China Airlines
2021 Investor Conference
Nov 16, 2021
TSE：2610

LegalDisclaimer• The information contained in this presentation,
including all forward-looking information, issubject to change without notice, whether as aresult of new information, further events orotherwise, and China Airlines(the “Company”)
undertakes no obligation to publicly update orrevise the information contained in thispresentation.
• No guarantees regarding the completeness,accuracy, and reliability of information contained
are made explicitly or implicitly. They are notintended to represent complete statement of theCompany, industry or future development.

2Agenda

1. Financial Results for First ThreeQuarters of 2021
1) Operating Performance2) Composition of Op. Revenue & Cost
3) Financial Risk Management

2. Impact of COVID-19 Pandemic
1) Operational Performance Update2) Industry Environment Update
3) Response to COVID-19 and outlookfor post COVID

3

Financial Results for First Three Quartersof 2021

4

Operating Performance – 2021Q3
Consolidated Financial Statistics

TWD 100 Million
2020Q32021Q3

YoY %26,612

34,47429.54%Net Operating Income (Loss)-358

3,985-

Non-Operating Income (Loss)-817

2,801-Net Income (Loss) After Tax-708

2,917-

Earnings (Loss) Per Share (TWD)

-0.13

0.51-

Operating Revenue

TWD 100 Million

Group Revenue
2020Q32021Q3YoY %Passenger Revenue

3,241

1,189-63.31%

Cargo Revenue

21,50931,24745.27%

Other Operating Revenue

1,862

2,038

9.45%

Total Operating Revenue

26,612

34,47429.54%
5

Operating Performance – 2021Q1~Q3
Consolidated Financial Statistics

TWD 100 Million
2020Q1-Q3

2021Q1-Q3

YoY %85,484

91,675-7.24%Net Operating Income (Loss)-581

4,722-

Non-Operating Income (Loss)-2,375

1,098-Net Income (Loss) After Tax-2,022

1,555-

Earnings (Loss) Per Share (TWD)

-0.37

0.28

-

Operating Revenue

TWD 100 Million

Group Revenue
2020Q1-Q3

2021Q1-Q3

YoY %Passenger Revenue

23,4834,569-80.54%

Cargo Revenue

56,04681,31045.08%

Other Operating Revenue

5,955

5,796

-2.67%

Total Operating Revenue

85,484

91,675

7.24%
6

Composition of Op. Revenue - CI
2021Q1-Q3

2020Q1-Q3
Other Op.
Rev 4%

Other Op.
Rev 4%

19%
24%
4%

Passenger
Rev 24%Passenger
Rev 3%

66%
67%

4%
Cargo Rev
72%

Cargo Rev
93%

Cargo revenue accounted for 93%, and Passenger and other operating
revenue accounted for 3% and 4% respectively in 2021Q1-Q3.

7Composition of Op. Expenses - CI
2020Q1-Q3

22.2%

Fuel 22%

Others 3%

2021Q1-Q3

Airport &Airport &Ground

GroundFuel 28%

Handling
Labor Cost
Charge 12%17%Handling
Charge 11%
Labor Cost

Others 4%
Pax Service

Rental &Pax Service2%

Depreciation

1%

Sales &General

Maitenance
30.7%
19%

&

Sales &Amortization

General Adm.

23%

1%

Adm. 2%

16%
Rental &Maitenance Depreciation
17%&Amortization

3.8%

22%

Fuel cost accounted for 28% of operating expenses due to the increase infuel price during 2021.

8

Financial Risk Management (CI)
1.Fuel Cost：Hedging ratio is 4.5% during next six months
2020 Q1-Q3
Jet Fuel (MOPS)
Fuel Consumption
Fuel Expend
Hedging Loss (Gain)
Total Fuel Cost

USD/BBL
10KBBLTWD/100Million
TWD/100Million
TWD/100Million

44.04
1,026.71
167.380.34
167.722021 Q1-Q3
70.75
1,059.95
223.27-0.02
223.25

YoY%
60.65%
3.24%
33.39%
33.11%

2. Exchange rate hedging
The current cash position of US Dollars well manages to offset the unrealizedgains(losses) of the US Dollars liabilities caused by the exchange rate, as the effectof natural hedging.

3. Interest rate hedging
As of Sep 30 2021, The portion of Fixed-rate borrowing positions was approximate
18%.
Keeping a close watch on the monetary policy trends of major economies andformulate hedging strategies based on market dynamics.
9

Impact of COVID-19 PandemicOperational Performance Update

10Passenger Performance
Revenue
16,295Composition by Region

19,075million in 2020Q1-Q3
Australia/Trans Pacific▼86%

Ocean 31%

New Zealand
5%
Europe 9%2,579 million in 2021Q1-Q3

Hong Kong
3%

1,808

972

1,433

1,287612

680

South East
Asia 27%

Q1Q2Q32020

Q4Q1Q2Mainland

North East

China 23%

Asia 2%Q32021•

Passenger revenue decreased by 86% to TWD 2,579 million in 2021Q1-Q3.

•

Trans Pacific Ocean accounted for the largest share (31%) of revenue, followed bySouth East Asia and Mainland China with revenue share of 27% and 23%
respectively.
11

Passenger Performance Index
Yield (TWD)

Load Factor、 ASK (MN)

5.7

5.5

10,731

5.2

36%

2.3
26%496Q1

5.0
4.5

4.5

67%

Q2

1,342

16%
1,977

Q3

Q4

17%
1,348

20%

17%

669

811

Q1

Q2

Q32020

2021

ASKQ1

Q2

Q3
2020

Q4

Q1Q2

Q32021

Pax LF

ASK and load factor decreased by 77% and 43.8ppt respectively while yield
was 5.0 which increased by 110% in 2021Q1-Q3.

12Impact on Passenger Traffic•

Our frequencies between 2020 and 2021 plunged more than 90% compared to the same period
during 2019.

•There was no rebound tendency in demand for passenger transport capacity from 2021 to thethird quarter due to the worldwide Alpha and Delta variant, domestic outbreak of epidemics
and low vaccinated population in Asia-Pacific.
0%

5000

4000
3,240
3,128
3000

3,229

3,253

2,984

3,271

3,315

3,331

3,194

3,247

3,157

3,091

3,214

-40%

2,309
2000
-89%

1,150
-95%-93%-93%

216

231
89-80%-96%

1000
336
0RoundTrips

Jan

160
Feb

Mar-99%-98%-96%-96% -96%

132
53

86 32

156
75

187
149

232
129

286
134

AprMayJunJulAug

SepOct

2019

2020

2021

346

325
-120%

NovDec2021 v.s 2019 Diff%
13

Cargo Performance
Revenue

Composition by Region

55,894million in 2020Q1-Q3

31,17025,79823,400Australia/

81,106million in 2021Q1-Q3▲45%

25,978

NewZealandTransPacific

23,958EuropeOcean

21,448

3%

8%

61%

4%

11,046MainlandSouthQ2

Q32020

Q4

Q1

Q2

Q3

North East

China

East Asia
Q1

Hong Kong

6%Asia
5%13%2021•

Cargo revenue totaled TWD 81,106 million, a 45% increase, in 2021Q1-Q3.

•

Trans Pacific Ocean accounted for the largest share(61%) of revenue, followed bySoutheast Asia and Europe with revenue share of 13% and 8% respectively.

14

Cargo Performance Index
Load Factor、 FATK (MN)

Yield (TWD)
15.6

69%
1,802

Q173%

72%

2,392

2,092

Q274%
2,542

Q3

Q476%

76%

2,329

2,328

Q1

Q2

13.8

13.5

Q4

Q1

15.6

12.3

75%
2,669

2020

2021
FATK

14.7

8.8

Q3

Q1

Q2

Q3
2020

Q2

Q3

2021

CGO LFFATK increased by 17% and load factor grew 4.03 ppt. Yield was 15.6 which
increased by 18% in 2021Q1-Q3.

15

Impact of COVID-19 PandemicIndustry Environment Update16

2020-2021 Air Passenger／Freight DemandInternational Air Passenger(RPK)／Freight(CTK)（%YoY, vs 2019）2021 RPK ↓ 80.2%

2020 RPK ↓ 75.6%(til Sep)

CTK ↓ 11.8%

20%

1.2%

CTK ↑ 8.7%

Freight0%-20%-29.5%
2021/1
1st positive growthvs. pre-pandemic level

-40%

-60%

APR 2020
low point

Passenger-80%-98.4%-100%

Source：IATA

17

Demand of Pax Market is far below the pre-crisis levels
International Pax Traffic decreased by 69.2% in Sep,2021. and decreased by 80.2% fromJan to Sep, which is still far lower than the pre epidemic level.
The recovery of international pax market of airlines in the Asia lags behind otherregions, because delta variant virus epidemic and strict border control measures.
YoY%
International Pax capacity/traffic/LF
International Capacity/Traffic
20%

100%

Capacity0%80%

Traffic

LF

-20%

0%

-94.5%-86.5%

2020 (vs 19)

Traffic -75.6%-100% LF
62.8%

40%

2021YTD (vs 19)
Traffic -80.2%
LF
54.2%

-120%

2019

2020

20%

MiddleEast

0%Europe-76.7%-61.5%-74.7%

2021-65.1%

Year

202101202102202103202104202105202106202107202108202109

Capacity-74.4%-77.9%-77.4%-76.0%-74.6%-71.0%-63.8%-59.0%-59.1%

Traffic-85.6%-88.7%-87.8%-87.3%-85.1%-80.9%-73.6%-68.8%-69.2%

LF %

44.9%

40.8%

43.7%

43.8%

47.3%

55.2%

62.1%

65.3%

61.6%

Yoy%

-100%

Asia

-80% Capacity -68.1% Capacity -69.9%

Yoy%

-50%

60%

-40%
-60%

2021/01~09 （international capacity）
2021/01~09 （international traffic）※ 2021 (vs the same month in 2019)-73.3%

Latin
America
North
America-67.3%-71.0%-56.7%※ 2021 (vs the same month in 2019)

Source：IATA18Impact of COVID-19 PandemicResponse to COVID-19 andoutlook for post COVID

19Air cargo continue to rise
Demand surge still spread across various sectors from hi-tech, automotive topharma.
E-commerce contributed to robust air demand.
Cargo demand remains strong amidst the upcoming e-commerce heavy
events(Black Friday, Singles Day) and holiday shopping along with new tech productlaunched.
Healthy PMI index, historically low I/S ratio & peak season indicate strong air cargodemand.
Continued conversion of ocean freight to air as US port congestion worsens.

Yields elevated, load factors close to historicalhighs

Air cargo continue to rise, trend above goods
trade
Source：IATA；DHLEase travel restrictions for vaccinated tourists
Government policies will play a huge role in air traffic recovery, with travel restrictions mostly
impacting cross-border flights.

More and more countries beginning to reopen was not only welcome news to airlines but also
represents a structural improvement in the international travel landscape.
2021/11/01 Countries for Taiwan vaccinated travelers can visit

2021 JUL
travel restriction

29%

36%

completely closed34%

partially closurestesting or quarantine

2021 NOV
travel restriction
The travel status of individual
countries can change suddenly.

26%

17%

57%

Ssource：travelweekly；UNWTO

Entry is restricted
testing or quarantine
travel is open21

Passenger volume recovery projection
Looking ahead to projected air traffic into July
2022

Most major flows are expected torecover by 2023 or 2024
Projected recovery by region, index(2019=100)

For intraregional flights, we expect close to fullrecovery as early as 2022.

Baseline scenario projection of G20 countries’ total
airline passenger volume in July 2022, as percentage ofJuly 2019 numbers.

Overall air traffic demand will still be hampered by thelow level of interregional flights, which is currently at 20
percent of pre-COVID-19 levels.

Source：Bain & Company, Inc. ；PaxIS；McKinsey analysis of global airline demand

22

Operational strategies during pandemic
Mainly rely on air cargo supplemented by passenger service, during pandemic
air cargo is our core source of revenue.
Cargo：Differentiation pricing strategy, maximize cargo capacity, consolidate
source of goods, optimize rate structure, hold on to cargo business opportunities.
Passenger：Stay ahead of market trends, maintain schedule stability, consolidate
rigid demand and pay a close attention to border & quarantine-free policy.

FleetPlanning Fleet modernization
 Expand cargo fleet

CargoBiz

 Max capacity Belly hold
 21 Freighter Market opportunity Sea-to-Air conversions
 Charter Board package
 Valuable cargo

Flexible
Schedule

 Passenger aircraft for cargodemand Schedule stability(core routes)

Fly Safe

 “IATA Travel Pass” trial
 Disinfection & deep cleaning Fly safe information & Service Touchless services Aircrew Safety and Health

FinancialStability

Stable cash-flow
Adequate liquidity
Minimize costs

23

CAL Expands Cargo Service
CAL leverages Taiwan’s strategic position and cargo capacity during the pandemic,
increasing by 23% of schedule flights per week . The overall weekly capacity will be up
to 130 flights including charter flights in 2021.

• Fully utilize CAL 18 747-400 freighters• Leverage belly space to support cargo demand• Maintain high efficiency with 3 777F operation• Monthly route review and flexible routeadjustment• Prioritize high-yield goods and regularproject shipment for route profit boost• Pursue high yield charter to uplift loadfactor and revenue

24

The fifth cargo capacity in the world• IATA ranked China Airlines the fifth in the world in terms of cargo capacity, threeplaces higher than 2019, ranking first among Asian airlines. It also ranked ninth inthe world in terms of CTK.

2020 Top 10 Airlines: Ranked by Cargo Traffic

資料來源: IATA WATS

25

Flight Schedule Adjusted in Line with Market DemandOperations remain active in adapting to the dynamic changes of the market
landscape and governments regulations.

Operate selected routes to maintain network connectivity,and enhance revenue management .

Gradually resume flights to align with boarder reopening,regional business travel needs and travel bubbles.

Operate charter flights to generate revenue.

26

Resume Passenger flights as borders progressively reopen• Asia-Pacific :Indonesia：CECChas removed Indonesia from list of high-risk countries. flight services to Jakarta

have resumed since 20th Oct.
Myanmar： having been removed from list of high-risk countries because of the Delta variant by
CECC since 6th Nov. Flight services will resume according to market demand.
Singapore：It is going to the scheme of “ Vaccinated Travellers Lane “ to welcome the reopen toforeign visitors. Flight frequency tends toward stability.

• Oceania：
Australia：Australia’s international borders have progressively reopened since 1st Nov.

New Zealand：Non-New Zealand citizens as fully vaccinated are permitted to travel to New Zealandfrom 1st Nov. Bookings on our current ANZ flights will increase after travellrestrictions were lifted.
• USA：From 8th Nov, borders reopen to Non US citizens who must be fully vaccinated. We have
responded to maintain stable flight operations to and from several gateways in US.

UK：having been removed from list of high-risk countries because of the Delta variant by CECC
since 6th Nov. Flight services to and from London will resume in Dec.

27

Cargo opportunity | Passenger recovery
Economic recovery , strong cargo demand, seato-air conversions, supply chain disruption, lowinventory, air cargo becomes a sellers' market,
freight rates at a higher level and outlook forcargo stays positive.
Stay ahead of market trends, seize the chance tomanage rate, ship high-value goods as priority,schedule flexible cargo operation, optimize
revenue.
International cargo TrafficIncreasing vaccination coverage, reopening ofinternational travel , new international travel vaccine
rules, herd immunity is the key to lead the way intravel recovery.
Introduce Airbus A321neo, featuring the new
touchless Audio and Video On Demand (AVOD)
system to meet post Covid-19 passenger demand.
International pax Traffic(thousand tonne)(100 million RP)
100,000,000 RP

10,000,000 tonne

Market Dynamics & Demand

Demand, Border & Quarantine

Source of Goods

Restock Inventory

Schedule Stability

Epidemic Prevention& Manpower Demand

Sea-to-Air
Conversions

Flexible Pricing
Strategy

A321neo Delivery

Strengthen Revenue
management system（Bulk、Heavy、Value）（Low inventory）

28

Proactive COVID-19 Response Strategies

Conserve cashflow & lower thecost

Maintain business
continuity andstability

Integrate sales
and marketingstrategy

Comply withregulations topromote safe travel

Rebuild
passenger
confidence in
air travel

Fleet status
Oct

Boeing 737-800

Narrow
Body

WideBody

Airbus 321neo

2021

2022

2021

OctDec150(-3)(+10)

1210Boeing 747-400F

Freighters

Boeing 777F

Freighters

Airbus 350-900

1414

Boeing 777-300ER

1010

2022年

2167
23

Airbus 330-300

23Boeing 747-400

sold06267

Passengers(-2)

2021 OCT
Total 83 aircraft

902022183
2118(+2)

523

Airline industry will recover,
especially start fromregional market

Due to port congestion ,Lackof cargo capacity remains
a key obstacle for the risingdemand,.

30

S&P revised rating outlook to stable

RatingOrganization

Long-Term
RatingOutlookRating Date

TaiwanRatings

twBBB+

Stable2021/10/28

TaiwanRatings

twBBB+

Negative

2020/3/16

TaiwanRatings

twBBB+

Stable

2019/10/30

CAL is the first airlinethat received revised
rating outlook tostable in Asia
31

Sustainability We Care• The only Taiwanese airline selected for DJSIEmerging Markets for six consecutive years.
• China Airlines ranked in 2nd place among the world'sairlines(DJSI ).

Excellent Corporate Governance2014-2021

7 consecutive years
Top 6%-20% TWSE/TPEx
listed companies in theseventh corporate
governance review.

Pioneer in Environmental Protection
2012-2020

9 consecutive years
Achieved great CDP
score on climatechangeEstablish Happy Workplace
2017-2021

5 consecutive years
Taiwan High Compensation
100 Index (HC 100)
Taiwan Employment Creation
99 Index (EMP 99)
32

Thank you# We fly We fight# We will all be fine2021.11China Airlines│No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City, TaiwanTEL│03.399.8888