China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for the
Six Months Ended June 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 June 30, 2020 and 2019, the related consolidated statements of comprehensive income forthe three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, theconsolidated statements of changes in equity and cash flows for the six months then ended, and the related notes
to the consolidated financial statements, including a summary of significant accounting policies (collectively
referred to as the “consolidated financial statements”). Management is responsible for the preparation and fairpresentation 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 Republicof China. Our responsibility is to express a conclusion on the consolidated financial statements based on ourreviews.
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$11,344,058 thousand andNT$13,872,020 thousand, which represented 3.98% and 4.73% of the consolidated total assets as of June 30,
2020 and 2019, and for the three months ended June 30, 2020 and 2019 and for the six months ended June 30,
2020 and 2019, the total revenue were NT$19,215 thousand, NT$2,389,810 thousand, NT$1,638,292 thousand
and NT$4,905,056 thousand, which represented 0.07%, 5.57%, 2.78% and 5.89% of the consolidated total
revenue, respectively.
Scope of Review
Except as explained in the following paragraph, we conducted our reviews in accordance with the Statement ofAuditing Standards 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 other review procedures. A review
is substantially less in scope than an audit and consequently does not enable us to obtain assurance that wewould 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 first paragraphand some investments accounted for using the equity method were not reviewed. As of June 30, 2020 and 2019,the combined total assets of these non-significant subsidiaries were NT$22,064,911 thousand andNT$23,284,052 thousand, respectively, representing 7.75% and 7.94%, respectively, of the consolidated total
assets, and combined total liabilities of these non-significant subsidiaries were NT$11,850,552 thousand and-1-

NT$12,332,446 thousand, respectively, representing 5.24% and 5.24%, respectively, of the consolidated total
liabilities; for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and
2019, the amounts of the combined comprehensive income of these non-significant subsidiaries were
NT$(251,695) thousand, NT$332,113 thousand, NT$(355,476) thousand and NT$557,817 thousand,respectively, representing (9.04%), (67.52%), (26.15%) and (79.31%), respectively, of the consolidated total
comprehensive income. As of June 30, 2020 and 2019, the aforementioned investments accounted for using theequity method were NT$2,056,661 thousand and NT$2,367,567 thousand, respectively; and for the threemonths ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019, the amounts of theGroup’s share of the profit of such investments accounted for using the equity method were NT$(94,728)
thousand, NT$87,895 thousand, NT$(119,222) thousand and NT$157,799 thousand, respectively.
Qualified Conclusion
Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had thefinancial statements of the non-significant subsidiaries and investments accounted for by using the equity
method as described in the preceding paragraph been reviewed, nothing has come to our attention that caused us
to believe that the accompanying consolidated financial statements do not present fairly, in all material respects,
the consolidated financial position of the Group as of June 30, 2020 and 2019, its consolidated financial
performance for the three months ended June 30, 2020 and 2019, and its consolidated financial performance andits cash flows for the six months ended June 30, 2020 and 2019 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 Republicof China.
The engagement partners on the reviews resulting in this independent auditors’ review report are Huang, Jui
Chan and Cheng, Shiuh Ran.

Deloitte & Touche
Taipei, Taiwan
Republic of China
August 6, 2020

Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial
position, financial performance and cash flows in accordance with accounting principles and practices
generally accepted in the Republic of China and not those of any other jurisdictions. The standards, proceduresand practices to review such consolidated financial statements are those generally applied in the Republic ofChina.
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 the original Chinese version or
any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review
report and consolidated financial statements shall prevail.

-2-

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

June 30, 2020
(Reviewed)
AmountASSETS
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 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 and 12)
Other assets - current (Note 18)%

June 30, 2019
(Reviewed)
Amount%$ 34,217,741
498,746
1,640,422
1,576
8,362,976
1,314
566,495
83,711
7,898,734
69,2872,400,780

12
1
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

$ 23,348,904
279,701
1,339,154
38,572
9,865,930
10,3381,229,387
37,1238,220,667
2,709,373

8
1
3
3
1

55,741,782

20

51,822,342

18

47,079,149

16

133,369
344,538
2,056,661
138,715,341
66,113,940
2,074,932
1,141,368
5,520,819
12,871,410

1
49
23
1
2
4

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

130,606
2,367,567
158,181,473
72,742,812
2,075,205
1,187,784
5,225,931
4,131,020

1
54
25
1
2
1

228,972,378

80

241,225,637

82

246,042,398

84$ 284,714,160

100$ 293,047,979

100$ 293,121,547

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 (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 3, 4, 21 and 32)
Notes and accounts payable (Note 32)
Notes and accounts payable - related parties (Note 33)
Other payables (Notes 22 and 32)
Current tax liabilities (Notes 4 and 28)
Lease liabilities - current (Notes 4 and 21)
Provisions - current (Notes 4, 24 and 32)
Contract liabilities - current (Notes 4, 5 and 23)
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
360,393
21,060,773
10,000,000
14,148,892
3,830,570

3
1
5
1
7
3
5
1

24

76,351,527

38,661,467
14,100,000
65,052,216
2,171,317
12,592,800
662,612
14,568,636
9,286,159
565,707

14
5
23
1
4
5
3
-

Total non-current liabilities

157,660,914

Total liabilities

Total current liabilities
NON-CURRENT LIABILITIESFinancial 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 deficit)
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficit)
Total retained earnings (accumulated deficit)
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 August 6, 2020)-3-

2,150,000
8,248,702
2,491
8,566,992
2,128,256
92,5928,070,297
154,2142,537,067
330,617
6,085,481
11,542,384
17,527,332
1,212,111

1
3
3
1
3
1
2
4
6
-

68,648,536$$

6,167,457
1,546,528
541,965
13,430,894
232,768
4,561,017
53,81821,251,986
6,600,000
9,463,029
6,103,156

2
1
5
2
7
2
3
2

26

69,952,618

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
-

33,206,454
25,412,707
56,579,627
2,049,234
9,469,265
193,631
29,198,565
8,662,756
622,134

11
9
19
1
3
10
3
-

55

156,564,335

53

165,394,373

56

226,309,450

79

232,915,862

79

235,346,991

80

54,209,846
1,187,155

19-

54,209,846
2,488,907

19
1

54,209,846
1,241,214

19-(1,315,618)(1,315,618)
1,397,973(30,875)1-

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

466,416
12,967(686,463)(207,080)(200,614)(43,372)-

55,448,481

20

56,553,772

20

54,999,994

19

2,956,229

1

3,578,345

1

2,774,562

1

58,404,710

21

60,132,117

21

57,774,556

20$ 284,714,160

100$ 293,047,979

100$ 293,121,547

100

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

For the Three Months Ended June 30
2020
2019
Amount%Amount

For the Six Months Ended June 30
2020
2019
Amount%Amount%%REVENUE (Notes 4, 27 and 34)$ 26,315,522

100$ 42,892,312

100$ 58,872,652

100$ 83,297,660

100

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

21,650,702

82

38,595,777

90

53,986,964

92

74,787,686

90

GROSS PROFIT

4,664,820

18

4,296,535

10

4,885,688

8

8,509,974

10

OPERATING EXPENSES(Notes 4, 25 and 27)

1,917,054

8

3,724,015

9

5,108,778

8

7,175,981

8

OPERATING PROFIT (LOSS)

2,747,766

10

572,5201(223,090)-

1,333,993

2

199,5741

172,623-

363,204-

325,879-

83,802-(170,434)-(70,288)-(236,875)-(796,493)(3 )(844,417)(2 )(1,617,165)(3 )(1,720,248)(2 )(94,728)-

87,895-(119,222)-

157,799-(607,845)(2 )(754,333)(2 )(1,443,471)(3 )(1,473,445)(2 )PROFIT (LOSS) BEFOREINCOME TAX

2,139,921

8(181,813)(1 )(1,666,561)(3 )(139,452)-

INCOME TAX (BENEFIT)
EXPENSE (Notes 4 and 28)(112,692)(1 )

109,077-(108,609)(1 )

298,314

1

NET INCOME (LOSS) FOR
THE PERIOD

2,252,613

9(290,890)(1 )(1,557,952)(2 )(437,766)(1 )(30,722)---(10,817)---(76,376)-(18,971)-(73,807)-(2,065)-

20,126(86,972)-

4,275(14,696)-

16,021(68,603)-851(1,214)(Continued)

NON-OPERATING INCOME
AND EXPENSES
Other income (Note 27)
Other gains and losses(Notes 12, 15 and 27)
Finance costs (Notes 27
and 33)
Share of the profit (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 on hedging instruments
subject to basis adjustment
Unrealized gain 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)-4-CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share)(Reviewed, Not Audited)

For the Three Months Ended June 30
2020
2019
Amount%AmountItems that may be reclassified
subsequently to profit orloss:
Exchange differences ontranslating the financial
statements of 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)$

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 (LOSSES) PER
SHARE (NEW TAIWANDOLLARS; Note 29)
Basic
Diluted-815,915

$

%

2,370

-

(57,000)-

3(234,490)-

392,976(157,451)
619,527(1 )
245,799(186,321)-

532,5552(201,017)$

2,785,168

11

$

$

2,459,448(206,835)

10
(1 )

$

2,252,613$$

Other comprehensive
income (loss) for theperiod, net of income
tax(38,937)

For the Six Months Ended June 30
2020
2019
Amount%Amount26,046--(358,236)-(68,646)
267,330-

67,842(264,348)--

198,727-(265,562)-(491,907)(1 )$ (1,359,225)

(2 )

$

(703,328)(1 )$(442,759)
151,869(1 )-$ (1,313,885)(244,067)

(2 )
(1 )

$

(686,463)
248,697

(1 )
-

9

$

(290,890)(1 )$ (1,557,952)

(3 )

$

(437,766)(1 )

2,995,035(209,867)

12
(1 )

$

(641,416)
149,509(1 )-$ (1,112,145)(247,080)

(2 )
-

$

(953,773)
250,445(1 )-

2,785,168

11$(491,907)(1 )$ (1,359,225)

(2 )

$

(703,328)(1 )$ 0.45$ 0.42$(0.08)$(0.08)$$(0.24)$(0.24)$%$(0.13)$(0.13)

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

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

Share Capital

Capital Surplus

Equity Attributable to Owners of the Company
Other Equity
Exchange
Unrealized
Differences on
Gain (Loss) on
Retained Earnings
Translating the Financial Assets
UnappropriatedFinancial
at Fair Value
Earnings
Statements ofThrough Other(Accumulated
ForeignComprehensive
Legal Reserve
Special Reserve
Deficit)Operations
Income$ 54,209,846$ 1,241,214$

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

Net profit (loss) for the six months ended June 30, 2019-

Other comprehensive loss for the six months ended June 30, 2019,
net of income tax

BALANCE AT JANUARY 1, 2019

$ 2,965,512$ 60,047,084--(1,136,278)-(1,136,278)

-

-

-

(686,463)

-

-

-

-

(686,463)

248,697(437,766)

-

-

-

-

-

19,706(1,214)(285,802)-(267,310)

1,748(265,562)

Total comprehensive income (loss) for the six months ended
June 30, 2019

-

-

-

-

(686,463)

19,706(1,214)(285,802)-(953,773)

250,445(703,328)

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(416,438)(416,438)

Loss of control of subsidiaries

-

-

-

-

-

8,368

105

-

-

8,473

(24,957)(16,484)

BALANCE AT JUNE 30, 2019

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

466,416$

12,967$(686,463)$

18,410$41,510$(260,534)$(43,372)$ 54,999,994$ 2,774,562$ 57,774,556

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

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

466,416
12,967
1,297,843

-

-

-

-

-

-

-

Net profit (loss) for the six months ended June 30, 2020

-

-

-

-

(1,313,885)

-

-

-

-

(1,313,885)(244,067)(1,557,952)

Other comprehensive income for the six months ended June 30,
2020, net of income tax

-

-

-

-

-

(43,304)(59,949)

304,993-

201,740(3,013)

198,727

Total comprehensive income (loss) for the six months ended
June 30, 2020

-

-

-

-

(1,313,885)(43,304)(59,949)

304,993-(1,112,145)(247,080)(1,359,225)

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

12,497

6,854

-

6,854

Non-controlling interests arising from acquisition of subsidiaries

-

-

-

-

-

-

-

-

-

-

(375,036)(375,036)$ 54,209,846$ 1,187,155-$ (1,315,618)

47,313$ 1,448,671(30,875)$ 55,448,481$ 2,956,229$ 58,404,710

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated August 6, 2020)-6-$$ 57,081,572-$

25,268(43,372)-(98,011)42,619$(114,493)
105,843(1,136,278)$$

Total Equity(105,843)-$(9,664)Non-controlling
Interests

114,493
-

-

$

Total

$ 1,144,928$$

Treasury
Shares118,810BALANCE AT JUNE 30, 2020

351,923

Gain (Loss) on
Hedging
Instruments$

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

For the Six Months Ended
June 30
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIESLoss 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 inventory and property, plant and equipment
Net (gain) loss on foreign currency exchange
Finance costs
Recognition of provisions
OthersChanges in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities classified as at fair value through profit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash (used in) generated from operations
Interest received
Dividends received
Interest paid
Income tax paid
Net cash (used in) generated from operating activities-7-$ (1,666,561)$(139,452)

16,021,382
105,557
2,522

16,490,382
101,533
14,382(1,930)(180,111)(7,417)
119,222(6,880)325,297(252,373)
1,617,165
3,294,263
879(23,042)(194,430)(6,700)(157,799)(5,458)
10,462(7,656)
381,788476,460
1,720,248
2,100,313-

15,820(9,258)
187,671756,951
146,089
830,140
681,984
196,379(1,219,579)(4,600,240)(15,040,287)(612,080)(2,615,031)(148,876)(27,267)(2,086,569)
175,460
46,012(1,730,469)(145,226)

15,846(68,379)
195,574(192,866)(246,963)
300,303710,277(489,142)
105,013(168,563)
1,851,965(1,452,256)
517,947(140,528)
1,060
21,700,319
184,615
658,408(1,735,507)(265,436)(3,740,792)

20,542,399(Continued)

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

For the Six Months Ended
June 30
2020
2019
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of amortized cost financial assets
Disposal of amortized cost financial assets
Proceeds from disposal of non-current assets held for sale
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software costs
Increase in restricted assets
Net cash outflow on disposal of associates (Note 31)$ (1,514,154)
1,683,931(479,254)
12,310(62,023)
34,426(2,586,640)(64,235)
8,992-$ (1,345,902)
3,640,441
35,692(2,638,353)
38,428(141,954)
131,469(4,094,312)(81,022)(6,844)(17,413)(2,966,647)(4,479,770)

1,770,000
8,248,702(6,450,000)
30,589,678(15,673,913)(5,434,431)
42,027(107,945)(375,036)
6,854

3,500,000(4,445,900)
1,726,863(12,117,617)(5,810,165)
80,786(74,443)(416,438)-

Net cash generated from (used in) financing activities

12,615,936(17,556,914)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES(150,284)(94,348)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

5,758,213(1,588,633)

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$ 34,217,741$ 23,348,904

Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term debts
Increase in short-term bills payable
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds from long-term debts
Repayments of long-term debts
Repayments of the principal portion of lease liabilities
Proceeds of guarantee deposits received
Refunds of guarantee deposits received
Cash dividends paid to non-controlling interests
Proceeds from disposal of treasury shares

The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche auditors’ review report dated August 6, 2020)-8-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 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) leasing of aircraft.
The major shareholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of June 30, 2020, December 31, 2019 and June30, 2019, CADF and NDF held a combined 44.03% of the Company’s shares.

2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiaries (collectively, the “Group”) wereapproved by the board of directors and authorized for issue on August 6, 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. 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.

-9-

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 10 and IAS 28 “Sale or Contribution ofAssets 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 Fulfillinga Contract”

January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
Effective immediately uponpromulgation by the IASB
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 are 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” are applied prospectively to thefair value measurements on or after the annual reporting periods beginning on or after January
1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” are 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.

- 10 -

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 for the consolidated financial statements for the year ended December 31,
2019.
Statement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” asendorsed by the FSC. Disclosure information included in these interim consolidated financial statements isless than the disclosures required in a full set of annual consolidated financial statements.
Basis of Consolidation
The consolidated financial statements reporting principles are the same as those in 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
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated
as the aggregate of the fair value of the consideration received and any investment retained in the former
subsidiary at its fair value at the date when control is lost The Group accounts for all amounts recognized inother comprehensive income in relation to that subsidiary on the same basis as would be required had theGroup directly disposed of the related assets or liabilities.
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.
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.

- 11 -

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

6. CASH AND CASH EQUIVALENTS

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

June 30,2020

December 31,
2019

118,222
16,589,082$$

483,951
7,206,938

June 30,
2019$

227,671
9,234,222

15,220,214
2,290,223

16,565,821
4,202,818

12,569,690
1,317,321$ 34,217,741$ 28,459,528$ 23,348,904

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

June 30,2020

December 31,
2019

June 30,
2019

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

0.34%-2.80%
0.30%-1.10%

0.59%-3.55%
0.47%-0.70%

0.59%-3.50%
0.43%-2.83%

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

December 31,
2019

June 30,
2019

Financial assets at FVTPL - 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

$

5,447

498,746

511,758

274,254$ 498,746$ 512,192$ 279,071$$$

Financial liabilities - current
Financial liabilities held for trading
Derivative financial instruments (not underhedge accounting)Foreign exchange forward contracts- 12 -

2,491

11,749-

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:
Notional Amount(In Thousands)

Currency

Maturity Date

NTD/USD

2020.7.23-2020.7.31

NTD59,347/USD 2,000

NTD/USD

2020.1.15-2020.7.31

NTD570,571/USD19,000

NTD/USD

2019.7.29-2019.10.29

NTD155,280/USD5,000

June 30, 2020
Buy forward contracts
December 31, 2019
Buy forward contracts
June 30, 2019
Buy forward contracts

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

December 31,
2019

June 30,
2019$ 111,018$ 182,356$ 106,669

22,351

26,86523,937$ 133,369$ 209,221$ 130,606

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 profit through long-term investment. Accordingly, themanagement elected to designate these investments in equity instruments as at FVTOCI as they believes
that 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
June 30,2020

December 31,
2019

June 30,2019$ 1,640,121
301$ 2,354,794
301$ 1,339,154-$ 1,640,422$ 2,355,095$ 1,339,154

$

$

$

Current
Time deposits with original maturities of morethan 3 months (e)Governmental bonds

Non-currentxxx- 13 -

344,538

105,586-

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

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE, NET
June 30,
2020
Notes receivable$

15,658December 31,
2019$299,245

June 30,2019$

608,079

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

8,568,023(220,705)
8,347,318

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

9,464,819(206,968)
9,257,851$ 8,362,976$ 8,520,834$ 9,865,930

The average credit period was 7 to 55 days. In determining the recoverability of a accounts receivable, theGroup considered any change in the credit quality of the receivable since the date credit was initiallygranted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Group’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position. The Group adopted a policy of
only dealing with entities that are rated the equivalent of investment grade or higher and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Credit rating information is obtained from independent rating agencies where available or, if not available,
the Group uses other publicly available financial information or its own trading records to rate its major
customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored andthe aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure
is controlled by counterparty limits that are reviewed and approved by the risk management committee
annually.
The Group applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit
losses on accounts receivables are estimated using a provision matrix by reference to past default
experience with the debtors and an analysis of the debtors’ current financial position, adjusted for general
economic conditions of the industry in which the debtors operate and an assessment of both the current 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 for loss allowance based on 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 receivables which are due. Where recoveries are made, these are recognized in profit or loss.

- 14 -

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

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.05%

0.34%

2.12%

12.55%

97.84%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,661,711

Amortized cost

$ 7,657,883$

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

0.06%

0.21%

1.12%

19.48%

97.46%-

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,400,031$ 1,484,996(4,339)(3,169)Amortized cost

$ 7,395,692$ 1,481,827$

395,658(3,828)$(1,329)394,329

181,405$(3,853)$

177,552

129,490$(16,257)$

113,233

Total

199,759$ 8,568,023(195,438)(220,705)

4,321$ 8,347,318$

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$

June 30, 2019$

306,445$(3,445)$303,000

90,263$(17,579)$

72,684

183,084$ 9,464,819(178,436)(206,968)

4,648$ 9,257,851$

The movements of the loss allowance of accounts receivable were as follows:
For the Six Months Ended
June 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
2,522
(490)
8
-

$ 227,306
14,382(34,703)(17)

Balance at June 30$ 220,705$ 206,968- 15 -

11. INVENTORIES, NET

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
OthersJune 30,2020

December 31,
2019

June 30,2019$ 7,123,806
627,587
124,713
22,628$ 7,578,125
571,601
283,933
36,454$ 7,342,824
563,877
285,396
28,570$ 7,898,734$ 8,470,113$ 8,220,667

The operating costs for the six months ended June 30, 2020 and 2019 included losses from inventory
write-downs of $197,219 thousand and $266,052 thousand, respectively. And the operating costs for thethree months ended June 30, 2020 and 2019 included losses from inventory write-downs of $57,756
thousand and $3,078 thousand, respectively.

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

$ 69,287

December 31,
2019$

June 30,
2019

-

$

-

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft
according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original
carrying amount which was higher than the expected sale price and which was recognized as an impairment
loss, and would be continuously assessed whether there are further impairments in subsequent periods.
However, the actual loss shall be identified by the actual sale price.
The Company recognized impairment losses of $0 for the six months ended June 30, 2020 and 2019. Someaircraft had completed the planned disposal procedures, and the Company recognized the disposal losses 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 market and the proposed sale price which was 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 and hotel
services
General investing
Cleaning of aircraft and maintenance ofmachine and equipment
Travel business
Real estate leasing and international trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft

Proportion of Ownership (%)
June 30,
December 31,
June 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)- 16 -

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 Service, Ltd.
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Service (Samoa)

Main Businesses and Products

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

Air cargo and storage
Airport services

59
49

59
49

59
49

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

48
25
77
100

48
25
77
100

48
25
100
100

In-flight catering
Real estate management
Hotel businessAirport supporting service and investing

54
100
100
100

54
100
100
100

54
100
100
100

(Concluded)
Note:

Proportion of ownership is considered from the Group view.

Except that the Company has control over Taoyuan International Airport Service, Taiwan Airport Service
and Global Sky Express, the others are investees that the Company had more than 50% of their voting
shares. The above financial information of the subsidiaries for the six months ended June 30, 2020 and2019 of these subsidiaries was reported according to reports that was not reviewed by independent auditors,
except for Mandarin Airlines and Tigerair Taiwan Co., Ltd.
In order to prepare the listing of Tigerair Taiwan Co., Ltd. and comply with the rules relating to theexamination for public listing, the release of the shares of Tigerair Taiwan Co., Ltd. held by the Company
and Mandarin Airlines was resolved in the shareholders’ meeting of the Company on June 25, 2019, and in
the shareholders’ meeting of Mandarin Airlines on June 27, 2019. The shares shall be subscribed by all
shareholders of the Company and Mandarin Airlines on the basis of the percentage of shareholdings. For
the subscribed shares that the original shareholders waived or for the undersubscribed portion, the chairman
was authorized to contact specific persons to subscribe. The subscription price was set at $41 per share. In
October and December 2019, the share price was fully paid and the shares were completely delivered andtransferred. A total amount of 45,661,000 shares was disposed, and the proportion of ownership decreased
to 77%. The proceeds from disposal were $1,866,474 thousand. Since the Company did not loss control ofthe subsidiary, the related gain on disposal was $1,254,633 thousand and recognized in the capital surplus
account.
Tigerair Taiwan Co., Ltd. plans to issue ordinary shares for cash, the board of directors of the Company
approved the plan on August 6, 2020. The upper limit of the total amount of the transaction is $2,000,000
thousand, and the actual transaction price and shares are to be decided after Tigerair Taiwan Co., Ltd
approved the issuance.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates
Investments in jointly controlled entities

June 30,2020

December 31,
2019

June 30,2019$ 1,128,815
927,846$ 1,208,495
1,015,298$ 1,275,351
1,092,216$ 2,056,661$ 2,223,793$ 2,367,567- 17 -

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

December 31,
2019

June 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.

$377,985
8,397
448,464
250,922$461,263
10,004446,161
248,350$

510,687
11,034457,084
248,676

43,04742,71747,870$ 1,128,815$ 1,208,495$ 1,275,351

At the end of the reporting period, the proportion of ownership and voting rights of associates held by
the Group were as follows:
Proportion of Ownership and Voting Rights
June 30,
December 31,
June 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 were as
follows:
For the Three Months Ended
June 30
2020
2019
China Aircraft Services
Dynasty Holidays
Airport Air Cargo Terminal(Xiamen)
Airport Air Cargo Service(Xiamen)Eastern United International
Logistics (Holdings) Ltd.

$ (31,532)(1,068)$For the Six Months Ended
June 30
2020
2019

5,059
607

$ (61,232)(1,644)

$

6,909
604

10,925

6,368

13,90010,508

4,171

6,969

9,114

13,398

725

1,677

1,450

3,334

$ (16,779)$ 20,680$ (38,412)$ 34,753

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

- 18 -

The board of directors of the Company decided to sell part of the equity of Dynasty Holidays to H.I.S.
Taiwan Co., Ltd. on January 21, 2019 and completed the transaction on January 31, 2109. After the
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 the subsidiary.
Therefore, the relevant assets and liabilities were not consolidated in the current period, and only the
profit and loss from January 1, 2019 to January 31, 2019 were consolidated. For information on thedisposal of the subsidiary, refer to Note 30.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
June 30,
2020
China Pacific Catering Services
China Pacific Laundry Services
Nordam Asia Ltd.
Delica International Co., Ltd.

December 31,
2019$729,181
152,976
37,821
7,868$

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

927,846$ 1,015,298

June 30,2019$

921,127
160,861
2,358
7,870

$ 1,092,216

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled
entities held by the Group were as follows:
Proportion of Ownership and Voting Rights
June 30,
December 31,
June 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 the Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both sides have theright to make major motion vetoes on the board of directors, and therefore, the Group does not havecontrol.
To enhance the Group’s maintenance capabilities, the Company established a joint venture with the USNORDAM Aerospace Group in December 2017, planning to provide thrust reversers and composite
repair services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business disputation with their cooperative
partner, so their company operation was not impacted. As a result, NORDAM Asia suspended its
operation from October 5, 2018 to October 4, 2019 and resumed business on October 4, 2019. The
Company increased the capital of NORDAM Asia by $35,525 thousand in November 2019.
To expand the Group’s catering business, Kaohsiung Catering entered into a joint venture 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.

- 19 -

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

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

For the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 3020202019$ (70,479)(7,479)9-$62,8554,360-$ (71,890)(8,928)8-$ 115,970
7,076-$ (77,949)$

67,215$ (80,810)$ 123,046

The investments accounted for by 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 havebeen 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 5 and 6 (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
25,623(751)
9,014$ 259,695,130
2,105,992(1,823,636)
28,070,020---

OthersTotal

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

1,015,564
5,067

$

-

$

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

17,917,780
506,738(191,330)
297,578924$ 318,427,067
2,638,353(2,684,438)
3,235,785
15,005(2,158)(6,632)

18,529,532$ 321,625,140$

1,020,631$

14,027,471$ 288,047,506

$

$

-

$

(6,574,873)(219,666)
751(4,481)$ (123,507,657 )(9,350,459)
1,716,659(14,621,872)-$ (14,634,822)(627,716)
638,039
14,622,387-$ (10,601,997)(466,346)
188,765689(4,907)$ (155,319,349)(10,664,187)
2,544,214
1,204(9,388)

-

-

2,112

1,727

3,839
$ (163,443,667)

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

Balance at June 30, 2019

$

-

$

(6,798,269)$ (145,763,329 )$-$ (10,882,069)

Balance at June 30, 2019,
net value$

1,020,631$

7,229,202$ 142,284,177

$

-

$

7,647,463$ 158,181,473(Continued)- 20 -

Freehold Land

Buildings

FlightEquipment

Equipment
under FinanceLeasesOthersTotal

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

1,002,499(6,300)$16,084,063
16,078(11,497)$ 272,077,692
261,851(2,110,858)
753,739-$-$

16,846,835
201,325(116,056)
15,832(1,250)$ 306,011,089
479,254(2,226,914)
769,571(19,047)$

996,199$

16,088,644$ 270,982,424

$

-

$

16,946,686$ 305,013,953

$

-

$

(7,028,540)(245,302)
6,043$ (141,886,170 )(9,063,667)
1,988,398
1,489,158-$-$ (11,209,408)(463,903)
112,444
5,563(3,228)$ (160,124,118)(9,772,872)
2,100,842
1,494,721
2,815

Balance at June 30, 2020

$

-

$

(7,267,799)$ (147,472,281)$-$ (11,558,532)$ (166,298,612)

Balance at June 30, 2020,
net value$996,199$8,820,845$ 123,510,143

$

-

$

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

5,388,154$ 138,715,341(Concluded)
The reclassification mostly enumerated the amount of prepayments for equipment.
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset:
Buildings
Main buildings
Others
Machinery equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements- 21 -

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

16. INVESTMENT PROPERTIES

Carrying amount
Investment properties

June 30,2020

December 31,
2019

June 30,2019$ 2,074,932$ 2,075,068$ 2,075,205

The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to others. The buildings were 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 June 30, 2020, December 31, 2019 and June 30, 2019,respectively.
The fair value valuations were performed by independent qualified professional valuers, and the future
income evaluated by management was based on market transactions.
All of the Group’s investment properties were held under freehold interests.

17. OTHER INTANGIBLE ASSETS

Computer
Software Cost

Relationship
Between
Clients

Accumulated
Amortization

Net Value

Balance at January 1, 2019
Additions
Amortization expenses
Disposal of subsidiaries$ 2,237,382
81,022(3,858)$186,197-$ (1,212,783)(101,533)
1,357$ 1,210,796
81,022(101,533)(2,501)

Balance at June 30, 2019

$ 2,314,546$

186,197$ (1,312,959)$ 1,187,784

Balance at January 1, 2020
Additions
Amortization expenses
Effects of exchange rate changes$ 2,406,163
64,235-$

186,197-$ (1,409,668)(105,557)(2)$ 1,182,692
64,235(105,557)(2)

Balance at June 30, 2020

$ 2,470,398$

186,197$ (1,515,227)$ 1,141,368

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

- 22 -

18. OTHER ASSETS
June 30,2020

December 31,
2019

June 30,2019$

160,459
1,857,860
13,556368,905$

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

884,250
1,121,026
20,832
683,265$

2,400,780$

2,655,711$

2,709,373$

9,010,266
2,502,660
1,248,473
66,71018,22425,077$

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

363,001
2,489,306
1,076,790
99,224
102,699$ 13,171,063$

4,131,020

Current
Temporary payments
Prepayments
Restricted assets
OthersNon-current
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
Others$ 12,871,410

The prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
A350-900, ATR72-600, A321neo, A329neo and 777F aircraft. For details of the contract for the purchaseof the aircraft, refer to Note 35.

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

December 31,
2019
380,000

June 30,
2019

Bank loans - unsecured$ 2,150,000

$

$

-

Interest rates

0.99%-1.34%

0.95%-1.07%-

June 30,2020

December 31,
2019

June 30,
2019

b. Short-term bills payable

Commercial paper
Less: Unamortized discount on bills payable$ 8,300,000
51,298$-$-$ 8,248,702

$

-

$

-

Annual discount rate

0.89%-0.98%- 23 ---

c. Long-term borrowings

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discount$December 31,
2019

4,916,000
41,086,093$

1,929,827
34,064,099

June 30,
2019$

3,112,000
36,314,281

36,610,000
32,54582,579,548
17,527,332

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

26,650,000
33,62566,042,656
9,463,029$ 65,052,216$ 53,514,891$ 56,579,627

0.81%-1.68%

1.08%-1.79%

0.93%-1.46%

Less: Current portion

Interest rates

June 30,
2020

Secured bank loans were 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:

Periods

June 30,2020

December 31,
2019

June 30,20192009.2.42032.6.30

2008.2.262030.4.25

2007.8.242030.4.25

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until March 2022, were used by the Group to guarantee the commercial paperissued. As of June 30, 2020, December 31, 2019 and June 30, 2019, such commercial paper was issued
at discount rates of 1.0483%-1.1483%, 1.1300%-1.3380% and 1.1250%-1.1660%, 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 a
special loan project to maintain its operation, and the fund along with credit guarantee were provided by
the government. The total amount of the loan was $23,000,000 thousand, and it shall be payable within
2 years from the date of initial drawdown. As of June 30, 2020, the Group had a drawdown of$1,100,000 thousand.

20. BONDS PAYABLE
June 30,
2020
Unsecured corporate bonds first-time issued in2013
Unsecured corporate bonds first-time issued in2016$

December 31,
2019

2,350,000- 24 -$

2,750,000
4,700,000

June 30,2019$

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

June 30,2020

December 31,
2019

5,000,000$

5,000,000

June 30,2019$

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
5,792,384
25,642,384

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

3,500,000
5,712,707
32,012,707

11,542,384

10,000,000

6,600,000$ 14,100,000$ 22,052,625$ 25,412,707(Concluded)

Less: Current portion and put options ofconvertible bonds

Related issuance conditions were as follows:
Category

PeriodConditions

Rate (%)

Five-year private unsecured bonds - issued at par in January
2013; repayable in January 2017 and 2018; 1.6% interestp.a., payable annually
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.

2013.01.17-2018.01.17

Principal repayable in January of 2017and 2018; indicator rate; payableannually
Principal repayable in January of 2019and 2020; indicator rate; payableannually
Principal repayable in May of 2020 and2021; interest p.a. payable annually

1.60

2016.09.27-2021.09.27

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

1.08

2017.05.19-2020.05.19

Principal repayable on due date;indicator rate; payable annually

1.20

2017.05.19-2024.05.19

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 of 2021
and 2022; indicator rate; payableannually
Principal repayable in November of2022 and 2023; indicator rate;
payable annuallyPrincipal repayable in November of2024 and 2025; indicator rate;
payable annuallyPrincipal repayable in June of 2023 and2024; indicator rate; payableannually
Principal repayable in June of 2025 and2026; indicator rate; payableannually
Unless bonds are converted to sharecapital or redeemed, principal
repayable one time in January 2023;
1.3821 discount rate p.a.

1.45

2013.01.17-2020.01.17

2016.05.26-2021.05.26

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- 25 -

1.85

1.19

1.32

1.45

1.10

1.32

-

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

The initial 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 to Coronavirus Pneumonia, the changes in the share price of the Company were unfavorable to theseventh issue of the Company’s unsecured convertible bonds. After comprehensive consideration, theissuance was suspended with the permission of the competent authority based on the best interest of theCompany and the 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 $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 became volatile due
to coronavirus pneumonia, 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 approval of the competent authority based on the best interest of the Company and theshareholders’ equity.

- 26 -

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

Carrying amounts
Land
Buildings
Flight equipment
Other equipment$

June 30,2020

December 31,
20198,057,540
1,182,287
56,871,948
2,165

$

$ 66,113,940

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

June 30,
2019$8,337,415
1,116,424
63,287,704
1,269$ 72,742,812

For the Six Months Ended
June 30
2020
2019
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment$ 1,832,399$

992,516$$

217,225
369,355
5,238,410
1,065

253,258
395,276
5,598,902
938$ 6,248,374$ 5,826,055

June 30,2020

December 31,
2019

June 30,2019$ 2,537,067$ 14,568,636$ 2,340,873$ 15,801,724$ 4,561,017$ 29,198,565

b. Lease liabilities

Carrying amounts
Current
Non-current

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

Land
Buildings
Flight equipment
Other equipment

June 30,2020

December 31,
2019

June 30,
2019

0%-1.65%0%-3.56%
0.68%-3.34%
1.06%-1.50%

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

0%-2.87%0%-3.04%
2.00%-3.34%
1.06%-1.73%- 27 -

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

Maturity Date
June 30, 2020

Carrying
Value

Subject

2022.2.9-2028.5.15

Financial liabilities for hedging - current
Financial liabilities for hedging non-current
December 31, 2019 2021.4.15-2028.5.15 Financial liabilities for hedging - current
Financial liabilities for hedging non-current
June 30, 20192021.4.15-2028.5.15 Financial liabilities for hedging - current
Financial liabilities for hedging non-current$

8,485,591
38,661,467
8,577,482
42,420,205
6,164,197
33,206,454

Influence of comprehensive income

For the six months ended June 30, 2020
For the three months ended June 30, 2020
For the six months ended June 30, 2019
For the three months ended June 30, 2019

Recognized in
Other
Comprehensive
IncomeReclassified toIncome$ 430,586
787,054(361,201)(236,337)$ 126,768
76,281(19,046)(19,046)

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

Refundable deposits
Credit guarantees$

June 30,2020

December 31,
2019757,411
1,834,845$

737,895
1,717,953

June 30,2019$

680,085
1,632,939

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.
As of June 30, 2020, December 31, 2019 and June 30, 2019, the lease liabilities increase by $879,756
thousand, $873,293 thousand and $868,070 thousand, respectively.
Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 35.
- 28 -

d. In September, 2019, the Company signed a rental contract for six A321neo with Air Lease Corporation,
which is expected to be introduced between 2021 and 2022.
In October, 2019, the Company signed a rental letter of intent for eight A321neo with CALC Lease
Corporation, which is expected to be introduced in 2022.
In September, 2019, Tigerair Taiwan Co., Ltd. signed a rental letter of intent for eight A321neo withICBC Lease Corporation, which is expected to be introduced between 2021 and 2024.
e. Other lease information
The Company use operating lease agreement for investment properties, refer to Note 16.

Short-term and low price lease
payment
Total of lease cash outflow

For the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 30
2020
2019

$
5,739
$ (3,083,439)$
12,123$ (6,397,788)$
12,672$ (3,167,427)$
20,975$ (5,975,528)

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

22. OTHER PAYABLES

Fuel costs
Ground service expenses
Repair expenses
Interest expenses
Short-term employee benefits
Terminal surcharges
Commission expenses
OthersJune 30,2020

December 31,
2019$

1,120,411
698,913635,621
168,033
2,038,768
446,659
451,574
2,510,318$$

8,070,297$ 13,187,972$ 13,430,894

June 30,2020

December 31,
2019

June 30,2019$

2,922,083
5,334,715$$

8,256,798$ 23,297,084$ 23,301,220$

6,085,481
2,171,317$ 21,060,773
2,236,311$ 21,251,986
2,049,234$

8,256,798$ 23,297,084$ 23,301,220

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

June 30,
2019$

4,216,674
1,233,643
1,178,949
205,977
1,847,542
988,249
440,077
3,319,783

23. CONTRACT LIABILITIESFrequent flyer program
Advance ticket sales

Current
Non-current- 29 -

2,895,535
20,401,549$

2,677,014
20,624,206

24. PROVISIONS
June 30,2020

December 31,
2019

Operating leases - aircraft$ 12,923,417$ 10,371,857$

9,523,083

Current
Non-current$$

360,393
10,011,464$

53,8189,469,265$ 10,371,857$

9,523,083

330,617
12,592,800$ 12,923,417

June 30,2019

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

8,794,539
2,100,313(1,452,256)
80,487

Balance at June 30, 2019$

9,523,083

Balance at January 1, 2020
Additional provisions recognized
Usage
Effects of exchange rate changes$ 10,371,857
3,294,263(612,080)(130,623)

Balance at June 30, 2020

$ 12,923,417

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

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

Operating costs
Operating expenses

For the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 3020202019$ 243,158
106,052$ 245,897
118,118$ 487,098
212,518$ 491,769
224,841$ 349,210$ 364,015$ 699,616$ 716,610- 30 -

26. EQUITY
a. Share capital
Ordinary shares

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

June 30,2020

December 31,
2019

June 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

June 30,2020

December 31,
2019

June 30,
2019

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
xxx
Others$146,351$

315,114$315,11433,513
11,747
118,962
409,978
466,604

3,909
33,513
11,747
118,962
409,978
1,129,080
466,604

3,303
33,513
11,747955
409,978$ 1,187,155$ 2,488,907$ 1,241,214

466,604

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 donations may be used to offset deficit;
in addition, when the Group has no deficit, such capital surplus may be distributed as cash dividends ortransferred to capital (but limited to a certain percentage of the Group’s paid-in capital on a yearlybasis).
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
deficit. The capital surplus arising from share options for employees and convertible bonds cannot be
used.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”),
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.

- 31 -

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

114,493
1,136,278

Dividends Per
Share (NT$)$0.20960737

Rotation Special reserve is $105,843 thousand.
2) Offsetting deficit in 2019
On June 23, 2020, the board proposed to offset the accumulated deficit in 2019. The deficit included
a net loss of $1,199,798 thousand, negative adjustment of other retained earnings of $577,427
thousand, the remaining amount of accumulated deficit was $1,777,225 thousand. The deficits wereoffset by $466,416 thousand of legal reserve, $12,967 thousand of special reserve and $1,297,843 ofcapital reserve.

- 32 -

d. Other equity items
The movement of other equity items is as follows:
Exchange
Differences on
Translating the
Financial
Statements ofForeign
Operations(9,664)

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

25,268

Total

Balance on January 1, 2019
Exchange differences on translating the financial
statements of 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 gain on financial assets at fair value
through other comprehensive income
Effects of income tax
Other comprehensive income recognized in the period
Disposal of subsidiaries$$

58,223

Balance on June 30, 2019$18,410$41,510$

Balance on January 1, 2020
Exchange differences on translating the financial
statements of 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 gain on financial assets at fair value
through other comprehensive income
Effects of income tax
Other comprehensive income recognized in the period$(54,707)$107,262$ 1,143,678$ 1,196,233(53,253)--(53,253)--

481,682481,682--(100,441)(100,441)

9,949(43,304)(73,807)13,858(59,949)(76,248)304,993(73,807)(52,441)
201,740

Balance on June 30, 2020$

47,313$ 1,448,671$ 1,397,973

24,322--

24,322--(347,505)(347,505)--(10,755)(10,755)(4,616)
19,706
8,368(2,065)851(1,214)105

72,458(285,802)-(2,065)68,693(267,310)
8,473(98,011)$(260,534)$(200,614)

e. Non-controlling interests
For the Six Months Ended
June 30
2020
2019
Beginning balance
Net (loss) income attributable to non-controlling interests
Exchange differences on translating the financial statements offoreign operations
Gain (loss) on hedging instruments
xxx
Cumulative gain (loss) on changes in fair value of hedging
instruments reclassified to profit or loss
Effects of income tax
Disposal of subsidiaries
Dividends paid by subsidiaries
Ending balance- 33 -$ 3,578,345(244,067)$ 2,965,512
248,697(3,747)(46,118)
(3)

1,724
92

921
(184)
(3,013)(375,036)

(68)
1,748
(24,957)(416,438)$ 2,956,229$ 2,774,562

f. Treasury shares
Treasury shares are the Company’s share held by its subsidiaries as of June 30, 2020 and 2019 and are
as follows:(Shares in Thousands)

Purpose of Treasury Shares

Number of
Shares,Beginningof Year

Reduction
Duringthe Year

Number of
Shares,Endof YearSix months ended June 30, 2020
Six months ended June 30, 2019

2,889
2,889

(814)
-

2,075
2,889

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value

2,075$ 17,012$ 17,012

2,075
814

$ 18,796
7,376$ 18,796
7,376$ 26,172$ 26,172$ 20,414
8,011$ 20,414
8,011$ 28,425$ 28,425

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

June 30, 2019
Mandarin Airlines
Dynasty Aerotech International Corp.

2,075
814

The above acquisitions by subsidiaries of the Company’s shares in previous years was due toinvestment planning.
The shares of the Company held by its subsidiaries were treated as treasury shares. The subsidiaries can
exercise shareholders’ right on these treasury shares, except for the right to subscribe for theCompany’s new shares and voting rights.
Dynasty Aerotech International Corp. sold a total of 814 thousand shares of its shares in the Company
between January 1, 2020 and June 30, 2020. The disposal price was $6,854 thousand.

- 34 -

27. NET INCOME
a. Revenue
For the Three Months Ended
June 30
2020
2019
Passenger
Cargo
Others$For the Six Months Ended
June 3020202019

1,513,347
23,441,802
1,360,373$ 28,206,142
10,956,320
3,729,850$ 20,241,369
34,537,413
4,093,870$ 55,456,289
21,118,018
6,723,353$ 26,315,522$ 42,892,312$ 58,872,652$ 83,297,660

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

Interest income
Subsidy income
OthersFor the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 30
2020
2019

$

97,475
6,826
68,322$ 180,111
18,507
164,586$ 194,430
16,728
114,721$ 172,623$ 363,204$ 325,879

91,811
382
107,381$ 199,574$

c. Other gains and losses

Gain on disposal of property,
plant and equipment
Gain (loss) on disposal of
non-current assets held forsale
Net gain (loss) on financial
assets classified as held for
sale
Gain on disposal of investments
Gain (loss) on foreignexchange, net
OthersFor the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 30
2020
2019

$

$

$

1,759

$

4,109

6,880

$

5,458

-

-

-

(10,462)(1,366)-

11,902-

1,930-

23,0427,656

130,072(46,663)(119,984)(66,461)

50,958(130,056)(146,884)(115,685)

83,802$ (170,434)$ (70,288)$ (236,875)- 35 -

d. Finance costs
For the Three Months Ended
June 30
2020
2019
Interest expense
Bonds payable
Bank loans
Interest on lease liabilities$

45,915
237,028
513,550$

106,316
207,333
530,768$$

796,493$

844,417$ 1,617,165$ 1,720,248

0.709%1.917%

1.250%1.337%

Capitalization rate

Capitalization interest

For the Six Months Ended
June 30
2020
2019

0.709%1.461%$

18,5001.273%1.337%
$

1,310

$

143,147
522,784
951,234$

46,149200,991
427,084
1,092,173

$

2,381

e. Depreciation and amortization expenses
For the Three Months Ended
June 30
2020
2019
Property, plant, equipment
Right-of-use assets
Investment properties
Intangible assets
Depreciation and amortization
expenses
An analysis of depreciation byfunction
Operating costs
Operating expenses

An analysis of amortization byfunction
Operating costs
Operating expenses

For the Six Months Ended
June 30
2020
2019

$

4,865,963
2,987,753
68
55,655$5,364,344
2,919,622
70
51,691$9,772,872
6,248,374
136
105,557$ 10,664,187
5,826,055
140
101,533$

7,909,439$

8,335,727$ 16,126,939$ 16,591,915$

7,459,234
394,550$

7,931,615
352,421$ 15,209,069
812,313$ 15,683,520
806,862$

7,853,784$

8,284,036$ 16,021,382$ 16,490,382

$

3,548
52,107$

3,167
48,524$

7,086
98,471$

6,333
95,200$55,655$51,691$

105,557$

101,533

f. Employment benefits expense
For the Three Months Ended
June 30
2020
2019
Post-employment benefits
Defined contribution plans
Defined benefit plans

For the Six Months Ended
June 30
2020
2019

$

128,023
349,210$

141,414364,015$

283,882699,616$

282,253
716,610$477,233$

505,429$

983,498$

998,863(Continued)- 36 -

For the Three Months Ended
June 30
2020
2019
Other employee benefits
Salary expenses
Personnel service expenses

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

For the Six Months Ended
June 30
2020
2019

$

3,683,148
627,408$

5,172,756
1,693,221$

9,065,317
2,414,772$ 10,446,358
3,412,551$

4,310,556$

6,865,977$ 11,480,089$ 13,858,909$

3,742,732
1,045,057$

6,094,292
1,277,114$ 10,003,692
2,459,895$ 12,137,935
2,719,837$

4,787,789$

7,371,406$ 12,463,587$ 14,857,772(Concluded)

To be in compliance with the Company Act as amended, the Articles stipulate the distribution of
employees’ compensation at rates of no less than 3% of the net profit before income tax and employees’
compensation. For the three months ended June 30, 2020 and 2019, and for the six months ended June30, 2020 and 2019, the Company has experienced a deficit and, therefore, no employees’ compensation
was estimated.
Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date that the annual consolidated financial statements are authorized for issue
are adjusted in the year that the compensation and remuneration are recognized. If there is a change inthe proposed amounts after the annual consolidated financial statements are authorized for issue, thedifferences are recorded as a change in the accounting estimate.
Information on the employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors 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
June 30
2020
2019

For the Six Months Ended
June 3020202019$ 302,514(22,322)$ 169,869
532$ 325,810(22,322)$ 317,904
532(392,884)(61,324)(412,097)(20,122)$ (112,692)$ 109,077$ (108,609)$ 298,314- 37 -

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

For the Six Months Ended
June 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

6,819

$

(1,392)

9,949$(4,616)

13,982

4,275

13,858851(158,126)

47,191(76,432)

72,45850,074$ (52,625)$ (137,325)$$

68,693c. Income tax assessments
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.

29. EARNINGS (LOSSES) PER SHARE
For the Three Months Ended
June 30
2020
2019
Basic earnings (losses) per share
Diluted earnings (losses) per share
Earnings (losses) used in thecomputation of basic earnings
per share
Effect of potentially dilutive
ordinary shares:
Interest on convertible bonds(after tax)
Earnings used in the computationof diluted earnings per share

$
$

0.45
0.42

$ 2,459,448$ (0.08)$ (0.08)$

19,914$ 2,479,362- 38 -$For the Six Months Ended
June 3020202019$ (0.24)$ (0.24)$ (0.13)$ (0.13)(442,759)$ (1,313,885)--(442,759)$ (1,313,885)$(686,463)-$(686,463)(Continued)

For the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 30
2020
2019

Thousand unit
Weighted average number ofordinary shares in computationof basic earnings (losses) per
share
Effects of potentially dilutive
ordinary shares:
Convertible bonds
Weighted average number ofordinary shares used in thecomputation of diluted earnings(losses) per share

5,418,910

5,418,096

5,418,640

5,418,096

476,190---

5,895,100

5,418,096

5,418,640

5,418,096(Concluded)

If the Group offers to settle compensation or bonuses paid to employees in cash or shares, the Groupassumes 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 effects of thepotential shares was included in the computation of diluted earnings (losses) 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 part of Dynasty Holidays to
H.I.S. Taiwan Co., Ltd. for disposal price of $34,036 thousand and a disposition of $7,656 thousand. Afterthe disposal, the proportion of ownership decrease from 51% to 20%, loss control to the subsidiary.
a. Consideration received from disposals
Consideration received in cash and cash equivalents$ 34,036

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

Net assets disposed of$ 50,934- 39 -

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

Gain on disposal

$

7,656

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

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

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.
June 30, 2020
Carrying
AmountFair Value

December 31, 2019
Carrying
AmountFair Value

June 30, 2019
Carrying
AmountFair Value

Financial liabilities
Bonds payable$ 25,642,384$ 25,423,136$ 32,052,625$ 32,062,874$ 32,012,707$ 32,059,708

Some long-term debts are floating-rate financial liabilities, so their carrying amounts are their fairvalues. As of June 30, 2020, December 31, 2019 and June 30, 2019, the fair values of long-term debts
and private bonds with fixed interest rates were estimated at the present value of expected cash flows
discounted at rates of 0.4475%, 0.6700% and 0.6700%, respectively, prevailing in the market for
long-term debts (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;- 40 -

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 (i.e. unobservable inputs).
June 30, 2020
Level 1
Financial assets at FVTPL
Domestic money market
funds
Financial assets at FVTOCI
Investments in equity
instruments
Unlisted shares domestic
Unlisted shares foreign

Level 2

Level 3

Total$

498,746

$

-

$

-

$

498,746

$

-

$

-

$

22,351$

22,351--

111,018

111,018

$

-

$

-

$

133,369$

133,369

Financial liabilities at
FVTPL
Derivative instruments

$

-

$

2,491

$

-

$

2,491

Derivative financial assets
for hedging

$

-

$

1,314

$

262

$

1,576

Derivative financial
liabilities for hedging$ 47,147,058$

41,823$39,578$ 47,228,459

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

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

Level 2

511,758$-

Level 3

-

$

434

Total

-

$

-

511,758434$

511,758

$

434

$

-

$

512,192

$

-

$

-

$

26,865$

26,865$-- 41 -$-

182,356$

209,221

182,356$

209,221(Continued)

Level 1

Level 2

Level 3

Total

Financial liabilities at
FVTPL
Derivative instruments

$

-

$

11,749$-$11,749Derivative financial assets
for hedging

$

-

$

147

$

9,479

$

9,626

Derivative financial
liabilities for hedging$ 50,997,687$

37,069$3,955$ 51,038,711(Concluded)

June 30, 2019
Level 1
Financial assets at FVTPL
Domestic money market
funds
Derivative instruments

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

Level 2

Level 3

Total$

274,254
-

$

5,447

$

-

$

274,2545,447$

274,254

$

5,447

$

-

$

279,701

$

-

$

-

$

23,937$23,937--

106,669

106,669

$

-

$

-

$

130,606$

130,606

Derivative financial assets
for hedging

$

-

$

32,327

$

6,245

$

38,572Derivative financial
liabilities for hedging$ 39,370,651

$

2,794

$

466

$ 39,373,911

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
Derivatives

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

- 42 -

5) Valuation techniques and inputs applied for Level 3 fair value measurement
The fair values of foreign exchange and fuel options are determined using option pricing models
where the significant unobservable inputs are implied fluctuations. Changes in the implied
fluctuations used in isolation would result in an increase or decrease in the fair values 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 multiplier and liquidity discount of Level 3 financial instruments are as follows:

Multiplier

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
(44,840)$ 209,221(75,852)

Balance at June 30, 2020

$ (39,316)$ 133,369

Balance at January 1, 2019
Recognized in other comprehensive income

$

4,901
878

$ 132,191(1,585)

Balance at June 30, 2019

$

5,779

$ 130,606

June 30, 2020
December 31, 2019
June 30, 2019
The movements of Level 3 financial instruments are as follows:

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

December 31,
2019498,746
1,576
46,462,225
133,369$

June 30,
2019

Financial assets
Financial assets at FVTPL
Derivative financial assets for hedging
Financial assets at amortized cost (Note 1)
Financial assets at FVTOCI$- 43 -

512,192
9,626
41,479,556
209,221$279,701
38,572
36,997,307
130,606(Continued)

June 30,2020

December 31,
2019

2,491
47,228,459
159,308,896$

June 30,
2019

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

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

39,373,911
123,848,566(Concluded)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, lease liabilities, provisions, parts of othercurrent liabilities, parts of other non-current liabilities and guarantee deposits.
d. Financial risk management objectives and policies
The Group has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and in fuel prices, the Group has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by the Group
shareholders to reduce the impact of market price changes on earnings. These risks include market risk(including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
In addition, the Group has a risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentage. This committee informs theGroup of global economic and financial conditions, controls the entire financial risk resulting fromchanges in the financial environment and fuel prices, and develops the strategy and response to avoid
financial risk with the assistance of financial risk experts to effect risk management.
1) Market risk
The Group is primarily exposed to the 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.

- 44 -

Sensitivity analysis
The Group was mainly exposed to the U.S. dollar. The following details the Group’s sensitivity
to increase and decrease in New Taiwan dollars (the functional currency) against the relevant
foreign currencies. U.S. dollars increase/decrease one dollar against New Taiwan dollars used
when reporting foreign currency risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in foreign exchange rates. The
sensitivity analysis included only outstanding foreign currency denominated monetary items
and foreign currency forward contracts designated as cash flow hedges, and adjusts theirtranslation at the end of the reporting period for U.S. dollars increase/decrease one dollar against
New Taiwan dollars change in foreign currency rates.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be a decrease in pre-tax losses and increase in pre-tax othercomprehensive income gain and losses for the six months ended June 30, 2020 of $10,888
thousand and $1,452,974 thousand and an increase in pre-tax profit and increase in pre-tax othercomprehensive income gain and loss for the six months ended June 30, 2019 of $773,362
thousand and $1,216,486 thousand, respectively.
The Group’s hedging strategy is to enter into foreign exchange forward contracts to avoid
exchange rate exposure of its foreign currency denominated receipts and payments and to
manage exchange rate exposure of its aircraft prepayments in the next year. Those transactions
are designated as cash flow hedges. When forecasted purchases actually take place, basis
adjustments are made to the initial carrying amounts of hedged items.
For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Group performs a qualitative assessment of theeffectiveness, and it is expected that the value of the foreign exchange forward contracts and thevalue of the corresponding hedged items will systematically change in the opposite direction in
response to movements in the underlying exchange rates.
The following table summarizes the information relating to the hedges of foreign currency risk.
Please refer to Note 21 for rental contract for hedging.
June 30, 2020
Notional
AmountMaturity

NTD/USD

NTD293,226/
USD9,882

Aviation fuel forward exchange
contracts

NTD/USD

Aircraft prepayments- forward
exchange contracts
Long-term
prepayments forward exchange
contracts

Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts

ForwardRate

Line Item in
Balance Sheet

2020.7.212021.6.9

29.5-30.8

NTD539,472/
USD20,000

2020.7.312021.5.28

29.4-30.7

NTD/USD

NTD3,115,727/
USD105,000

2020.11.42020.12.4

29.5-30.4

NTD/USD

NTD29,674/
USD1,000

2020.9.25

29.5

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

Currency

Carrying AmountAsset
Liability

$

13

$

4,531

348

7,364

803

29,928150-

The above hedging instruments are continuously applied to hedging accounting. The book valueof other equity which belongs to each hedging items (aircraft rentals, aviation fuel, aircraft
prepayments and long-term prepayments in U.S. dollar) are $(4,518) thousand, $(7,016)
thousand, $(29,125) thousand and $150 thousand.
- 45 -

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

$

38

$

8,491

32

10,19377

18,385The above hedging instruments are continuously applied to hedging accounting. The book valueof other equity which belongs to each hedging item (aircraft rentals in U.S. dollars, aviation fueland aircraft prepayments) are $(8,453) thousand, $(10,161) thousand and $(18,308) thousand,respectively.
June 30, 2019
Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts

Currency

NTD/USD

Notional
AmountMaturity

NTD1,591,584/
USD51,249

2019.7.82020.6.8

ForwardRate

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

29.7-31.3

Financial assets forhedging/liabilities
for hedging$ 32,327$

2,794

The above hedging instruments are continuously applied to hedging accounting. The book valueof other equity which belongs to each hedging items (aircraft rentals in U.S. dollar) are $29,533
thousand.
For the six months ended June 30, 2020
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments
Long-term prepayment

Note:

$

3,935
3,145
(10,817)150$ (3,953)(2,100)-$ (3,587)$ (6,053)

Increase in operating costs or foreign exchange loss.

- 46 -

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

For the three months ended June 30, 2020

Comprehensive Income

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

Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments
Long-term prepayment$ (1,502)(5,729)(30,721)150$ (4,835)(1,829)-$ (37,802)$ (6,664)

Note:(Note)

Increase in operating costs or foreign exchange loss.

For the six months ended June 30, 2020
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Note:

$

2,087

AmountReclassified toProfit and Lossand theAdjusted LineItem

$ 36,961(Note)

Decrease in operating costs or foreign exchange loss.

For the three months ended June 30, 2019
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Note:

$

2,989

AmountReclassified toProfit and Lossand theAdjusted LineItem

$ 19,872(Note)

Decrease in operating costs or foreign exchange loss.

b) Interest rate risk
The Group was exposed to interest rate risk because entities in the Group borrowed funds atboth fixed and floating interest rates. The risk is managed by the Group by maintaining anappropriate mix of fixed and floating rate borrowings and using interest rate swap contracts andforward interest rate contracts.

- 47 -

The carrying amount of the Group’s financial liabilities with exposure to interest rates at the endof the reporting period were as follows.

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

June 30,2020

December 31,
2019

June 30,2019$ 90,260,915$ 91,414,806$ 80,432,067

92,612,480

77,821,887

90,753,529

Sensitivity analysis
The sensitivity analysis below was determined based on the Group’s exposure to interest rates
for both derivatives and non-derivative instruments at the end of the reporting period. For
floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A one yard
(25 basis) point increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.
Had interest rates increased one yard (25 basis) points and had all other variables been held
constant, the Group’s pretax profit for the six months ended June 30, 2020 would haveincreased by $115,766 thousand.
Had interest rates increased one yard (25 basis) point and had all other variables been held
constant, the Group’s pretax profit for the six months ended June 30, 2019 would haveincreased by $113,442 thousand.
c) Other price risk
The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters into
fuel swaps contract to hedge against adverse risks on fuel price changes.
June 30, 2020
Hedging Instrument

Currency

Cash flow hedges - fueloptions

USD

Cash flow hedges - fuelswap contract

USD

Notional
AmountMaturity

ForwardRate

Line Item in
Balance Sheet

NTD19,641

2020.9.302020.12.31

USD49.65USD78.50

NTD19,675

2020.12.31

USD67.48

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

Carrying AmountAsset
Liability$262$ 19,903-

19,675The above hedging instruments are continuously applied to hedging accounting. The carrying
amount of other equity which belongs to each hedging item (fuel payments) is $(39,316)
thousand.
December 31, 2019
Hedging Instrument

Currency

Cash flow hedges - fueloptions

USD

Notional
AmountNTD5,524

Maturity

ForwardRate

Line Item in
Balance Sheet

2020.3.312020.12.31

USD49.65USD80.75

Financial assets forhedging- 48 -

Carrying AmountAsset
Liability
$

9,479

$

3,955

Hedge accounting is continued to be applied to the abovementioned hedging instruments
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $5,524 thousand.
June 30, 2019
Hedging Instrument

Currency

Cash flow hedges - fueloptions

USD

Notional
AmountNTD5,779

Maturity

ForwardRate

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

2019.9.302020.3.31

USD55USD82.5

Financial assets forhedging - current/
liabilities forhedging - current

$

6,245

$

466

The above hedging instruments are continuously applied to hedging accounting. The carrying
amount of other equity which belongs to each hedging item (fuel payments) is $5,779 thousand.
For the six months ended June 30, 2020

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

Note:

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

$ (25,165)(19,675)$ (21,195)-$ (44,840)$ (21,195)

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

$ 55,616(19,675)$ (19,393)-$ 35,941$ (19,393)

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

(Note)

Increasing in operating costs.

For the three months ended June 30, 2020

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

Note:(Note)

Increasing in operating costs.

For the six months ended June 30, 2019

Comprehensive Income
Cash flow hedges - fuel options
Note:

$

Increasing in operating costs.

- 49 -

878$ (7,092)(Note)

For the three months ended June 30, 2019

Comprehensive Income
Cash flow hedges - fuel options
Note:

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

$ (1,143)$ (6,165)(Note)

Increasing 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 Six Months Ended June 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%

$

605
(605)

$

2,232
(8,829)

$

-

$

-

2) Credit risk
The goal, policies and procedure of credit risk management are same as consolidated financial
statement in 2019. Related illustration can be referred in Note 33.
3) Liquidity risk
Except for the following, the objectives, policies and procedures of liquidity risk management aresame as consolidated financial statement in 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.)

$ 41,309,668

Liquidity and interest risk rate table
The following table shows the remaining contractual maturity analysis of the Group’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Group may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.

- 50 -

Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other non-derivative financial liabilities were based on theagreed-upon repayment dates. The Group’s liquidity analysis for its derivative financial instruments
is also shown in the following table. The table was based on the undiscounted contractual net cash
inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted grosscash inflows and outflows on those derivatives that require gross settlement. When the amountpayable or receivable is not fixed, the amount disclosed has been determined by reference to theprojected interest rates as illustrated by yield curves at the end of the reporting period.
June 30, 2020
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Hedging instruments
Bonds payable

2.3909Less than 1Year

1 to 5 Years

Over 5 Years

3,265,019$ 10,294,529$

18,340,320
10,356,709
12,154,558

32,644,201
38,103,864
10,938,049

33,373,807
3,888,599
3,332,309$ 44,116,606$ 91,980,643$ 47,945,645

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$

0.98453.0476
0.97917,350,930

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

1.1613$1.90583.11312.2573- 51 -

8,949,194

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

0.7958Less than 1Year

1 to 5 Years

Over 5 Years

5,766,579$ 22,486,711$ 10,420,218

9,881,052
7,310,026
6,772,030

39,337,815
29,380,226
19,201,464

17,849,433
7,022,822
4,551,438$ 29,729,687$ 110,406,216$ 39,843,911$

1.2842
1.1431

33. TRANSACTIONS WITH RELATED PARTIESThe balances and transactions between the Company and its subsidiaries, which are related parties of theCompany, including remaining account balances, revenue and expense, have been eliminated upon
consolidation and are not disclosed in this note. Besides information disclosed elsewhere in the other notes,
details between the Group and other related parties are disclosed 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
Nordam Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
Others

Associate
Associate
Associate
Associate
Associate (become associate in January 2019)
Joint venture investment
Joint venture investment
Joint venture investment
Joint venture investment
Director of the Company and major shareholder
Director, key management personnel, chairman,
general manager of the Group, spouse andsecond-degree relatives

b. Operating income

Account
Items

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

Other income Major shareholdersof the Company
Associate
Joint venture
investment

$

-

$
$

104
2,774

- 52 -

$

5,843

$
13
$ 10,601

For the Six Months Ended
June 30
2020
2019
$

5,097

$ 10,968$
112$ 13,189$39$ 21,246

c. Purchases of goods

Related Party TypeFor the Three Months Ended
June 30
2020
2019

For the Six Months Ended
June 30
2020
2019

$
$ 145,317$ 44,819$ 11,418$ 222,980$ 375,720$ 23,782$ 192,845$ 940,207

December 31,
2019

June 30,
2019

Major shareholders of theCompany
Associate
Joint venture investment$ 12,458$ 85,604$ 482,524

d. Accounts receivable - related parties (generated by operations)
June 30,
2020

Related Party Type
Major shareholders of the Company
Joint venture investment

$

1,314

$

2,588
7,760

$

2,519
7,819

$

1,314

$

10,348$

10,338The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.
e. Accounts payable - related parties (generated by operations)
June 30,
2020

Related Party Type
Major shareholder of the Company
Associate
Joint venture investment

December 31,
2019$

45,57247,020$5,982
51,333484,700$

92,592$ 542,015

June 30,
2019
$

5,762
46,288489,915$ 541,965

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.
f. Lease arrangements
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. As of June 30, 2020 and 2019, the Company paid rentals of $11,418 thousand and $23,782
thousand, respectively; for the three months ended June 30, 2020 and 2019, the Company’s paid rentals
amounted to $0 thousand and $12,458 thousand.
g. Endorsements and guarantees
June 30, 2020
Authorized
AmountAmountUsed

December 31, 2019
Authorized
AmountAmountUsed

June 30, 2019
Authorized
AmountAmountUsed$ 3,850,000
2,774,837$ 2,024,250
473,735$ 3,850,000
1,080,000
3,012,668$ 2,129,400
685,444$ 3,850,000
1,080,000
1,089,966$ 2,234,550
422,3902,000,000

1,301,327

2,000,000

1,279,827

2,000,000

1,022,277

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

- 53 -

h. Compensation of key management personnel
For the Three Months Ended
June 302020
2019
Short-term employee benefits
Post-employment benefits

For the Six Months Ended
June 30
2020
2019

$

6,569
528

$

9,018
399

$ 16,051
1,165$ 22,637
1,274

$

7,097

$

9,417

$ 17,216$ 23,911

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

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

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

June 30,2020

December 31,
2019

June 30,2019$ 35,343,455
66,113,940
131,487$ 31,260,801
71,033,617
130,052$ 37,242,967
72,742,812
120,056$ 101,588,882$ 102,424,470$ 110,105,835

35. COMMITMENTS AND CONTINGENT LIABILITIESAs of June 30, 2020, the Group had commitments and contingent liabilities (except for those mentioned inother 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 $120,000 thousand. As of June 30, 2020, four of the aircraft has been
handed over to the company, and has been paid in the amount of US$8,314 thousand (recognized as
prepayments for aircraft).
b. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. 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.

- 54 -

As of June 30, 2020, TACT had signed the following construction contracts with unrelated parties:

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 June 30, 2020, the cumulated consultant service expense and construction equipment had
amounted to $481,776 thousand (VAT included) and $5,253,600 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,755 thousand (VAT included) and$5,250,556 thousand (VAT included) were reclassified to property, plant and equipment. The remaining
cumulative payments were recognized under construction in progress.
Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation when thechartered operating license expires.
TACT should pay royalties to Taoyuan Airport Corporation and the CAA during the charteredoperation period. The calculation is based on annual sales (including operating and non-operating
revenue but excluding the rental revenue from specific districts), and Taoyuan Airport Corporation and
the CAA have the option to adjust the royalty rates every 3 years starting from the date of transfer of thechartered operation rights on the basis of actual revenue and expenditures. The current royalty rate is
6%.
c. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights on
this contract from the CAA. The contract is effective for 50 years (consisting of the development stage
and operating period) from the contract date. Three years before contract expiry date, CAL Park has thefirst option to renew the contract once with a 20-year extension.
CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.
CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow Article
No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies inInfrastructure Projects,” which states that rental calculation in the development stage should include theland value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of theamount based on the National Building Land Rental Standard plus land value tax, value-added tax andthe necessary maintenance fee.
During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.

- 55 -CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.
d. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo
aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is
US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922
thousand. The expected delivery period of the eleven aircraft ranges from 2024 to 2026. As of June 30,
2020, the list price has been paid in the amount of US$17,014 thousand (recognized as prepayments foraircraft). In October 2019, the Company signed a contract with International Aero Engines Company topurchase four backup engines of A321neo. The total list price of the four engines is US$60,289
thousand.
e. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three
B777F aircraft and exercised the option to purchase three B777F aircraft. The total list price of the six
aircraft is US$2,320,315 thousand, and the expected delivery period is from 2020 to 2023. As of June30, 2020, the list price has been paid in the amount of US$241,650 thousand (recognized as
prepayments for aircraft).
f. In September 2019, Tigerair Taiwan Co., Ltd. signed a contract with Airbus S.A.S. to purchase sevenA320neo aircraft and an option to purchase two A320neo aircraft. The total list price of the sevenaircraft is US$729,746 thousand, and the list price of the option to purchase two aircraft is US$208,499
thousand. The expected delivery period of the seven aircraft ranges from 2025 to 2027. As of June 30,
2020, the list price has been paid in the amount of US$9,324 thousand (recognized as prepayments foraircraft). In addition, in December 2019, Tigerair Taiwan Co., Ltd. signed a contract with International
Aero Engines Company to purchase two backup engines of A320neo aircraft. The total list price of thetwo engines is US$27,345 thousand. As of June 30, 2020, the list price has been paid in the amount of
US$2,988 thousand (recognized as prepayments for aircraft).

36. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
By the end of January 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei province
in China became a pandemic. The Company has complied and continues to comply with the travel alerts
issued by the Taiwan Centers for Disease Control and has cancelled flights between several countries like
China, Hong Kong, Japan and Korea. Other flights have flexible capacity depending on the demand. So far,the air transport services for passengers have been severely affected. In addition to adjusting the operation,
the Company also takes measures about funding assistance, human resources, reducing expenditure, andasks the government for help in three main areas including guarantee for its operation, relief compared withthe burden, and a recovery plan.
The Company plans to complete the governmental $20 billion relief loans application. Interest subsidy planis provided by the government, with the advantage of full cargo fleet, and the flexible dispatch of passenger
aircraft to carry goods in the belly freight, the Company expects to take advantage of global air cargobusiness opportunities. For the six months ended June 30, 2020, the cargo revenue was higher than thesame period last year. As a result, the loss caused by the epidemic was abated.

- 56 -

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

Exchange Rate

Carrying
Amount708,607
22,349293,927
3,597,792
511,200

29.6736
33.3333
3.82560.2751
4.1946$ 21,026,924
744,958
1,124,433
989,819
2,144,296

2,310,351
9,497
61,375
3,111,172
122,11229.6736
33.3333
3.82560.2751
4.1946

68,556,401
316,551
234,795
855,940
512,216

Exchange Rate

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

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

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

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

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 57 -

June 30, 2019
Foreign
Currencies

Exchange Rate

Carrying
Amount425,683
16,504
221,531
4,897,518
293,157

31.0559
35.3357
3.97770.28864.5188$ 13,219,981
583,163881,173
1,413,443
1,324,713

2,471,781
7,043
87,9686,481,054
150,199

31.0559
35.3357
3.97770.28864.518876,763,374
248,875
349,517
1,870,466
678,716

Financial assets
Monetary items
USD
EUR
HKD
JPY
RMB

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
RMB

For the three months ended June 30, 2020 and 2019, net foreign exchange gains and (losses) were $103,072
thousand and $(119,984) thousand, respectively; and for the six months ended June 30, 2020 and 2019, net
foreign exchange gains (losses) were $50,958 thousand and $(146,884) thousand, respectively. It isimpractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to thevariety of the foreign currency transactions and functional currencies of the group entities.

38. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided: None
2) Endorsements/guarantees provided: Table 1 (attached)
3) Marketable securities held: Table 2 (attached)4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None
5) Acquisitions of individual real estate at costs or prices of at least NT$300 million or 20% of thepaid-in capital: None
6) Disposals of individual real estate at costs or prices of at least NT$300 million or 20% of the paid-in
capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 3 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 4 (attached)- 58 -

9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 5 (attached)10) Trading in derivative instruments (Notes 7 and 33)
b. Investments in mainland China: Table 6 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 7 (attached)

39. SEGMENT INFORMATION
Segment Information
The Group mainly engages in air transportation services for passengers, cargo and others. Its major
revenue-generating asset is its aircraft fleet, which is used jointly for passenger and cargo services. Thus,
the Group’s sole reportable segment is its flight segment. For operating segment reporting in the
consolidated financial statements, the reportable segment of the Group and its subsidiaries comprises theflight and the non-flight business departments. The accounting policies applied for reportable segments are
consistent with the policies aforementioned in Note 4.
For the six months ended June 30, 2020 and 2019, financial information of segments is listed below:
For the Six Months Ended June 30, 2020
Air
Adjustments
Transportation
Othersand Write-offs
Operating revenue$ 56,970,659$

3,647,999$(1,746,006)

Operating profit and loss
Interest revenue
Investment income accounted for using
the equity method
Revenue
Finance costs
Expenses$$(347,162)$(42,657)

166,729$ 58,872,652$(223,090)
180,111(119,222)
271,990(1,617,165)(159,185)

Loss before income tax
Identifiable assets
Investments accounted for using theequity method
AssetsTotal$$ 197,620,322$ 15,553,415$(6,269,524)(1,666,561)$ 206,904,213
2,056,661
75,753,286

Total assets$ 284,714,160- 59 -

For the Six Months Ended June 30, 2019
Air
Adjustments
Transportation
Othersand Write-offs
Operating revenue$ 81,335,439$

5,426,472$(3,464,251)

Operating profit and loss
Interest revenue
Investment income accounted for using
the equity method
Revenue
Finance costs
Expenses$$735,562$(43,586)

642,017$ 83,297,660$

1,333,993
194,430
157,799
174,038(1,720,248)(279,464)

Loss before income tax
Identifiable assets
Investments accounted for using theequity method
AssetsTotal$$ 223,221,443$ 16,250,947$(6,472,900)(139,452)$ 232,999,490
2,367,567
57,754,490

Total assets$ 293,121,547- 60 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENTS/GUARANTEES PROVIDEDFOR THE SIX MONTHS ENDED JUNE 30, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counter-party
Endorsement/
Guarantee
Provider

No.

0

Name

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

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

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

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

ActualBorrowingAmount$ 11,089,696
11,089,696$ 3,850,000
3,038,197$ 3,850,000
2,774,837$ 2,024,250
473,735

11,089,696

2,000,000

2,000,000

1,301,327

Note 1:

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

Note 2:

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

- 61 -

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

-

6.94
5.00

$ 27,724,241
27,724,241

Yes
Yes

No
No

No
No

-

3.61

27,724,241

Yes

No

No

TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELDJUNE 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. - ordinary shares-

Everest Investment Holdings Ltd. - preferred shares-

Chung Hua Express Co.

-

Jardine Air Terminal Services
The Grand Hi Lai Hotel-

Mandarin Airlines

Cal-Asia Investment

SharesChina Airlines

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

Tigerair Taiwan Co., Ltd.

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

1,359,368$$

80,548

Note73,225

13.59

Note 1

135,937

7,323-

1,100,000

22,351

11.00

22,351

12,000,000
3,216

-

15.00
0.02

-

2,074,628

17,012-

17,012--Financial assets at fair value through profit or loss - current
Financial assets at fair value through other comprehensive
income - non-current-

30,4702.59
5.45

30,470Note 2
Note 2-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

78,34055,31388,718100,271-

78,34055,31388,718100,271--

Financial assets at fair value through profit or loss - current

2,277,786

-

-

-

-

Financial assets at fair value through profit or loss - current

349,523

4,760

-

4,760

-

Beneficial 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-Government bondPhilippines government bond-Amortized cost financial assets-

301

Not applicable

301-

SharesTransAsia Airways

Dynasty Aerotech International Beneficial certificates
Corp.
Taishin 1699 Money Market Fund
Kaohsiung Catering Services

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

Shares/Units-

Sabre Travel Network (Taiwan) Beneficial certificatesFranklin Templeton SinoAm Money Market FundFSITC Money Market Fund
Capital Money Market Fund
Allianz Global Investors Taiwan Money Market Fund
Taiwan Airport Services

Financial Statement AccountJune 30, 2020
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount
(%)
Value

0.40

(Continued)- 62 -

Note 1: The subsidiary’s net equity value was $80,548 thousand for the six months ended June 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 IFRS 9 regulated.
(Concluded)- 63 -TABLE 3

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

China Airlines, Ltd.
(“China Airlines”)

Related Party

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

Nature of Relationship

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

Purchase/
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
PurchaseAmount$282,803110,247
346,179
488,635
175,069(126,888)
182,318- 64 -

% of
Total
0.58
0.23
0.71
1.00
0.36
(0.24)
0.37

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

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

Unit Price
$

-

-

$

(44,518)(64)(44,442)(175,482)(47,208)
16,525(38,148)(2.26)(2.26)(8.91)(2.40)
0.19(1.94)Note-

TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
JUNE 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

$ 175,482

3.75- 65 -

Amount$Action Taken--

Amounts Received
in Subsequent
Period$ 112,989

Allowance for
Bad Debts$-

TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE SIX MONTHS ENDED JUNE 30, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company

China Airlines, Ltd.

Investee Company

Cal Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
Cal-Asia Investment
Sabre Travel Network (Taiwan)
China Aircraft Service
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
China Pacific Laundry Services
Dynasty Aerotech International Corp.
Yestrip
Dynasty Holidays
Global Sky Express
Tigerair Taiwan Co., Ltd.
Taiwan Aircraft Maintenance andEngineering Co., Ltd.
NORDAM Asia Ltd.

Location

Main Businesses and Products

Taoyuan, Taiwan
Real estate lease and international trade
Taipei, Taiwan
Air transportation and maintenance of aircraft
Taoyuan, Taiwan
Air cargo and storage
Los Angeles, U.S.A.
A holding company, real estate and hotel services
Taoyuan, Taiwan
In-flight catering
Taoyuan, Taiwan
Airport services
Territory of the British Virgin Islands General investment
Taipei, Taiwan
Sale and maintenance of hardware and software
Hong Kong International Airport
Airport services
Taipei, Taiwan
Airport services
Kaohsiung, Taiwan
In-flight catering
Taoyuan, Taiwan
Hotel businessTaoyuan, Taiwan
Cleaning and leasing of the towel of airlines,
hotels, restaurants and health clubs
Taoyuan, Taiwan
Cleaning of aircraft and maintenance of machineand equipment
Taipei, Taiwan
Travel businessTokyo, Japan
Travel business
Taipei, Taiwan
Forwarding and storage of air cargo
Taipei, Taiwan
Air transportation and maintenance of aircraft
Taoyuan, Taiwan
Aircraft maintenance

Investment Amount
December 31,
June 30, 20202019

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

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

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

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.0055.00$

77,27077,270100.00108,366

13,205

13,199Note 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
100.0018,3888,397
6,243
1,275,406
815,164(6,928)(8,219)2,196(569,136)(106,839)(6,881)(1,644)549(395,295)(106,825)

Note 4Note 4-1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000
US$
7,172
52,200
HK$ 58,000
12,289383,846
465,000
137,500$

77,270JPY

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

JPY$

1,578,413
1,179,060
1,459,435
1,251,963
729,181
638,118
439,545
246,649
377,985
189,274
519,586
415,940
152,976

Investment
Income (Loss)

4,674 $
(335,885)
131,598(10,259)(140,960)(202,301)
12,554(33,151)(306,159)(83,841)(2,420)(63,355)(16,233)

Note

27,150Note 4(315,698) Notes 1 and 4
71,089(9,516)Note 2(71,890)(99,127)
12,554(31,139)(61,232)(39,699)(1,299)Note 5(63,319)
Note 4(8,928)-

Taoyuan, Taiwan

Composite repair and manufacturing business

37,9752,450

3,797,500

49.00

37,82116

8-

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

7.72
1.08

141,7024,305(569,136)(83,841)(43,917)(903)-

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

43,047

4,142

1,450

-

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

US$

5,877

-

100.00349,685

11,203

11,203Note 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:

Difference caused by lease arrangement between consolidated entities.

Note 5:Difference caused by acquisition.

10,200- 66 --TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS IN MAINLAND CHINAFOR THE SIX MONTHS ENDED JUNE 30, 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

China Airlines

Investee Company Name

Main Businesses andProducts

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

Investment Flows

Outflow

Inflow

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

Forwarding and storage $ 1,067,450
of air cargo(RMB 254,480)

Indirect(Note 1)$
124,213 $(US$4,186)

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

Forwarding and storage
58,725of air cargo(RMB 14,000)

Indirect(Note 1)

57,788
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,465,579
maintenance services (US$ 83,090)

Indirect(Note 1)

63,8342,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Indirect(Note 1)

18,872
636)

-

(US$

Accumulated Outward Remittance forInvestment in Mainland China as ofJune 30, 2020
$264,707 (US$8,920)(US$

346,083
11,663)

Accumulated
Outflow ofInvestment
from Taiwan asofJune 30, 2020

-

$

-

Net Income(Loss) of
the Investee% Ownershipof Direct orIndirect
Investment

Carrying
Amountas ofJune 30, 2020

Investment
Gain (Loss)$
124,213 $
51,677(US$
4,186) (RMB 12,082)

14.00

57,78833,313
1,947) (RMB 7,789)

14.00

(US$

63,8342,151)

2.589

-

(US$

18,872
636)

5.45

-

(US$

-

-

-

$
(RMB

(RMB

Accumulated
InwardRemittance ofEarnings as ofJune 30, 2020

6,665 $
225,013 $104,942
1,691) (RMB 53,644) (US$3,537)(Note 2)4,450
125,469
1,090) (RMB 29,912) (US$

-

(RMB

46,307
1,561)(Note 2)-30,4707,264) (US$10,579357)

Investment Amounts
Upper Limit on the Amount of
Authorized by Investment Commission, Investments Stipulated by the Investment
MOEA
Commission, MOEA
$642,662 (Note 3)$35,042,826 (Note 4)(Continued)- 67 -

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 $ 1,067,450
of air cargo(RMB 254,480)

Indirect(Note 5)$
119,239 $(US$4,018)

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

Forwarding and storage
58,725of air cargo(RMB 14,000)

Indirect(Note 5)

(US$

Remittance of Funds

Outward57,174
1,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof June 30, 2020

Inward

-

$

-

-

$
119,239 $
51,677(US$
4,018) (RMB 12,082)

14%

57,17433,313
1,927) (RMB 7,789)

14%

(US$

Accumulated Outward
Remittance for Investment in
Mainland China as of June 30, 2020

Investment Amounts Authorized by
Investment Commission, MOEA

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

$176,413 (US$5,945)$176,413 (US$5,945)$239,840 (Note 6)

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

Investment
Income (Loss)

Carrying
Amount as ofJune 30, 2020

Accumulated
Repatriation of
Investment
Income as ofJune 30, 2020$
(RMB

7,235 $
223,451 $
134,752
1,691) (RMB 53,271) (US$4,541)(RMB

4,664
125,453
1,090) (RMB 29,908) (US$62,071
2,092)

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.
Note 2: As of June 30, 2020, the inward remittance of earnings amounted to US$3,536,561 and US$1,560,538.
Note 3: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.
Note 4: The limit stated in the Investment Commission’s regulation, “The Review Principle of Investment or Technical Cooperation in mainland China,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.
Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.
Note 6: The RMB and U.S. dollar amounts of assets are translated at period-end rates and those of gains (losses), at the average of the period-end rates of refer for the reporting period.
(Concluded)- 68 -TABLE 7

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

Company Name

Related Party

Natural of
Relationship(Note 1)

Financial Statement Account0

China Airlines, Ltd.

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

a
a
a
a
a
a
a

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

China Airlines, Ltd.

3

Taoyuan International Airport Services

4

Amount$Transaction Criteria% to Total
Consolidated
Total Revenue
or Assets

126,888488,635
175,069
282,803110,247
175,482
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

0.22
0.83
0.30
0.48
0.19
0.06
0.04

Sales revenue

282,803

The same as ordinary transactions

0.48

b

Financial assets at amortized cost

125,000

The same as ordinary transactions

0.04

China Airlines, Ltd.
China Airlines, Ltd.

bb

Airport service revenue
Accounts receivable - related parties

488,635
175,482

The same as ordinary transactions
The same as ordinary transactions

0.83
0.06

Dynasty Aerotech International Corp

China Airlines, Ltd.

b

Operating revenue

175,069

The same as ordinary transactions

0.30

5

Cal Park

China Airlines, Ltd.

b

Operating revenue

110,247

The same as ordinary transactions

0.19

6

Tigerair Taiwan Ltd.

China Airlines, Ltd.

b

Operating expense

126,888

The same as ordinary transactions

0.22

Note 1: Three kinds of business relationships between China Airlines, Ltd. and its subsidiaries were as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were written off in the consolidated financial statements.
Note 3: The Company only discloses transaction amounts or balances of more than $100,000 thousand.
(Concluded)- 69 -TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIESINFORMATION OF MAJOR STOCKHOLDERS
FOR THE SIX MONTHS ENDED JUNE 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 table presents information provided by the Taiwan Depository & Clearing
Corporation on shareholders holding greater than 5% of the Company’s ordinary sharesthat have completed the process of dematerialized registration and delivery as of the lastbusiness day for the current quarter. Number of shares in the consolidated financial report
may differ from actual number of dematerialized securities that have completed theprocess of registration and delivery due to different basis of computation.
Note 2: If the shareholders transferred shares for trust, the accounts are disclosed separately by
the principal who opened a trust account for the subcontractor. Insiders’ shares ofshareholders who held more than 10% of shares based on the laws and regulations of
securities transaction include those held by the shareholders plus the shares for trust while
the shareholders have controlling interest over trusted property. For the shareholder’srights in filing information of insiders, please refer to the Market Observation Post
System website.

- 70 -