized. If there is a change in the
proposed amounts after the annual consolidated financial statements are authorized for issue, thedifferences are recorded as a change in the accounting estimate.

- 39 -

Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors is available at the Market Observation Post System website of the
Taiwan Stock Exchange.

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

Current tax
Current year
Adjustments for prior periods
Deferred tax
Current year
Income tax expense recognizedin profit or loss

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$ 120,086
199$ 161,942(36)$ 445,896(22,123)$ 479,846
496(196,052)

14,265(608,149)(5,857)$ (75,767)$ 176,171$ (184,376)$ 474,485

b. Income tax recognized in other comprehensive income
For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

$

Deferred tax
Recognized in othercomprehensive income
Translation of foreign
operations
Fair value changes offinancial assets at
FVTOCI
Fair value revaluation ofhedging instruments forcash flow hedging
Total income tax recognized inother comprehensive income

3,548

$

4,188

13,497

$

(428)

2,295

25

16,153876(124,971)(8,698)(201,403)

63,760(4,485)$ (171,753)$ (119,128)$$

64,208c. Income tax assessment
Income tax returns for 2018 of the Company, Cal Hotel Co., Ltd. and Cal Park have been examined by
the tax authorities. And the income tax returns for 2017 of the rest of the Company’s subsidiaries havebeen examined by the tax authorities.

- 40 -

29. EARNINGS (LOSS) PER SHARE
For the Three Months Ended
September 30
2020
2019
Basic earnings (loss) per share
Diluted earnings (loss) per share

Earnings (loss) used in thecomputation of basic earnings
per share
Effects of potentially dilutive
ordinary shares:
Interest on convertible bonds(after tax)
Earnings (loss) used in thecomputation of diluted earnings(loss) per share$ (0.13)$ (0.13)

$
$

0.06
0.06

For the Nine Months Ended
September 30
2020
2019
$ (0.37)$ (0.37)$ (0.06)$ (0.06)

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

340,038$ (2,021,822)

19,924-359,962$ (2,021,822)

5,418,910

5,418,096

5,418,640

5,418,096-

476,190--

5,418,910

5,894,286

5,418,640

5,418,096(707,937)$-$

Weighted average number ofordinary shares in computationof basic earnings (loss) per share
Effects of potentially dilutive
ordinary shares:
Convertible bonds
Weighted average number ofordinary shares used in thecomputation of diluted earnings(loss) per share(707,937)$$(346,425)-$(346,425)

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

30. DISPOSAL OF SUBSIDIARIESOn January 21, 2019, the board of directors of the Company decided to sell a portion of Dynasty Holidays
to H.I.S. Taiwan Co., Ltd. with proceeds from disposal of $34,036 thousand and a gain on disposal of$7,656 thousand. After the disposal, the Company’s proportion of ownership in Dynasty Holidays
decreased from 51% to 20%, resulting in a loss of control of the subsidiary.
a. Consideration received from disposals
Consideration received in cash and cash equivalents- 41 -$ 34,036

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

Net assets disposed of$ 50,934

c. Gain on disposal of subsidiaries
Consideration received
Net assets disposed of
Fair value of equity
Non-controlling interests
Reclassification of other comprehensive income in respect of subsidiaries$ 34,036(50,934)
10,187
24,957(10,590)

Gain on disposal

$

7,656

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

31. CAPITAL MANAGEMENT
The goal, policies and procedures as well as the composition of the Group’s capital management are thesame as those stated in Note 32 to the Group’s consolidated financial statements for the year ended
December 31, 2019.

32. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments not measured at fair value
Except as detailed in the following table, the management considers the carrying amounts of financial
assets and financial liabilities recognized in these consolidated financial statements as approximating
their fair values.
September 30, 2020
Carrying
AmountFair Value

December 31, 2019
Carrying
AmountFair Value

September 30, 2019
Carrying
AmountFair Value

Financial liabilities
Bonds payable$ 23,162,586$ 23,145,514$ 32,052,625- 42 -$ 32,062,874$ 32,032,632$ 32,025,831

Some long-term debts and lease liabilities are floating-rate financial liabilities, so their carrying
amounts are their fair values. As of September 30, 2020, December 31, 2019 and September 30, 2019,the fair values of private bonds with fixed interest rates were estimated at the present value of expectedcash flows discounted at rates of 0.5100%, 0.6700% and 0.6500%, respectively, prevailing in themarket for private bonds (Level 2). Fair values of bonds payable were the same as identical liabilities
trading on the over-the-counter exchange and were based on quoted market prices (Level 1).
b. Fair value of financial instruments measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured subsequent to initialrecognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value isobservable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and3) Level 3 fair value measurements are those derived from valuation techniques that include inputs forthe asset or liability that are not based on observable market data (unobservable inputs).
September 30, 2020
Level 1
Financial assets at FVTPL
Domestic money market funds

Level 2

Level 3

Total$

491,271

$

-

$

-

$

491,271

$

-

$

-

$

22,351
100,161$

22,351
100,161

$

-

$

-

$

122,512$122,512

Derivative financial assets forhedging$ 9,505,814

$

44

$

2

$ 9,505,860

Derivative financial liabilities forhedging$ 44,164,666$

92,968$33,243$ 44,290,877

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

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

Level 2

Level 3

Total$

511,758
-

$

434

$

-

$

$

511,758

$

434

$

-

$

511,758434
512,192(Continued)- 43 -

Level 1
Financial assets at FVTOCI
Investments in equity instruments
Unlisted shares - domestic
Unlisted shares - foreign

Level 2

Level 3

Total

$

-

$

-

$

26,865
182,356$

26,865
182,356

$

-

$

-

$

209,221$

209,221

Financial liabilities at FVTPL
Derivative instruments

$

-

$

11,749$-$11,749Derivative financial assets forhedging

$

-

$

147

$

9,479

$

9,626

Derivative financial liabilities forhedging$ 50,997,687$

37,069$3,955$ 51,038,711(Concluded)
September 30, 2019
Level 1
Financial assets at FVTPL
Domestic money market funds
Derivative instruments

Level 2

Level 3

Total$

357,259-$

16,864$-$357,259
16,864$357,259$

16,864$-$374,123

$

-

$

-

$

21,117104,952$

21,117104,952

$

-

$

-

$

126,069$

126,069

Financial liabilities at FVTPL
Derivative instruments

$

-

$

2,115

$

-

$

2,115

Derivative financial assets forhedging

$

-

$

6,230

$

6,130

$

12,360Derivative financial liabilities forhedging$-$ 54,986,873

$

4,309

$ 54,991,182

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

There were no transfers between Levels 1 and 2 in the current period.
4) Valuation techniques and inputs applied for Level 2 fair value measurement
Financial Instrument
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 Group used
to determine the fair values are identical to those used in thepricing of financial instruments for market participants.

- 44 -

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

Multiplicator

Liquidity
Discount

0.80-21.22
0.75-13.23
0.74-15.29

80%
80%
80%

Derivative
Instruments

EquityInstruments

Balance at January 1, 2020
Recognized in other comprehensive income

$

5,524
(38,765)$ 209,221(86,709)

Balance at September 30, 2020

$ (33,241)$ 122,512

Balance at January 1, 2019
Recognized in other comprehensive income

$

4,901
(3,080)$ 132,191(6,122)

Balance at September 30, 2019

$

1,821

$ 126,069

September 30, 2020
December 31, 2019
September 30, 2019

Because some financial instruments and nonfinancial instruments may not have their fair values
disclosed, the total fair value disclosed herein is not the total value of the Group’s collective
instruments.
c. Categories of financial instruments
September 30,
2020

December 31,
2019

September 30,
2019

$

$

$

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

491,971
9,505,860
42,853,509
122,512512,192
9,626
41,479,556
209,221374,123
12,36041,927,268
126,069

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (Note 2)- 45 -

44,290,877
163,590,555

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

2,115
54,991,182
127,666,956

Note 1: The balances include financial assets measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivable, accounts receivable - related parties, otherreceivables, refundable deposits and other restricted financial assets.
Note 2: The balance of financial liabilities measured at amortized cost comprised short-term loans,short-term notes payable, notes and accounts payable, accounts payable - related parties, otherpayables, bonds payable and long-term loans, capital lease obligations, provisions, parts ofother current liabilities, parts of other noncurrent liabilities and guarantee deposits.
d. Financial risk management objectives and policies
The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and in fuel prices, the Group fixed its operating costs within a specified range by using
appropriate financial hedging instruments and hedging percentages in accordance with the “Processing
Program of Derivative Financial Instrument Transactions” approved by the Group’s shareholders to
reduce the impact of market price changes on earnings. These risks include market risk (including
currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
In addition, the Group has a risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentage. This committee informs theGroup of global economic and financial conditions, controls the entire financial risk resulting fromchanges in the financial environment and fuel prices, and develops the strategy and response to avoid
financial risk with the assistance of financial risk experts to effect risk management.
1) Market risk
The Group is primarily exposed to the financial risks of changes in foreign currency exchange rates
and interest rates. The Group entered into derivative financial instruments to manage its exposure toforeign currency risk and interest rate risk.
The Group enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated to the fair values of hedged items andevaluates the hedging effectiveness of these instruments periodically.
a) Foreign currency risk
The Group enters into foreign currency option contracts to hedge against the risks on change in
related exchange rates, enters into forward contracts to hedge against the risks on changes inforeign-currency assets, liabilities and commitments in the related exchange rates.
Sensitivity analysis
The Group was mainly exposed to the U.S. dollar.

- 46 -

The Group was mainly exposed to the U.S. dollar. The following details the Group’s sensitivity
to increase and decrease in New Taiwan dollars (the functional currency) against the relevant
foreign currencies. An increase/decrease of US$1 against New Taiwan dollars is used whenreporting foreign currency risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in foreign exchange rates. The
sensitivity analysis included only outstanding foreign currency denominated monetary items
and foreign currency forward contracts designated as cash flow hedges, and adjusts theirtranslation at the end of the reporting period for an increase/decrease of US$1 against the New
Taiwan dollars.
When New Taiwan dollars increased by one dollar against U.S. dollars and all other variables
were held constant, there would be a decrease in pre-tax loss and an increase in pre-tax othercomprehensive income for the nine months ended September 30, 2020 of $330,226 thousand
and $1,069,139 thousand, and an increase in pre-tax profit and increase in pre-tax othercomprehensive income for the nine months ended September 30, 2019 of $115,507 thousand
and $1,748,005 thousand, respectively.
The Group’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the next year. Those transactions
are designated as cash flow hedges. When forecasted purchases actually take place, basis
adjustments are made to the initial carrying amounts of hedged items.
For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Group performs a qualitative assessment of theeffectiveness, and it is expected that the value of the foreign exchange forward contracts and thevalue of the corresponding hedged items will systematically change in the opposite direction in
response to movements in the underlying exchange rates.
The following table summarizes the information relating to the hedges of foreign currency risk.
Please refer to Note 21 for information related to equipment contracts for hedging.
September 30, 2020
Notional
AmountMaturity

Forward Rate

NTD/USD

NTD212,144/
USD7,126

2020.10.72021.10.6

28.88-30.28

Aviation fuel - forward
exchange contracts

NTD/USD

NTD319,767/
USD11,000

2020.10.302021.5.28

29.38-30.02

Aircraft prepayments forward exchange
contracts

NTD/USD

NTD3,052,326/
USD 105,000

2020.11.42020.12.4

29.48-30.5

Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts

Currency

Line Item in
Balance Sheet

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

Carrying AmountAsset
Liability

$

44

$

4,879

-

6,958

-

81,131

The above hedging instruments are continuously accounted for under hedge accounting. The
book value in other equity recognized from each hedged item (aircraft rentals, aviation fuel andaircraft prepayments) amounted to $(4,835) thousand, $(6,958) thousand and $(81,131)
thousand, respectively.

- 47 -

December 31, 2019
Notional
AmountMaturity

NTD/USD

NTD509,507/
USD16,967

Aviation fuel - forward
exchange contracts

NTD/USD

Aircraft prepayments forward exchange
contracts

NTD/USD

Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts

Currency

ForwardRate

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

2020.1.212020.12.24

29.5-30.8

NTD660,661/
USD22,000

2020.2.272020.11.30

29.7-30.7

NTD1,411,411/
USD47,000

2020.11.4

29.6-30.5

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

$

38

$

8,491

32

10,19377

18,385The above hedging instruments are continuously accounted for under hedge accounting. The
book value in other equity recognized from each hedged item (aircraft rentals, aviation fuel andaircraft prepayments) amounted to $(8,453) thousand, $(10,161) thousand and $(18,308)
thousand, respectively.
September 30, 2019
Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts
Aviation fuel - forward
exchange contracts

Notional
AmountMaturity

NTD/USD

NTD383,659/
USD12,354

2019.10.252020.8.19

29.7-30.8

NTD/USD

NTD357,143/
USD11,500

2019.11.272020.8.31

30.4-31.2

Currency

Line Item in
Balance Sheet

Forward Rate

Carrying AmountAsset
Liability

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

$

5,892

338

$

192

1,169

The abovementioned hedging instruments are continuously accounted for under hedge
accounting. The book value in other equity recognized from each hedged item (aircraft rentals
and aviation fuel) amounted to $5,700 thousand and $(831) thousand, respectively.
For the nine months ended September 30, 2020
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments
Maintenance cost

Note:

$

3,618
3,203
(62,823)-$ (7,286)(8,050)5$ (56,002)$ (15,331)

Increase in operating costs or foreign exchange loss.

- 48 -

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

For the three months ended September 30, 2020
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments
Long-term prepayments
Maintenance cost

Note:

$

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(318)
59
(52,006)(150)-$ (3,333)(5,950)5$ (52,415)$ (9,278)(Note)

Increase in operating costs or foreign exchange loss.

For the nine months ended September 30, 2019

Comprehensive Income

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeCash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments$ (21,743)
(831)
603

$

45,4142,265-$ (21,971)$

47,679Note:

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

Decrease in operating costs or foreign exchange loss.

For the three months ended September 30, 2019

Comprehensive Income

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeCash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments$ (23,830)
(831)
(603)

$

8,453
2,265
-

$ (24,058)$

10,718Note:

Decrease in operating costs or foreign exchange loss.

- 49 -

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

b) Interest rate risk
The Group was exposed to interest rate risk because entities in the Group borrowed funds atboth fixed and floating interest rates. The risk is managed by the Group by maintaining anappropriate mix of fixed and floating rate borrowings and using interest rate swap contracts andforward interest rate contracts.
The carrying amounts of the Group’s financial liabilities with exposure to interest rates at theend of the reporting period were as follows:

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

September 30,
2020

December 31,
2019

September 30,
2019$ 73,848,215$ 91,414,806$ 95,678,592

109,059,037

77,821,887

79,793,065

Sensitivity analysis
The sensitivity analysis below was determined based on the Group’s exposure to interest rates
for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A one yard
(25 basis points) increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.
Had interest rates increased by one yard (25 basis points) and all other variables been held
constant, the Group’s pretax profit for the nine months ended September 30, 2020 would havedecreased by $204,486 thousand.
Had interest rates increased by one yard (25 basis points) and all other variables been held
constant, the Group’s pretax profit for the nine months ended September 30, 2019 would havedecreased by $149,612 thousand.
c) Other price risk
The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters into
fuel swaps contract to hedge against adverse risks on changes in fuel price.
September 30, 2020
Notional
AmountHedging Instrument

Currency

Cash flow hedges - fueloptions

US$

NT$10,714

Cash flow hedges - fuelswap contract

US$

NT$22,527

ForwardRate

Line Item in
Balance Sheet

2020.12.31

US$55US$68.05

2020.12.31

US$67.48

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

Maturity

Carrying AmountAsset
Liability$2$ 10,716-

22,527

The above hedging instruments are continuously accounted for under hedge accounting. The
book value in other equity recognized from each hedged item (fuel payments) amounted to$(33,241) thousand.

- 50 -

December 31, 2019
Hedging Instrument

Currency

Cash flow hedges - fueloptions

US$

Notional
Amount
NT$5,524

Maturity

ForwardRate

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

2020.3.312020.12.31

US$49.65US$80.75

Financial assets forhedging - current/
liabilities forhedging - current

$

9,479

$

3,955

The above hedging instruments are continuously accounted for under hedge accounting. The
book value in other equity recognized from each hedged item (fuel payments) amounted to$5,524 thousand.
September 30, 2019
Hedging Instrument

Currency

Cash flow hedges - fueloptions

US$

Notional
Amount
NT$1,821

Maturity

ForwardRate

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

2019.12.312020.6.30

US$55US$82.5

Financial assets forhedging - current/
liabilities forhedging - current

$

6,130

$

4,309

The above hedging instruments are continuously accounted for under hedge accounting. The
book value in other equity recognized from each hedged item (fuel payments) amounted to$1,821 thousand.
For the nine months ended September 30, 2020

Comprehensive Income
Cash flow hedges - fuel options
Cash flow hedges - fuel swap contract

Note:

Hedging Gain
(Loss)
Recognized in
OCI

AmountReclassified to
P/L and the
Adjusted LineItem

$ (16,238)(22,527)$ (26,720)-$ (38,765)$ (26,720)

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

(Note)

Increase in operating costs.

For the three months ended September 30, 2020

Comprehensive Income
Cash flow hedges - fuel options
Cash flow hedges - fuel swap contract

Note:

Increase in operating costs.

- 51 -$

8,927(2,852)$ (5,525)
-

$

6,075

$ (5,525)(Note)

For the nine months ended September 30, 2019

Hedging Gain
(Loss)
Recognized in
OCI

Comprehensive Income
Cash flow hedges - fuel options

Note:

AmountReclassified to
P/L and the
Adjusted LineItem

$ (3,080)$ (11,751)(Note)

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

$ (3,958)$ (4,659)(Note)

Increase in operating costs.

For the three months ended September 30, 2019

Comprehensive Income
Cash flow hedges - fuel options

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 Nine Months Ended September 30
2020
2019
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%

$

622
(622)

$

1,624
(5,537)

$

-

$

-

2) Credit risk
The goal, policies and procedure of credit risk management are the same as those stated in the
consolidated financial statements for the year ended December 31, 2019. Related illustration can bereferred to in Note 33.
3) Liquidity risk
The goal, policies and procedures of liquidity risk management are the same as those stated in the
consolidated financial statements for the year ended December 31, 2019. Related illustration can bereferred to in Note 33.

- 52 -

Except for the following, the objectives, policies and procedures of liquidity risk management are
the same as those stated in the consolidated financial statements for the year ended December 31,
2019. Related illustration can be referred in Note 33.

Unused Bank
Loan Limit(Unsecured)
The Group (China Airlines, Ltd., Mandarin Airlines and Tigerair Taiwan Co.,Ltd.)

$ 29,285,466

Liquidity and interest risk rate table
The following table shows the remaining contractual maturity analysis of the Group’s financial
liabilities with agreed-upon repayment periods, which are based on the date the Group may berequired to pay the first repayment and financial liabilities are evaluated based on undiscounted
cash flows, including cash flows of interest and principal.
Bank loans with a repayment on demand clause are 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 are based on theagreed-upon repayment dates. The Group’s liquidity analysis for its derivative financial instruments
is also shown in the following table. The table was based on the undiscounted contractual net cash
inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted grosscash inflows and outflows on those derivatives that require gross settlement. When the amountpayable or receivable is not fixed, the amount disclosed has been determined by reference to theprojected interest rates as illustrated by yield curves at the end of the reporting period.
September 30, 2020
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Hedging instruments
Bonds payable

2.3229Less than 1Year

1 to 5 Years

Over 5 Years$

3,347,633$ 10,262,311$

27,816,081
10,039,917
11,938,111

41,208,946
36,035,514
8,412,218

32,420,708
2,687,815
3,331,924$ 53,141,742$ 95,918,989$ 45,629,041

0.94303.04970.9674- 53 -

7,188,594

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

1.1613

Less than 1Year

1 to 5 Years

Over 5 Years$

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

15,254,687
10,060,822
10,823,905

36,274,033
39,729,062
19,871,174

16,785,664
6,373,333
3,383,401$ 39,497,410$ 106,496,473$ 35,491,592

Less than 1Year

1 to 5 Years

Over 5 Years

3,496,714$ 11,579,171$

8,464,150
10,385,182
6,857,878

45,970,241
42,351,815
19,201,333

16,213,392
7,913,453
4,551,404$ 29,203,924$ 119,102,560$ 37,104,764

1.90583.11312.2573

8,949,194

September 30, 2019
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Hedging instruments
Bonds payable

1.1513$1.2842
1.14238,426,515

33. RELATED-PARTY TRANSACTIONS
The balances and transactions between the Company and its subsidiaries, which are related parties of theCompany, including remaining account balance, revenue and expense have been eliminated upon
consolidation and are not disclosed in this note. Unless otherwise stated, the transactions between the Groupand other related parties are as follows:a. Related party’ name and relationships
Related Party Name

Relationship with the Company

China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
Dynasty Holidays
China Pacific Catering Services
China Pacific Laundry Services

Associate
Associate
Associate
Associate
Associate (become associate in January 2019)
Joint venture investment
Joint venture investment(Continued)- 54 -

Related Party Name

Relationship with the Company

Nordam Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
OthersJoint venture investment
Joint venture investment
Director of the Company and major shareholder
Director, key management personnel, chairman,
general manager of the Group, spouse andsecond-degree relative(Concluded)b. Operating income

Account
Items

For the Three Months Ended
September 30
Related Party Type
2020
2019

Other income Major shareholdersof the Company
Associate
Joint venture
investment

$

1

$

$
$

10
4,415

For the Nine Months Ended
September 30
2020
2019

6,605

$

$ 1,198$ 10,636

5,097$ 17,573$
122$ 17,604$ 1,237$ 31,882

c. Purchases of goods

Related Party Type
Major shareholders of theCompany
Associate
Joint venture investment

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$
$
$

$
$
$

105,438
67,760$$$14,823
111,772
492,895

11,418328,418
443,479$
38,605$ 304,617$ 1,433,102

December 31,
2019

September 30,
2019

d. Accounts receivable - related parties (generated by operations)

Related Party Type

September 30,
2020

Major shareholders of the Company
Joint venture investments

$

1,537

$

2,588
7,760

$

2,797
7,772

$

1,537

$

10,348$

10,569The receivables from related parties 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.

- 55 -

e. Accounts payable - related parties (generated by operations)
September 30,
2020

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

December 31,
2019

41,63068,323$$ 109,953

September 30,
2019

5,982
51,333484,700$$ 542,015

5,994
46,133498,249$ 550,376

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.
f. Lease arrangements (operating leases)
Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots, and the Company paid the rental based on
usage hours. For the nine months ended September 30, 2020 and 2019, the rental paid amounted to$11,418 thousand and $38,605 thousand, respectively; for the three months ended September 30, 2020
and 2019, the rental paid by the Company amounted to $0 and $14,823 thousand, respectively.
g. Endorsements and assurances
September 30, 2020
Authorized
AmountAmount Used

December 31, 2019
Authorized
AmountAmount Used

September 30, 2019
Authorized
AmountAmount Used

$ 3,850,000
2,718,372$ 1,914,690
464,095$ 3,850,000
1,080,000
3,012,668$ 2,129,400
685,444$ 3,850,000
1,080,000
1,089,966$ 2,151,550
422,3902,000,000

1,301,327

2,000,000

1,279,827

2,000,000

1,095,827

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

h. Compensation of key management personnel

Short-term employee benefits
Post-employment benefits

For the Three Months Ended
September 30
2020
2019

For the Nine Months Ended
September 30
2020
2019

$

7,926
657

$

7,721
533

$

23,977
1,822$

30,358
1,807

$

8,583

$

8,254

$

25,799$32,165

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

- 56 -

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

Property, plant and equipment
Right-of-use asset
Restricted assets

September 30,
2020

December 31,
2019

September 30,
2019$ 35,211,100
62,866,981
193,471$ 31,260,801
71,033,617
130,052$ 33,391,634
74,143,766
116,642$ 98,271,552$ 102,424,470$ 107,652,042

35. COMMITMENTS AND CONTINGENT LIABILITIESAs of September 30, 2020, the Group had commitments and contingent liabilities (except for thosementioned in other notes) as follows:a. For operation needs, the board of directors of Mandarin Airlines resolved to enter into a contract with
AVIONS DE TRANSPORT REGIONAL G.I.E to purchase six ATR72-600 aircraft, and the total list
price of the six aircraft was US$120,000 thousand. As of September 30, 2020, four of the aircraft had
been handed over to the Company, and the amount paid was US$8,314 thousand (recognized as
prepayments for aircraft).
b. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. TACT filed an
application for a 10-year extension of the COP for the cargo terminals in the Taiwan Taoyuan
International Airport and Kaohsiung International Airport and received the approval from the Taoyuan
Airport Corporation and CAA in July 2013 and July 2015, respectively.
However, TACT filed an arbitration for the total amount of $6,840,000 thousand based on theconstruction contract.
As of September 30, 2020, TACT had signed the following construction contracts with unrelatedparties:

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan
Bin Li Construction Co.,
Ltd., Taiwan

Cargo Terminal Expansion Construction Consultant
Contract
Cargo Terminal Expansion and Enhancement
Construction

Contract
Amount (VAT
Included)$ 552,285
275,000

As of September 30, 2020, the accumulated consulting service expense and construction equipment
amounted to $481,776 thousand and $5,301,244 thousand, respectively, of which upon completion of
the projects, the amounts of $468,755 thousand and $5,270,661 thousand were reclassified to property,
plant and equipment. The remaining cumulative payments were recognized under construction inprogress.

- 57 -

Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be returned to the government without any compensation when thechartered operating license expires.
TACT should pay royalties to Taoyuan Airport Corporation and the CAA during the charteredoperation period. The calculation is based on annual sales (including operating and non-operating
revenue but excluding the rental revenue from specific districts), and both Taoyuan Airport Corporationand the CAA have the option to adjust the royalty rates every 3 years starting from the date of transferof the chartered operation rights on the basis of actual revenue and expenditures. The current royalty
rate is 6%.
c. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights on
this contract from the CAA. The contract is effective for 50 years (consisting of the development stage
and operating period) from the contract date. Three years before contract expiry date, CAL Park has thefirst option to renew the contract with a 20-year extension.
CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the laws and regulations forproviding essential services approved by the Taoyuan Airport Corporation.
CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow Article
No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies inInfrastructure Projects,” which states that rental calculation in the development stage should include theland value added tax plus the necessary maintenance fee; in the operation period, the rentals are 60% of
the amount based on the National Building Land Rental Standard plus land value tax, value-added tax
and the necessary maintenance fees.
During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.
CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignment nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.
d. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery periods of the eleven aircraft are from 2024 to 2026. As of September
30, 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.
e. 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
September 30, 2020, the list price had been paid in the amount of US$241,650 thousand (recognized as
prepayments for aircraft).
- 58 -

f. In September 2019, Tigerair Taiwan Co., Ltd. signed a contract with Airbus S.A.S. to purchase sevenA320neo aircraft and an option to purchase two A320neo aircraft. The total list price of the sevenaircraft is US$729,746 thousand, and the list price of the option to purchase two aircraft is US$208,499
thousand. The expected delivery periods of the seven aircraft are from 2025 to 2027. As of September
30, 2020, the list price of the seven aircraft had been paid in the amount of US$18,549 thousand(recognized as prepayments for aircraft). In addition, in December 2019, Tigerair Taiwan Co., Ltd.
signed a contract with International Aero Engines Company to purchase two backup engines ofA320neo aircraft. The total list price of the two engines is US$27,345 thousand. As of September 30,
2020, the list price had been paid in the amount of US$2,988 thousand (recognized as prepayments foraircraft).

36. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
Since the outbreak of 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 the restrictions on travel. 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 has 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 Group continues to adjust the response measures according to the situation. In addition, to ensure theadequate liquidity, the Group 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
Group’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.
The Group has obtained relief loan from the government. Refer to Note 19 for details on the amount of loan
and its allocation.

37. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIESThe following information was aggregated by the foreign currencies other than functional currency of each
entity in the Group and the exchange rates between foreign currencies and respective functional currencies
were disclosed. The significant assets and liabilities denominated in foreign currencies are as follows:(In Thousands of Foreign Currencies)
September 30, 2020
Foreign
Currencies

Exchange Rate

Carrying
AmountFinancial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

- 59 -

702,459
17,096
307,3213,950,045
460,200

29.0698
34.12973.74810.27504.2644$ 20,420,314
583,488
1,151,878
1,086,281
1,962,475(Continued)

Foreign
Currencies

Exchange Rate

Carrying
AmountFinancial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB

$

2,224,950
8,058
84,5842,803,819
135,52029.0698
34.12973.74810.27504.2644$ 64,678,772
275,018
317,033
771,064
577,912(Concluded)

December 31, 2019
Foreign
Currencies

Exchange Rate

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

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

Exchange Rate

Carrying
Amount598,610
19,054
199,139
3,855,949
402,001

31.0559
33.8983
3.95730.28754.3592$ 18,590,366
645,899
788,052
1,108,574
1,752,405

2,518,476
7,135
86,773
6,399,067
172,552

31.0559
33.8983
3.95730.28754.3592

78,213,548
241,861
343,388
1,839,703
752,188

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB
September 30, 2019
Foreign
Currencies
Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB
- 60 -

For the three months ended September 30, 2020 and 2019, the amounts of net foreign exchange profit (loss)
were $161,378 thousand and $(108,675) thousand, respectively. For the nine months ended September 30,
2020 and 2019, the amounts of net foreign exchange profit (loss) were $212,336 thousand and $(255,559)
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 and functional currencies of theentities in the Group.

38. 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 estate at costs or price of at least NT$300 million or 20% of thepaid-in capital: None
6) Disposals of individual real estate at cost or prices of at least NT$300 million or 20% of the paid-in
capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 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) Trading in derivative instruments (Notes 7 and 33)
b. Investments in mainland China: Table 7 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 8 (attached)d. Information of major shareholders: Table 9 (attached)- 61 -

39. SEGMENT INFORMATIONThe Group mainly engages in air transportation services for passengers, cargo and others. Its main
revenue-generating asset is its aircraft fleet, which is jointly used for passenger and cargo services. Thus,
the Company’s sole reportable segment is its flight segment. For the purpose of reporting the operating
segment in the consolidated financial statements, the reportable segment of the Company and its
subsidiaries is divided into the flight and the non-flight business departments. The accounting policy
applied for reportable segments are consistent with the policies mentioned in Note 4.
For the nine months ended September 30, 2020 and 2019, financial information of segments is listed asfollows:
For the Nine Months Ended September 30, 2020
Air
Adjustments
Transportation
Othersand Write-offs
Total
Operating revenue$ 82,786,966$

5,377,233$(2,679,849)

Operation profit and loss
Interest revenue
Investment income accounted for using
the equity method
Revenue
Financial costs
Expenses$$(498,247)$(63,682)(18,730)$(580,659)
242,761(176,235)
492,920(2,367,841)(170,567)

Gain before income tax
Identifiable assets
Investments accounted for using theequity method
Assets$ 85,484,350$$ 190,748,755$ 15,288,594$(6,198,148)(2,559,621)$ 199,839,201
2,009,318
82,176,470

Total assets$ 284,024,989
For the Nine Months Ended September 30, 2019
Air
Adjustments
Transportation
Othersand Write-offs
Total

Operating revenue$ 123,620,400$

8,238,960$(5,557,052)

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

1,126,506$(65,044)

1,734,433$

2,795,895
287,238
234,913
231,939(2,523,631)(494,120)

Gain before income tax
Identifiable assets
Investments accounted for using theequity method
Assets$ 126,302,308$$ 216,527,282$ 15,730,110$(6,394,470)

532,234$ 225,862,922
2,186,140
70,385,257

Total assets$ 298,434,319- 62 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESFINANCING PROVIDED TO OTHERSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 PeriodEndingBalance

ActualBorrowingAmountY$ 103,244$ 101,744$

29,070Interest Rate(%)

Nature ofFinancing

2.25

Operatingcycle capital
expenditure

Note 1:

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

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

- 63 -

Business
Transaction
Amount$-Reasons for
Short-term
Financing

Allowance for
Impairment
Loss
$

-

Collateral
Item

Value

$

-

Financing
Limit for
Each
Borrower

Aggregate
FinancingLimit$ 146,432$ 292,865

NoteTABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENTS/GUARANTEES PROVIDEDFOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 Ltd.

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

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

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

ActualBorrowingAmount$ 11,043,909
11,043,909$ 3,850,000
3,038,197$ 3,850,000
2,718,372$ 1,914,690
464,095

11,043,909

2,000,000

2,000,000

1,301,327

Note 1:

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

Note 2:

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

- 64 -

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

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

-

6.97
4.92

$ 27,609,774
27,609,774

Yes
Yes

No
No

No
No

-

3.62

27,609,774

Yes

No

No

TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDSEPTEMBER 30, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name

Marketable Securities Type and Issuer/Name

Relationshipwith theHoldingCompany

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

Everest Investment Holdings Ltd. - preferred shares-

Chung Hua Express Co.

-

Jardine Air Terminal Services
The Grand Hi Lai Hotel-

Mandarin Airlines

Cal-Asia Investment

SharesChina Airlines

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

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

September 30, 2020
Percentage Market Value
Carryingofor Net Asset
AmountOwnership
Value
(%)

Shares/Units

1,359,368$

73,046

13.59

135,937

7,305-

1,100,000

22,351

12,000,000
4,021

-

2,074,628

17,178$80,351

Note

Note 1

-

-

11.00

22,351

-

15.00
0.02

-

-

-

17,178-

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

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

19,8102.59
5.45

19,810Note 2
Note 2

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

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

7,528,078.80
308,093.69
5,464,064.80
7,951,265.07

78,43055,36688,80492,562-78,43055,36688,80492,562-

SharesTransAsia Airways-

Financial assets at fair value through profit or loss - current

2,277,786---

Dynasty Aerotech International
Corp.

Beneficiary certificates
Taishin 1699 Money Market Fund-

Financial assets at fair value through profit or loss - current

349,523

4,765

-

4,765

-

Kaohsiung Catering Services

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

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

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

85,88770,422
15,035-85,88770,422
15,035-

Sabre Travel Network (Taiwan)

Taiwan Airport Services

0.40

-

(Continued)- 65 -

Note 1: The subsidiary’s net equity value was $80,351 thousand for the nine months ended September 30, 2020, which included ordinary shares and preference shares.
Note 2: The Company does not issue shares because it is a limited company.
Note 3: The table only listed financial assets that are in accordance with IFRS 9.
(Concluded)- 66 -TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESTOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

Related Party

Nature of Relationship

Purchase/
Sale

China Airlines, Ltd.

Taiwan Air Cargo Terminal
Cal Park
China Pacific Catering Services
Taoyuan International Airport Service
Dynasty Aerotech International Corp.
Tigerair Taiwan Co., Ltd.
Mandarin Airlines
Eastern United International Logistics(Holdings) Ltd.

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

Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Sale
Purchase

Mandarin Airlines

Taiwan Airport Services

Same parent company

PurchaseAmount
$

% of
Total

Payment Terms

450,877
159,974
407,430
752,110
262,714(197,809)(120,675)
275,674

0.63
0.22
0.57
1.05
0.37
(0.25)(0.15)
0.39

30 days
2 months
90 days
40 days
2 months
1 months
2 months
2 months

113,570

4.04

1 months- 67 -

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

Abnormal Transaction
Unit Price
$

-

-

-

-

$

Note

(53,602)(64,018)(194,275)(56,161)
10,026(30,316)(2.59)(3.09)(9.39)(2.71)
0.11(1.46)-(37,628)(6.95)-TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALSEPTEMBER 30, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Taoyuan International Airport Service

Related Party

China Airlines

Nature of Relationship

Parent company

Ending Balance

Turnover Rate

$ 194,275

3.70- 68 -

Amount$Action Taken--

Amounts Received
in Subsequent
Period$ 118,404

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 NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Thousands of New Taiwan Dollars/U.S. Dollars/Hong Kong Dollars/Japanese Yen in Thousands, Unless Stated Otherwise)

Investor Company

China Airlines, Ltd.

Investee Company

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

Location

Main Businesses and Products

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

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

Investment Amount
September 30, December 31,
2020
2019

Balance as of September 30, 2020
Number ofPercentage ofCarrying
SharesOwnership
AmountNet Income(Loss) of theInvestee$

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

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

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

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

51.00
49.00
100.00
93.93

HK$

HK$

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

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

77,27038,886(264,447)
108,704(21,870)

Note 4
Notes 1 and 4
Note 2680,527
606,191
455,610230,414(236,359)(267,457)
32,357(50,436)(120,543)(131,054)
32,357(47,375)

-

20.00
47.35
53.67
100.0055.00

365,387
168,929522,593
397,592
146,027(368,910)(131,493)
21,832(81,574)(28,868)(73,782)(62,262)
1,709(81,668)(15,877)

Note 5Note 4-

77,270100.00117,996

22,84822,829Note 426,265
20,4002,500
1,272,063
1,350,000

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

100.00
20.00
25.00
69.45
100.0010,2707,725
7,004
1,010,080
745,091(15,067)(11,630)
5,239(951,144)(176,918)(14,999)(2,326)
1,310(660,601)(176,898)

Note 4Note 4-37,9752,450

3,797,500

49.00

37,82015

7-154,330
11,658154,330
11,65815,433,000
469,755

7.72
1.08

112,222
3,842(951,144)(131,493)(73,395)(1,416)-

77,270JPY

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

JPY

1,590,148
1,230,356
1,497,049
1,214,371

Note

5,371 $
(281,357)
201,247(22,959)

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

Investment
Income (Loss)

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

HK$

3,329

1,050,000

35.00

42,891

9,394

3,288

-

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

US$

5,877

-

100.00360,324

15,985

15,985Note 3Kaohsiung, Taiwan

Catering business

10,2001,020,000

51.00

7,868

-

-

Kaohsiung Catering Services Delica International Co., Ltd

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

Note 2:

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

Note 3:

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

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

Note 5:The difference is due to acquisition.

10,200- 69 -TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Thousands of New Taiwan Dollars/Renminbi/U.S. Dollars in Thousands, Unless Stated Otherwise)

China Airlines

Investee Company Name

Main Businesses andProducts

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan
Capitalas ofJanuary 1, 2020

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

Forwarding and storage $ 1,085,203of air cargo(RMB 254,480)

Indirect(Note 1)

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

Forwarding and storage
59,701of air cargo(RMB 14,000)

Indirect(Note 1)

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,415,407
maintenance services (US$ 83,090)

Indirect(Note 1)

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Indirect(Note 1)

339,041(US$ 11,663)$
121,685 $(US$4,186)

Investment Flows

Outflow

Accumulated
Outflow ofInvestment
from Taiwan
as of
September 30,
2020

Inflow--(US$56,612
1,947)

62,5352,151)

-

(US$

-

(US$

18,488636)$

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

$259,320 (US$8,920)$630,982 (Note 3)$34,841,300 (Note 4)

Investment
Gain (Loss)$
121,685 $
71,197(US$
4,186) (RMB 16,696)

14

-

14

(US$

56,61250,3591,947) (RMB 11,809)

62,5352,151)

-

2.589

-

(US$

-

5.45

-

(US$

18,488636)-

Investment Amounts
Authorized by Investment Commission,
MOEA

Net Income(Loss) of
the Investee

Carrying
Amountas of
September 30,
2020

-

-

Accumulated Outward Remittance forInvestment in Mainland China as of
September 30, 2020

% Ownershipof Direct orIndirect
Investment

$
(RMB

(RMB

Accumulated
InwardRemittance ofEarnings as of
September 30,
2020

9,279 $
231,585 $102,8072,337) (RMB 54,307) (US$3,537)(Note 2)6,701
129,955
1,653) (RMB 30,475) (US$-45,364
1,561)(Note 2)-30,977(RMB 7,264) (US$10,364357)(Continued)- 70 -

Taiwan Airport Services

Investee Company

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

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

Forwarding and storage $ 1,085,203of air cargo(RMB 254,480)

Indirect(Note 5)$
116,813 $(US$
4,018)

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

Forwarding and storage
59,701of air cargo(RMB 14,000)

Indirect(Note 5)

(US$

Remittance of Funds

Outward56,0101,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan
as of
September 30,
2020

Inward

-

$

-

-

14

56,01050,3591,927) (RMB 11,809)

14

(US$

Investment Amounts Authorized by
Investment Commission, MOEA

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

$172,823 (US$5,945)$172,823 (US$5,945)$214,060 (Note 6)% Ownershipof Direct orIndirect
Investment$
116,813 $71,197(US$
4,018) (RMB 16,696)-

Accumulated Outward Remittance forInvestment in Mainland China as of
September 30, 2020

Net Income(Loss) of theInvestee

Investment
Income (Loss)

Accumulated
Carrying
Repatriation ofAmount as ofInvestment
September 30, Income as of
2020
September 30,
2020

$
(RMB

9,968 $
229,723 $
132,010
2,337) (RMB 53,870) (US$4,541)(RMB

7,050
129,810
1,653) (RMB 30,440) (US$60,8082,092)

Note 1: The Company invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.
Note 2: As of September 30, 2020, the inward remittance of earnings amounted to US$3,536,561 and US$1,560,538.
Note 3: The amounts comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.
Note 4: The limit stated in the Investment Commission’s regulation, “The Review Principle of Investment or Technical Cooperation in mainland China,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.
Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.
Note 6: The amounts of profit (loss) in RMB and U.S. dollars of assets are converted at the average exchange rates for the period.
(Concluded)- 71 -TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIESFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Amount(Note 2)Financial Statement Account0

China Airlines, Ltd.

Mandarin Airlines
Tigerair Taiwan Ltd.
Taoyuan International Airport Service
Dynasty Aerotech International Corp.
Taiwan Air Cargo Terminal
Cal Park
Taoyuan International Airport Service
Mandarin Airlines

a
a
a
a
a
a
a
a

Other operating income
Other operating income
Terminal and landing fees
Terminal and landing fees
Other operating cost
Other operating costAccounts payable - related parties
Bonds payable - non-current

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.

b

2

Mandarin Airlines

Taiwan Airport Services
China Airlines, Ltd.
China Airlines, Ltd.

3

Taoyuan International Airport Services

4$

Transaction Criteria% of Total
Consolidated
Total Revenue
or Assets

108,868
197,809752,110
262,714450,877
159,974
194,275
125,000

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

0.16
0.24
0.88
0.31
0.53
0.19
0.06
0.04

Sales revenue

450,877

The same as ordinary transactions

0.53

c
b
b

Terminal and landing fees
Operating expense
Financial assets at amortized cost

113,570
108,868
125,000

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

0.13
0.16
0.04

China Airlines, Ltd.
China Airlines, Ltd.

bb

Airport service revenue
Accounts receivable - related parties

752,110
194,275

The same as ordinary transactions
The same as ordinary transactions

0.88
0.06

Taiwan Airport Services

Mandarin Airlinesc

Operating revenue

113,570

The same as ordinary transactions

0.13

5

Dynasty Aerotech International Corp.

China Airlines, Ltd.

b

Operating revenue

262,714The same as ordinary transactions

0.31

6

Cal Park

China Airlines, Ltd.

b

Operating revenue

159,974

The same as ordinary transactions

0.19

7

Tigerair Taiwan Ltd.

China Airlines, Ltd.

b

Operating expense

197,809

The same as ordinary transactions

0.24

Note 1: Three categories of business relationships between China Airlines, Ltd. and its subsidiaries are as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were eliminated in the consolidated financial statements.
Note 3: The Company only discloses transaction amounts or balances above $100,000 thousand.
(Concluded)- 72 -TABLE 9

CHINA AIRLINES, LTD. AND SUBSIDIARIESINFORMATION OF MAJOR STOCKHOLDERS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 preferredshares held by shareholders with ownership of 5% or greater, that have been issued
without physical registration (including treasury shares) by the Company as of the lastbusiness day for the current quarter. The share capital in the consolidated 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 the individual 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, the shareholdings include shares held by shareholders andthose delivered to the trust over which shareholders have rights to determine the use oftrust property. For information relating to insider shareholding declaration, please refer toMarket Observation Post System.

- 73 -