China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theYears Ended December 31, 2020 and 2019 andIndependent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordancewith the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports andConsolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2020 are
all the same as the companies required to be included in the consolidated financial statements of parent
and subsidiary companies as provided in International Financial Reporting Standard 10 “Consolidated
Financial Statements.” Relevant information that should be disclosed in the consolidated financial
statements of affiliates has all been disclosed in the consolidated financial statements of parent andsubsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements ofaffiliates.

Very truly yours,
CHINA AIRLINES, LTD.
By

March 18, 2021

-1-

INDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
China Airlines, Ltd.
OpinionWe have audited the accompanying consolidated financial statements of China Airlines, Ltd. andits subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance
sheets as of December 31, 2020 and 2019, and the consolidated statements of comprehensive
income, changes in equity and cash flows for the years then ended, and the notes to theconsolidated financial statements, including a summary of significant accounting policies.
(collectively referred to as the “consolidated financial statements”)
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as of December 31, 2020 and 2019, andits consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers, and International Financial Reporting Standards (IFRS), International AccountingStandards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued
into effect by the Financial Supervisory Commission of the Republic of China.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and Attestationof Financial Statements by Certified Public Accountants and auditing standards generally acceptedin the Republic of China. Our responsibilities under those standards are further described in the
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of ourreport. We are independent of the Group in accordance with The Norm of Professional Ethics for
Certified Public Accountant of the Republic of China, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements for the year ended December 31, 2020. These
matters were addressed in the context of our audit of the consolidated financial statements as awhole, and in forming our opinion thereon, and we do not provide a separate opinion on thesematters.

-2-

Key audit matter in the audit of the Group’s consolidated financial statements is stated below:
Recognition of Cargo Revenue
In accordance with IFRS 15 “Revenue from Contracts with Customers”, cargo sales are accounted
for as cargo revenue after relevant transportation services have been provided. For the year ended
December 31, 2020, cargo revenue amounted to NT$81,692,574 thousand. Refer to Notes 4 and 27
to the accompanying consolidated financial statements for detailed information.
Cargo rates are highly affected by the supply and demand of the market and sales can only berecognized after relevant transportation services are provided. The input, processing andmaintenance of freight information on the air waybills involve manual operations. Therefore, we
identified the recognition of cargo revenue as a key audit matter.
Our main audit procedures performed included the following:1.

We understood the internal controls related to the recognition of cargo revenue, including
manual and automatic control.

2.

We understood and tested the effectiveness of information system related to the recognition ofcargo revenue.

3.

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

Other Matter
We did not audit the financial statements of some subsidiaries which were included in the
consolidated financial statements. Such financial statements were audited by other independent
auditors, and our audit opinion is based solely on the reports of other auditors.
As of December 31, 2020, total assets of these subsidiaries amounted to NT$11,694,612 thousand,representing 4.12% of the consolidated total assets. For the year ended December 31, 2020,
revenue from these subsidiaries amounted to NT$1,880,636 thousand, representing 1.63% of theconsolidated total revenue.
We have also audited the parent company only financial statements of China Airlines, Ltd. as ofand for the years ended December 31, 2020 and 2019 on which we have issued an unmodified
opinion.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with the Regulations Governing the Preparation of Financial Reports by
Securities Issuers, and International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC)
endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China,
and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or
error.

-3-

In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends toliquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including the audit committee and supervisors, are responsible foroverseeing the Group’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditors’ report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with the auditing standards
generally accepted in the Republic of China will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with the auditing standards generally accepted in the Republic ofChina, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:1.

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

2.

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

3.

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

4.

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

5. Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
6.

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

-4-

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

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

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

-5-

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

2020
Amount%2019
Amount%$ 27,125,937
274,761
6,551,693
7,613,636
9,697,511
1,667
801,134
67,5498,788,105
89,296
861,179

10
2
3
4
3
-

$ 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

61,872,468

22

51,822,342

18

163,746
311,596
1,970,802
141,481,694
59,861,537
2,074,798
1,076,351
6,028,200
9,352,892

1
50
21
1
2
3

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

222,321,616

78

241,225,637

82$ 284,194,084

100$ 293,047,979

100

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 32)
Financial assets at fair value through profit or loss - current (Notes 4, 7 and 32)
Financial assets at amortized cost (Notes 9 and 32)
Financial assets for hedging - current (Notes 4 and 32)
Notes and accounts receivable, net (Notes 4, 10 and 32)
Notes and accounts receivable - related parties (Notes 32 and 33)
Other receivables (Notes 4 and 32)
Current tax assets (Notes 4 and 28)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4, 5 and 12)
Other assets - current (Note 18)
Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 8 and 32)
Financial assets at amortized cost (Notes 4 and 9)
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 and 34)
Total non-current assets
TOTAL

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term debts (Note 19)
Short-term bills payable (Note 19)
Financial liabilities at fair value through profit or loss - current (Notes 4, 5, 7 and 32)
Financial liabilities for hedging - current (Notes 4, 21 and 32)
Notes and accounts payable (Note 32)
Accounts payable - related parties (Notes 32 and 33)
Other payables (Notes 22 and 32)
Current tax liabilities (Notes 4 and 28)
Lease liabilities - current (Notes 3, 4 and 21)
Contract liabilities - current (Note 23)
Provisions - current (Notes 4 and 24)
Bonds payable and put option of convertible bonds - current portion (Notes 4, 20, 27 and 32)
Loans and debts - current portion (Notes 19, 32 and 34)
Other current liabilities (Note 32)

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

3
1
5
1
7
3
5
1

22

76,351,527

26

32,455,333
10,300,000
77,288,330
1,761,104
14,369,486
87,181
1,023,084
13,279,792
9,737,741
530,745

11
4
27
1
5
5
4
-

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
-

Total non-current liabilities

160,832,796

57

156,564,335

53

Total liabilities

223,482,511

79

232,915,862

79

54,209,846
1,187,327

19-

54,209,846
2,488,907

19
1(350,581)(350,581)
2,543,766(30,875)1-

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

57,559,483

20

56,553,772

20

3,152,090

1

3,578,345

1

60,711,573

21

60,132,117

21$ 284,194,084

100$ 293,047,979

100

Total current liabilities
NON-CURRENT LIABILITIES
Derivative financial liabilities for hedging - non-current (Notes 3, 4, 21 and 32)
Bonds payable - non-current (Notes 4, 20, 27 and 32)
Loans and debts - non-current (Notes 19, 32 and 35)
Contract liabilities - non-current (Notes 4 and 23)
Provisions - non-current (Notes 4 and 24)
Current tax liabilities - non-current (Notes 4 and 28)
Deferred tax liabilities (Notes 4 and 28)
Lease liabilities - non-current (Notes 3, 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.

-6-$

1,932,000
8,088,882
8,129,752
1,354,237
128,567
8,306,257
216,6022,525,957
3,569,360
164,800
11,982,859
15,234,374
1,016,068

1
3
3
1
3
1
1
4
5
-

62,649,715$

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

2019
Amount%$ 115,250,550

100$ 168,444,160

100

COSTS (Notes 4, 9, 11, 17, 24, 25, 27 and 34)

105,031,349

91

151,757,232

90

GROSS PROFIT

10,219,201

916,686,928

10

OPERATING EXPENSES (Notes 4, 25 and 27)

8,034,785

7

14,021,107

8

OPERATING PROFIT

2,184,416

22,665,821

2

686,574(265,990)(3,057,963)

1(3)

718,988(473,812)(3,340,119)(2)(200,834)-

332,305-(2,838,213)(2)(2,762,638)(2)

PRETAX LOSS

(653,797)-(96,817)-

INCOME TAX (BENEFIT) EXPENSE (Notes 4, 5
and 28)373,983-(578,185)-

NET (LOSS) INCOME(279,814)-(675,002)-(474,202)(1)(17,705)-(45,588)-

79,392-(399,150)-(781,793)-

34,271-(32,102)-

144,158(740,511)(1)

145,166(607,042)(Continued)

REVENUE (Notes 4, 27 and 34)

NON-OPERATING INCOME AND LOSS
Other income (Notes 4, 8 and 27)
Other gains and losses (Notes 12, 14, 15, 27 and 31)
Finance costs (Notes 27 and 32)
Share of the profit of associates and joint ventures(Note 14)
Total non-operating income and loss

Other comprehensive gain for the year, net of income
tax
Items that will not be reclassified subsequently to
profit or loss:(Loss) gain on hedging instruments subject tobasis adjustment (Notes 4, 26 and 32)
Unrealized gain on investments in equity
instruments designated as at fair value throughother comprehensive income (Note 8)
Remeasurement of defined benefit plans (Notes 4
and 25)
Share of other comprehensive loss of associates
and joint ventures accounted for using theequity method (Notes 4 and 14)
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 28)

-7-

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

2020
AmountItems that may be reclassified subsequently to profit
or loss:
Exchange differences on translation of thefinancial statements of foreign operations(Notes 4 and 26)
Gain on hedging instruments not subject to basis
adjustment (Notes 4, 26 and 32)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 28)$

NET INCOME (LOSS) ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 29)
Basic
Diluted%(97,948)-

2,103,332-

2

1,411,623-(400,801)
1,604,583

2(268,871)
1,069,800-

864,0721

462,758-$

584,258

1$(212,244)-$

140,000(419,814)-$(1,199,798)
524,796(1)
1$(279,814)-$(675,002)-$

966,968(382,710)

1-$(647,085)
434,841-$584,258

1$(212,244)

-

$
$

0.03
0.03

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

-8-

$

%

(72,952)

Other comprehensive gain (loss) for the year,
net of income tax
TOTAL COMPREHENSIVE INCOME (LOSS) FOR
THE YEAR

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

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

Equity Attributable to Owners of the Company

Retained Earnings

BALANCE AT JANUARY 1, 2019

Share Capital

Capital Surplus

Legal Reserve

Special Reserve

UnappropriatedEarnings(Accumulated
Deficit)$ 54,209,846

$

$

$

$

1,241,214

351,923

118,810

1,144,928

Exchange
Differences on
Translation of the
Financial
Statements ofForeign$(9,664)

Other Equity
Unrealized Gainon Financial
Asset at Fair
Value Through
Other
Comprehensive
IncomeGain (Loss) on
Hedging
Instruments$$

42,61925,268Treasury Shares
Held by
Subsidiaries$

Non-Controlling
Interests

Total(43,372)$ 57,081,572$

Total Equity

2,965,512$ 60,047,084

Basis adjustment to loss on hedging instruments

-

-

-

-

-

-

-

(603)

-

(603)

-

(603)

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

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

-

-

-

-

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

Changes in capital surplus from dividends distributed to subsidiaries

-

606

-

-

-

-

-

-

-

606

-

606

Actual disposal of interests in subsidiaries-

1,247,087

-

-

-

-

-

-

-

1,247,087

7,546

1,254,633

Net profit (loss) for the year ended December 31, 2019

-

-

-

-

(1,199,798)

-

-

-

-

(1,199,798)

524,796(675,002)

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

-

-

-

-

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

1,119,013-

552,713(89,955)

462,758

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

-

-

-

-

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

1,119,013-(647,085)

434,841(212,244)

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

611,841

611,841

Non-controlling interests arising from acquisition of subsidiaries

-

-

-

-

-

-

-

-

-

-

(416,438)(416,438)

Loss of control of subsidiaries

-

-

-

-

-

8,368

105

-

-

8,473

(24,957)(16,484)

54,209,846

2,488,907

466,416

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

1,143,678(43,372)

56,553,772

3,578,345

60,132,117

Issuance of employee share options by subsidiaries

-

172

-

-

-

-

-

-

-

172

52

224

Changes in percentage of ownership interests in subsidiaries

-

-

-

-

(169,272)

-

-

-

-

(169,272)

331,427

162,155

Basis adjustments to gain on hedging instruments

-

-

-

-

-

-

-

200,989-

200,989-

200,989

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

466,416
12,967
1,297,843

-

-

-

-

-

-

-

Net profit (loss) for the year ended December 31, 2020

-

-

-

-

140,000

-

-

-

-

140,000(419,814)(279,814)

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

-

-

-

-

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

1,261,992-

826,968

37,104

864,072

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

-

-

-

-

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

1,261,992-

966,968(382,710)

584,258

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

12,497

6,854

-

6,854

Cash dividends from subsidiaries paid to non-controlling interests

-

-

-

-

-

-

-

-

-

-

(375,024)(375,024)(30,875)$ 57,559,483

3,152,090$ 60,711,573

BALANCE AT DECEMBER 31, 2019

BALANCE AT DECEMBER 31, 2020

$ 54,209,846$

1,187,327

$

-

$

-

$

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

-9-(350,581)$(134,252)$

71,359$2,606,659$$

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

2020
CASH FLOWS FROM OPERATING ACTIVITIESLoss before income tax
Adjustments for operating activities:
Depreciation expense
Amortization expense
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
Gain on disposal of investments accounted for using the equity
methodLoss on disposal of non-current assets held for saleImpairment loss recognized on property, plant, equipment
Loss on inventories and property, plant and equipment
Net gain on foreign currency exchange
Compensation costs of employee share options
Finance costs
Impairment loss of investments accounted for using the equity
methodRecognition of provisions
Amortization of unrealized sale-leasebacks
OthersChanges in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Financial liabilities mandatorily classified as at fair value throughprofit or loss
Notes and accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Other current assets
Notes and accounts payable
Accounts payable - related parties
Other payables
Contract liabilities
Provisions
Other current liabilities
Accrued pension liabilities
Other liabilities
Cash generated from operations
Interest received- 10 -$(653,797)

2019$(96,817)

31,167,247
206,936
4,895

32,601,400
198,237
24,096(2,287)(282,506)(23,043)
200,834(13,347)(27,580)(417,446)(21,422)(332,305)(32,460)

424,573471,507(1,338,716)
224
3,057,963(7,656)
10,462572,026(59,987)
3,340,119

46,757
6,075,077(2,435)

4,608,924
103,775(1,484)

241,592(278,741)(11,749)(1,073,959)
593,365(85,263)(83,341)
1,830,887(628,780)(1,043,501)(4,295,509)(17,966,621)(1,308,170)(2,620,022)(97,570)(17,082)
12,774,159
304,642

11,5281,564,298
66,538(49,138)(118,317)
548,156(14,326)(224,931)(832,288)
1,847,286(2,799,314)
202,815(149,678)(5,155)40,230,615
401,190(Continued)

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

2020
Dividends received
Interest paid
Income tax paid$

Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of financial assets at amortized cost
Disposal of financial assets at amortized cost
Payments to acquire financial assets for hedging
Disposal of financial assets for hedging
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) decrease in computer software costs
Decrease in restricted assets
Proceeds from disposal of associates accounted for using the equity
methodProceeds from acquisition of joint ventures accounted for using theequity method
Net cash outflow on disposal of subsidiaries (Note 31)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term debts
Increase in short-term bill 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 from guarantee deposits received
Refunds of guarantee deposits received
Proceeds from sale - leasebacks
Dividends paid to owners of the Company
Issuance of ordinary shares of subsidiaries
Cash dividends paid to non-controlling interests
Proceeds from disposal of treasury shares
Net cash generated from (used in) financing activities- 11 -

2019

32,433(3,209,074)(178,685)$

355,311(3,124,960)(335,544)

9,723,475

37,526,612(6,235,773)
1,934,516(10,269,055)
2,363,897(1,237,515)
45,620(63,005)
122,324(11,407,502)(130,461)(171,219)(2,089,871)
3,447,202
35,692(3,316,078)
71,194(440,443)
218,547(15,658,898)(172,639)
38,636-

1,866,474-(35,525)(17,413)(25,048,173)(16,053,122)

1,552,000
8,088,882(9,850,000)
45,605,919(20,746,998)(10,583,872)
165,404(156,143)
162,155(375,024)6,854

380,000
3,500,000(4,445,900)
9,078,690(17,819,750)(11,692,310)
180,360(149,198)
4,905,660(1,135,672)(416,438)-

13,869,177(17,614,558)(Continued)

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

2020
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES$

121,9302019$(336,941)

NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS(1,333,591)

3,521,991

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

28,459,528

24,937,537

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 27,125,937$ 28,459,528

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

- 12 -(Concluded)

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

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

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements of the Company and its subsidiaries (collectively referred to as the“Group”) were approved by the Company’s board of directors on March 18, 2021.

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

- 13 -

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

Amendments to IFRS 4 “Extension of the Temporary Exemption from Effective immediately upon
Applying IFRS 9”
promulgation by the IASB
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
January 1, 2021
“Interest Rate Benchmark Reform - Phase 2”
As of the date the 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.
c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date
Announced by IASB (Note 1)

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

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

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

- 14 -

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

4. SIGNIFICANT ACCOUNTING POLICIESStatement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by
the FSC.
Basis of Preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial
instruments which are measured at fair value.
The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fairvalue measurement inputs are observable and based on the significance of the inputs to the fair value
measurement in its entirety, are described as follows:a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); andc. Level 3 inputs are unobservable inputs for an asset or liability.
Current and Non-current Assets and Liabilities
Current assets include:a. Assets held primarily for the purpose of trading;b. Assets expected to be realized within 12 months after the reporting period; andc. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period.
Current liabilities include:a. Liabilities held primarily for the purpose of trading;b. Liabilities due to be settled within 12 months after the reporting period, even if an agreement torefinance, or to reschedule payments, on a long-term basis is completed after the reporting period andbefore the consolidated financial statements are authorized for issue; and- 15 -

c. Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12
months after the reporting period. Terms of a liability that could, at the option of the counterparty, resultin its settlement by the issue of equity instruments do not affect its classification.
Assets and liabilities that are not classified as current are classified as non-current.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and the entities
controlled by the Company. Income and expenses of subsidiaries acquired or disposed of during the period
are included in the consolidated statements of profit or loss and other comprehensive income from theeffective dates of acquisitions up to the effective dates of disposals, as appropriate. When necessary,adjustments are made to the financial statements of subsidiaries to bring their accounting policies into linewith those used by the Company. All intra-group transactions, balances, income and expenses are
eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to theowners of the Company and to the non-controlling interests even if this results in the non-controllinginterests having a deficit balance.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control
over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of theGroup and the non-controlling interests are adjusted to reflect the changes in their relative interests in thesubsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and thefair value of the consideration paid or received is recognized directly in equity and attributed to the ownersof the Company.
When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated
as the difference between (i) the aggregate of the fair value of the consideration received and any
investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the
assets (including any goodwill) and liabilities and any non-controlling interests of the former subsidiary attheir carrying amounts at the date when control is lost. The Group accounts for all amounts recognized inother comprehensive income in relation to that subsidiary on the same basis as would be required had theGroup directly disposed of the related assets or liabilities.
Foreign Currencies
In preparing the consolidated financial statements of the Group, transactions in currencies other than the
Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at
the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured athistorical cost in a foreign currency are not retranslated. Non-monetary items measured at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value wasdetermined.
Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;
b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

- 16 -

Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s
foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences are recognized in other comprehensive income (attributed to the owners of theCompany and non-controlling interests as appropriate).
On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.
Business Combinations
Where the consideration the Group transfers in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value and considered as part of the consideration transferred in a business combination.
Changes in the fair value of the contingent consideration that qualify as measurement period adjustments
are adjusted retrospectively, with the corresponding adjustments being made against goodwill or gains on
bargain purchases. Measurement period adjustments are adjustments that arise from additional information
obtained during the measurement period about facts and circumstances that existed as of the acquisition
date.
When a business combination is achieved in stages, the Group’s previously held equity interest in an
acquiree is remeasured to fair value at the acquisition date, and the resulting is recognized in profit or lossor other comprehensive income. Amounts arising from interests in the acquiree prior to the acquisition datethat have previously been recognized in other comprehensive income are recognized on the same basis as
would be required if those interests were directly disposed of by the GroupIf the initial accounting for a business combination is incomplete by the end of the reporting period inwhich the combination occurs, the Group reports provisional amounts for the items for which theaccounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement
period, or additional assets or liabilities are recognized, to reflect new information obtained about facts andcircumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognized as of that date.
Inventories
Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sales and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.
Non-current Assets Held for Sale
Non-current assets are classified as held-for-sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
the sale is highly probable and the non-current asset is available for immediate sale in its present condition.
To meet the criteria for the sale being highly probable, the appropriate level of management must be
committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.
Non-current assets classified as held-for-sale are measured at the lower of their previous carrying amountand fair value less costs to sell. Recognition of depreciation of those assets would cease.

- 17 -

Investments in Associates and Joint Ventures
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor
an interest in a joint venture. A joint venture is a joint arrangement whereby the Group and other parties
that have joint control of the arrangement and the rights to the net assets of the arrangement.
The Group uses the equity method to account for its investments in associates and joint ventures.
Under the equity method, investments in an associate and a joint venture are initially recognized at cost andadjusted thereafter to recognize the Group’s share of profit or loss and other comprehensive income of theassociate and joint venture. The Group also recognizes the changes in the Group’s share of equity of
associates and joint venture attributable to the Group.
Any excess of the cost of acquisition over the Group’s share of net fair value of the identifiable assets andliabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included
within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of net
fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, isrecognized immediately in profit or loss.
When the Group subscribes for additional new shares of an associate and joint venture at a percentage
different from its existing ownership percentage, the resulting carrying amount of the investment differsfrom the amount of the Group’s proportionate interest in the associate and joint venture. The Group records
such a difference as an adjustment to investments with the corresponding amount charged or credited tocapital surplus - changes in the Group’s share of equity of associates and joint ventures. If the Group’s
ownership interest is reduced due to the subscription of additional new shares of the associate and joint
venture, the proportionate amount of the gains or losses previously recognized in other comprehensive
income in relation to that associate and joint venture is reclassified to profit or loss on the same basis as
would be required had the investee directly disposed of the related assets or liabilities. When the adjustment
should be debited to capital surplus, but the capital surplus recognized from investments accounted forusing the equity method is insufficient, the shortage is debited to retained earnings.
When the Group’s share of losses of an associate and a joint venture equals or exceeds its interest in thatassociate and joint venture (which includes any carrying amount of the investment accounted for using theequity method and long-term interests that, in substance, form part of the Group’s net investment in theassociate and joint venture), the Group discontinues recognizing its share of further losses. Additional
losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, orconstructive obligations, or made payments on behalf of that associate and joint venture.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset
by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deductedfrom the carrying amount of the investment. Any reversal of that impairment loss is recognized to theextent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date on which its investment ceases to be an
associate and a joint venture. Any retained investment is measured at fair value at that date and the fairvalue is regarded as its fair value on initial recognition as a financial asset. The difference between theprevious carrying amount of the associate and the joint venture attributable to the retained interest and its
fair value is included in the determination of the gain or loss on disposal of the associate and the joint
venture. The Group accounts for all amounts previously recognized in other comprehensive income inrelation to that associate and the joint venture on the same basis as would be required had that associate
directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment
in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group
continues to apply the equity method and does not remeasure the retained interest.

- 18 -

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

- 19 -

Impairment of Tangible and Intangible Assets Other Than Goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of
an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which theasset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable andconsistent basis; otherwise, corporate assets are allocated to the smallest group of cash-generating units on areasonable and consistent allocation basis.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the Group uses the estimated cash flows discounted by the future pre-tax discount rate, and thediscount rate reflects the current market time value of money and the specific risks to the asset for estimatedfuture cash flows not yet adjusting to the market.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit
is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amountthat would have been determined had no impairment loss been recognized for the asset or cash-generating
unit in prior years. A reversal of an impairment loss is recognized in profit or loss.
Financial Instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issuance of financial assets and financial liabilities (other thanfinancial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of thefinancial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized
immediately in profit or loss.
a. Financial assets
All regular purchases or sales of financial assets are recognized and derecognized on a trade date basis.
All regular purchases or sales of financial assets are buy or sell of financial assets in the period set byregulation or market convention.
1) Measurement category
Financial assets are classified into the following categories: Financial assets at FVTPL, financial
assets at amortized cost, and investments in equity instruments at FVTOCI.
a) Financial assets at FVTPL
Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified
or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include
investments in equity instruments which are not designated as at FVTOCI and debt instrumentsthat do not meet the amortized cost criteria or the FVTOCI criteria.
- 20 -

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses
arising on remeasurement recognized in profit or loss. Fair value is determined in the manner
described in Note 33.
b) Financial assets at amortized cost
Financial assets that meet the following conditions are subsequently measured at amortized
cost:
i. The financial asset is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows; andii. The contractual terms of the financial asset give rise on specified dates to cash flows that aresolely payments of principal and interest on the principal amount outstanding.
Subsequent to initial recognition, financial assets at amortized cost, including cash and cash
equivalents, trade receivables, other receivables and other financial assets, are measured atamortized cost, which equals the gross carrying amount determined using the effective interest
method less any impairment loss. Exchange differences are recognized in profit or loss.
Interest income is calculated by applying the effective interest rate to the gross carrying amountof a financial asset.
Cash equivalents include time deposits with original maturities within 3 months from the date ofacquisition, which are highly liquid, readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value. These cash equivalents are held for the
purpose of meeting short-term cash commitments.
c) Investments in equity instruments at FVTOCI
On initial recognition, the Group may make an irrevocable election to designate investments inequity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if an equity
investment is held for trading or if it is contingent consideration recognized by an acquirer in abusiness combination.
Investments in equity instruments at FVTOCI are subsequently measured at fair value withgains and losses arising from changes in fair value recognized in other comprehensive income
and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit orloss on disposal of the equity investments; instead, they will be transferred to retained earnings.
Dividends on these investments in equity instruments are recognized in profit or loss when theGroup’s right to receive the dividends is established, unless the dividends clearly represent a
recovery of part of the cost of an investment.
2) Impairment of financial assets
The Group recognizes a loss allowance for expected credit losses on financial assets at amortizedcost (including trade receivables), as well as contract assets.
The Group always recognizes lifetime expected credit losses (ECLs) for trade receivables and otherreceivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has
been a significant increase in credit risk since initial recognition. If, on the other hand, the credit
risk on a financial instrument has not increased significantly since initial recognition, the Groupmeasures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

- 21 -

Expected credit losses reflect the weighted average of credit losses with the respective risks of a
default occurring as the weights. Lifetime ECL represents the expected credit losses that will result
from all possible default events over the expected life of a financial instrument. In contrast,
12-month ECL represents the portion of lifetime ECL that is expected to result from default eventson a financial instrument that are possible within 12 months after the reporting date.
The impairment loss of all financial assets is recognized in profit or loss by a reduction in theircarrying amounts through a loss allowance account, except for investments in debt instruments thatare measured at FVTOCI, for which the loss allowance is recognized in other comprehensive
income and the carrying amounts of such financial assets are not reduced.
3) Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognized in other comprehensive income is recognized in profit or loss.
b. Equity instruments
Debt and equity instruments issued by the entity in the Group are classified as either financial liabilities
or as equity in accordance with the substance of the contractual arrangements and the definitions of afinancial liability and an equity instrument.
Equity instruments issued by the entity in the Group are recognized at the proceeds received, net of
direct issue costs.
Repurchase of the Group’s own equity instruments is recognized in and deducted directly from equity.
No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.
c. Financial liabilities
1) Subsequent measurement
Except for financial liabilities at FVTPL, all financial liabilities are measured at amortized costusing the effective interest method.
2) Derecognition of financial liabilities
The difference between the carrying amount of a financial liability derecognized and theconsideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in
profit or loss.
d. Convertible bonds
The component parts of compound instruments (i.e. convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.

- 22 -

On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized and includedin equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion
option classified as equity will remain in equity until the conversion option is exercised, in which case,the balance recognized in equity will be transferred to capital surplus - share premiums. When theconversion option remains unexercised at maturity, the balance recognized in equity will be transferred
to capital surplus - share premiums.
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to theequity component are recognized directly in equity. Transaction costs relating to the liability component
are included in the carrying amount of the liability component.
e. Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to interest
rate, foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options swaps and fuel swaps.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gain orloss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event, the timing of the recognition in profit or loss depends on the natureof the hedging relationship. When the fair value of a derivative financial instrument is positive, thederivative is recognized as a financial asset; when the fair value of a derivative financial instrument isnegative, the derivative is recognized as a financial liability.
Hedge Accounting
The Group enters into some derivative transactions that aim to manage interest rates, foreign exchange
rates, fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging
transactions are defined as cash flow hedges. When entering into hedging transactions, the Group has
prepared official documents that describe the hedging relationship between hedging instruments and items
which have been hedged, the objective of risk management, the hedging strategy, and the way to evaluate
the effectiveness of the hedging instrument.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.
The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period as when the hedged item affects profit or loss. If a hedge of a forecasted transaction
subsequently results in the recognition of a non-financial asset or a non-financial liability, the associatedgains and losses that were recognized in other comprehensive income are removed from equity and areincluded in the initial cost of the non-financial asset or non-financial liability.

- 23 -Starting from 2018, the Group discontinues hedge accounting only when the hedging relationship ceases tomeet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or
exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized inother comprehensive income from the period in which the hedge was effective remains separately in equity
until the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur, thegain or loss accumulated in equity is recognized immediately in profit or loss.
Provisions
The Group recognizes provisions when the Group has a present obligation (legal or constructive) arisingfrom past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.
The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.
Aircraft lease contracts
When an aircraft lease contracts expires and the leased item will be returned to the lessor, the Group willassess if there are existing obligations exist and if it is required to recognize a provision when signing thelease contract.
Revenue Recognition
When applying IFRS 15 during 2018, the Group recognizes revenue by applying the following steps:






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

Shipping service revenue
Passenger and cargo revenue are recognized as revenue when the passengers and goods are actually carried.
When the tickets are sold, due to the fact that the fulfillment obligations of the shipment have not been met,
the relevant amount of revenue is first recorded as contract liabilities until passengers actually board.
Leasing
At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.
The Group as lessee
The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of alease, except for short-term leases and low-value asset leases accounted for applying a recognition
exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.
Right-of-use assets are initially measured at cost, which comprises the initial measurement of leaseliabilities adjusted for lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives
received. Right-of-use assets are subsequently measured at cost less accumulated depreciation andimpairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets arepresented on a separate line in the consolidated balance sheets.
- 24 -

Right-of-use assets are depreciated using the straight-line method from the commencement dates to theearlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. However, if
leases transfer ownership of the underlying assets to the Group by the end of the lease terms or if the costsof right-of-use assets reflect that the Group will exercise a purchase option, the Group depreciates theright-of-use assets from the commencement dates to the end of the useful lives of the underlying assets.
Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed
payments, in-substance fixed payments, variable lease payments which depend on an index or a rate,
residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to
exercise that option, and payments of penalties for terminating a lease if the lease term reflects suchtermination, less any lease incentives payable. The lease payments are discounted using the interest rate
implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, theGroup uses the lessee’s incremental borrowing rate.
Subsequently, lease liabilities are measured at amortized cost using the effective interest method, withinterest expense recognized over the lease terms. When there is a change in a lease term, a change in theamounts expected to be payable under a residual value guarantee, a change in the assessment of an option topurchase an underlying asset, or a change in future lease payments resulting from a change in an index or arate used to determine those payments, the Group remeasures the lease liabilities with a corresponding
adjustment to the right-of-use-assets. Lease liabilities are presented on a separate line in the consolidatedbalance sheets.
Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods
in which they are incurred.
For sale and leaseback transactions, if the transfer of an asset satisfies the requirements of IFRS 15 to beaccounted for as a sale, the Group recognizes only the amount of any gain or loss which relates to the rights
transferred to the buyer-lessor, and adjusts the off-market terms to measure the sale proceeds at fair value.
If the transfer does not satisfy the requirements of IFRS 15 to be accounted for as a sale, it is accounted for
as a financing transaction.
Employee Benefits
a. Short-term employee benefits
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related services.
b. Retirement benefits
Payments to the defined contribution retirement benefit plan are recognized as expenses whenemployees have rendered services entitling them to the contributions.
Defined benefit costs (including service cost, net interest and remeasurement) under the defined
contribution retirement benefit plan are determined using the projected unit credit method. Service cost(including current service cost and past service cost) and net interest on the net defined benefit
liabilities (assets) are recognized as employee benefits expense in the period in which they occur.
Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest),
is recognized in other comprehensive income in the period in which it occurs. Remeasurement
recognized in other comprehensive income is reflected immediately in retained earnings and will not bereclassified to profit or loss.
Net defined benefit liabilities (assets) represent the actual deficit in the Group’s defined benefit plans.

- 25 -

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

- 26 -

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

- 27 -

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

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

6. CASH AND CASH EQUIVALENTS
December 31
2020
Cash on hand and revolving funds
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities of less than three months
Repurchase agreements collateralized by bonds- 28 -$

333,677
17,690,186

2019$

483,951
7,206,938

6,980,493
2,121,581

16,565,821
4,202,818$ 27,125,937$ 28,459,528

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

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

2020

2019

0%-1.9%0.24%-2.20%
0.22%-0.55%

0%-1.9%0.59%-3.55%
0.47%-0.7%

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

Maturity Date
December 31, 20202021.1.4-2021.11.1

Carrying
Value

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

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

$ (372,632)

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

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

2019

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

$

-

$

434

274,761

511,758$ 274,761$ 512,192$$

Financial liabilities - current
Derivative financial instruments (not under hedge accounting) Foreign exchange forward contracts- 29 --

11,749

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Currency

Notional Amount(In Thousands)

Maturity Date

December 31, 2019
Buy forward contracts

NTD/USD

2020.01.15-2020.07.31

NTD570,571/USD19,000

8. FINANCIAL ASSETS AT FVTOCI
Investments in Equity Instruments
December 31
2020

2019

$ 134,042$ 182,356

29,704

26,865$ 163,746$ 209,221

Non-current
Foreign investments
Unlisted shares
Domestic investments
Unlisted shares

These investments in equity instruments are not held for trading. Instead, they are held for medium- tolong-term strategic purposes. Accordingly, the management elected to designate these investments in equity
instruments as at FVTOCI as it believes that recognizing short-term fluctuations in these investments’ fairvalues in profit or loss would not be consistent with the Group’s strategy of holding these investments forlong-term purposes.

9. FINANCIAL ASSETS AT AMORTIZED COST
December 31
2020

2019

$ 6,551,693$ 2,355,095$$

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

311,596

105,586

The interest rates for time deposits with original maturities of more than 3 months were 0.21%-1.90% and0.60%-1.30% as of December 31, 2020 and 2019, respectively.

- 30 -

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

$

2019
655

$

299,245

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

9,903,008(206,152)
9,696,856

8,440,254(218,665)
8,221,589$ 9,697,511$ 8,520,834

The average credit period was 7 to 55 days. In determining the recoverability of a trade receivable, theGroup considered any change in the credit quality of the receivable since the date credit was initiallygranted to the end of the reporting period, and any allowance for impairment loss was based on theestimated irrecoverable amounts determined by reference to the Group’s past default experience with thecounterparty and an analysis of the counterparty’s current financial position. The Group adopted a policy of
only dealing with entities that are rated the equivalent of investment grade or higher and obtaining
sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.
Credit rating information is obtained from independent rating agencies where available or, if not available,
the Group uses other publicly available financial information or its own trading records to rate its major
customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored andthe aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure
is controlled by counterparty limits that are reviewed and approved by the risk management committee
annually.
The Group applies the simplified approach to allowing for expected credit losses prescribed by IFRS 9,which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit
losses on trade receivables are estimated using a provision matrix by reference to past default experience
with the debtors and an analysis of the debtors’ current financial position, adjusted for general economic
conditions of the industry in which the debtors operate and an assessment of both the current as well as theforecasted direction of economic conditions at the reporting date. As the Group’s historical credit loss
experience does not show significantly different loss patterns for different customer segments, the loss
allowance based on the past due status is not further distinguished according to the different segments of theGroup’s customer base.
The Group writes off a trade receivable when there is information indicating that the debtor is experiencing
severe financial difficulty and there is no realistic prospect of recovery. For accounts receivable that havebeen written off, the Group continues to engage in enforcement activity to attempt to recover thereceivables which are due. Where recoveries are made, these are recognized in profit or loss.
The following table details the loss allowance of trade receivables based on the Group’s provision matrix.
December 31, 2020
Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.14%

0.18%

1.20%

53.78%

92.74%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 9,304,785

Amortized cost

$ 9,291,393$(13,392)

256,178

$

(470)
$

255,708

134,111$(1,608)$- 31 -

132,503

5,513$(2,965)
$

2,548

$

Total

202,421$ 9,903,008(187,718)(206,152)

14,703$ 9,696,856

December 31, 2019
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$

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$

The movements of the loss allowance of trade receivables were as follows:
For the Year Ended December 31
2020
2019
Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses
Loss of control of subsidiaries$ 218,665
4,895(17,398)(10)(-)$ 227,306
24,096(32,717)(3)(17)

Balance at December 31$ 206,152$ 218,665

11. INVENTORIES
December 31

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
Others2020

2019$ 7,898,482
627,437
214,362
47,824$ 7,578,125
571,601
283,933
36,454$ 8,788,105$ 8,470,113

The operating costs recognized for the years ended December 31, 2020 and 2019 included losses frominventory write-downs of $190,548 thousand and $327,919 thousand, respectively.

12. NON-CURRENT ASSETS HELD FOR SALE
December 31
2020
Long-term equity investments held for sale - Asian Compressor
Technology Services$ 89,296

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
book value which was higher than the expected sale price and which was recognized as an impairment loss.
However, the actual loss shall be identified by the actual sale price.

- 32 -

The Company completed the disposal procedures of some aircraft and recognized a loss on disposal of$10,462 thousand in 2019. The fair value was determined by transactions of the related market, and the
proposed sale price was based on the current status of the aircraft. The fair value is classified as Level 3.

13. SUBSIDIARIES
Subsidiary included in the consolidated financial statements:

Investor Company
China Airlines, Ltd.

Investee Company

Main Businesses and Products

Tigerair Taiwan Co., Ltd. (Note)
Taiwan Aircraft Maintenance
And Engineering Co., Ltd.
CAL-Dynasty International
CAL-Asia Investment
Dynasty Aerotech International
Corp.
Yestrip
Cal Park
Cal Hotel Co., Ltd.
Sabre Travel Network (Taiwan)
Mandarin Airlines

Cal-Dynasty
International
Taiwan Airport Services

Note:

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

Proportion of
Ownership (%)
December 31
2020
2019

Air transportation
Aircraft maintenance

81
100

77
100

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

100

100

100
100

100
100

100
100
100
94

100
100
100
94

94

94

59

59

In-flight catering

54

54

Airport services

49

49

Airport services
Forwarding and storage of air cargo
Real estate management
Hotel businessAirport supporting service and investment

48
25
100
100
100

48
25
100
100
100

Proportion of ownership is considered from the perspective of the Group.

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 years ended December 31, 2020 and2019 was reported according to financial reports that were not reviewed by independent auditors.
In order to prepare for the listing of Tigerair Taiwan Co., Ltd. and comply with the rules relating to theexamination for public listing, the release of the shares of Tigerair Taiwan Co., Ltd. held by 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 waiver of subscribed shares by the original shareholders or the undersubscribed portion, the chairman
was authorized to designate specific persons for subscription. The subscription price was set at $41 pershare. In October and December 2019, the shares were fully paid and were completely delivered andtransferred. A total of 45,661,000 shares were disposed of, and the Group’s issued share capital decreased
to 77%. The amount of proceeds from disposal was $1,866,474 thousand, and the related gain on disposal
was $1,254,633 thousand and recognized as capital surplus.

- 33 -

To strengthen the capital structure of Tigerair Taiwan Co., Ltd., the board of directors of the Company
approved the plan to issue ordinary shares for cash at $25 per share on August 6, 2020. The Company
subscribed for 47,228 thousand shares in October 2020 and 26,286 thousand shares in November 2020. The
proportion of ownership of the Group increased to 81%. Because the shares are subscribed at a percentage
different from its existing ownership percentage, the Company’s retained earnings decreased by $169,272
thousand.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
December 31

Investments in associates
Investments in jointly controlled entities

2020

2019

$ 1,079,852
890,950$ 1,208,495
1,015,298$ 1,970,802$ 2,223,793

a. The amount of investment in associates were as follows:
December 31
2020

2019

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

$

277,234
5,237
476,219
270,046
51,116$ 1,079,852$

461,263
10,004446,161
248,350
42,717$ 1,208,495

At the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Group were as follows:
Proportion of Ownership andVoting Rights
December 31
2020
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.

- 34 -

20%
20%
28%
28%
35%

20%
20%
28%
28%
35%

The investment income of associates accounted for using the equity method was as follows:2020
China Aircraft Services
Dynasty Holidays
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

2019

$ (102,758)(4,740)25,57819,124
13,94093,375$ (48,856)$

10,36515
21,53525,146
3,387$

60,448Other comprehensive income of associates accounted for using the equity method in 2020 and 2019
comprised of losses in the amount of $0.
The financial statements used as a basis of the amounts and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2020 and 2019 were all independently audited,
except those of China Aircraft Services and Eastern United International Logistics (Holding) Ltd.
However, the management determined that there would have been no significant adjustments had thisinvestee’s financial statements been independently audited.
The board of directors of the Company decided to sell part of the equity of Dynasty Holidays to H.I.S.
Taiwan Co., Ltd. on January 21, 2019, and completed the transaction on January 31, 2109. After thesale of the equity, the Group’s issued share capital decreased from 51% to 20%. Dynasty Holidays wasclassified 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 about the disposal of the subsidiary,
please refer to Note 30.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
December 31
2020
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

2019

$

695,959
149,353
37,7677,871$

801,071
168,547
37,8137,867$

890,950$ 1,015,298

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 andVoting Rights
December 31
2020
2019
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

51%
55%
49%
51%
- 35 -

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 parties havethe majority of voting power in the board of directors to pass a motion for veto, and therefore the Group
does not have control.
To enhance the Group’s maintenance capabilities, the Company established a joint venture with the USNORDAM Aerospace Group in December 2017, to provide thrust reversers and composite repair
services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business dispute with its cooperative partner, so
its operation was not impacted. 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 capitalof 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.
Details of investment income attributable to investment in jointly controlled entities were as follows:
For the Year Ended December 31
2020
2019
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

$ (136,459)(15,475)(46)
2$ 256,899
15,030(70)(2)$ (151,978)$ 271,857

Other comprehensive income of associates accounted for using the equity method in 2020 and 2019
comprised of losses in the amounts of $34,271 thousand and $(32,102) thousand, respectively.
The financial statements used as a basis of the amounts and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2020 and 2019 were all independently audited,
except for NORDAM Asia Limited. However, the management determined that there would have beenno significant adjustments had this investee’s financial statements been independently audited.
For details on services, major business offices and the country where the above associates and jointly
controlled entities are registered, refer to Table 6 “Names, Locations, And Other Information of
Investees Over Which the Company Exercises Significant Influence”, and Table 7 “Investments In
Mainland China”, following these notes to the consolidated financial statements.

- 36 -

15. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Equipment
under FinanceLeasesBuildings

FlightEquipment

13,993,585
209,413(1,130)1,906,078(23,883)$ 259,695,130
2,248,856(20,698,042)
30,831,748---

OthersTotal

Cost
Balance at January 1,
2019
Additions
Disposals
Reclassification
Net exchange difference
Loss of control ofsubsidiaries
Balance at December 31,
2019$

1,015,564(13,065)$-$

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

17,917,780
864,223(393,058)(1,537,494)(2,458)$ 318,427,067
3,322,492(21,760,951)
6,068,519(39,406)(2,158)(6,632)

16,846,835$ 306,011,089$

1,002,499$

16,084,063$ 272,077,692

$

$

-

$

(6,574,873)(466,943)
1,014
12,262$ (123,507,657)(18,571,992)
14,899,562(14,706,083)-$ (14,634,822)(741,852)
79,866
15,294,696-$ (10,601,997)(921,246)
355,222(45,103)
1,989$ (155,319,349)(20,702,033)
15,335,664
543,510
14,251

-

-

2,112

1,727

3,839

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

Balance at December 31,
2019

$

-

$

(7,028,540)$ (141,886,170)$-$ (11,209,408)$ (160,124,118)

Balance at December 31,
2019, net value$

1,002,499$

9,055,523$ 130,191,522

$

-

$

5,637,427$ 145,886,971$

1,002,499(18,026)(28,650)$

16,084,063
48,809(375,083)
304(52,458)$ 272,077,692
653,519(3,724,658)
13,000,582
-

$

-

$

16,846,835
535,187(387,858)
70,081(5,597)$ 306,011,089
1,237,515(4,505,625)
13,070,967(86,705)$

955,823$

15,705,635$ 282,007,135

$

-

$

17,058,648$ 315,727,241

$

-

$

(7,028,540)(492,734)
371,933
27,704-$ (141,886,170)(18,007,550)
3,452,870
1,489,158(424,573)$-$ (11,209,408)(925,138)
381,037
1,348
4,516
-

$ (160,124,118)(19,425,422)
4,205,840
1,490,506
32,220(424,573)

Balance at December 31,
2020

$

-

$

(7,121,637)$ (155,376,265)$-$ (11,747,645)$ (174,245,547)

Balance at December 31,
2020, net value$

955,823$

8,583,998$ 126,630,870

$

-

$

$ 141,481,694

Cost
Balance at January 1,
2020
Additions
Disposals
Reclassification
Net exchange difference
Balance at December 31,
2020
Accumulated depreciationand impairment
Balance at January 1,
2020
Depreciation expense
Disposals
Reclassification
Net exchange difference
Impairment losses- 37 -

5,311,003

The reclassification mostly resulted from the transfer of prepayments for equipment.
Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of theasset:
Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
Others
Office equipment
Leasehold improvements
Building improvements
OthersAssets leased to others
Flight equipment and equipment under finance leases
Airframes
Aircraft cabins
EnginesHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Leased aircraft improvements

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

Regarding changes in fleet composition, current and forecasted market value, and other technical factors,
the Company recognized impairment losses on aircraft equipment of $424,573 thousand in 2020. The fairvalue was determined based on aircraft conditions and market estimates.
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.
The Group generated the following non-cash investment activities related to the purchase of property, plantand equipment in 2020 and 2019:
December 31
2020

2019

Increase in property, plant and equipment
Capitalized interest paid

$ 1,237,515-$ 3,322,492(6,414)Purchase of property, plant and equipment paid

$ 1,237,515$ 3,316,078

16. INVESTMENT PROPERTIES
December 31

Carrying amount
Investment properties- 38 -

20202019$ 2,074,798$ 2,075,068

The investment properties held by the Group were land located in Nankan and buildings in Taipei, whichwere all leased to others. The buildings are depreciated on a straight-line basis over 55 years.
The fair value of the investment properties held by the Group was $2,488,931 thousand and $2,506,230
thousand as of December 31, 2020 and 2019, respectively. In addition, management assessed that there wasno significant difference in the fair value as of December 31, 2020 and 2019. The above fair value valuation
was performed by independent qualified professional valuers, and the future income evaluated bymanagement was based on market transactions.
All of the Group’s investment properties were held under freehold interest.
Cost

Accumulated

Net Value

Balance at January 1, 2019
Depreciation expense$ 2,082,390-$(7,045)(277)$ 2,075,345(277)

Balance at December 31, 2019

$ 2,082,390$(7,322)$ 2,075,068

Balance at January 1, 2020
Depreciation expense$ 2,082,390-$(7,322)(270)$ 2,075,068(270)

Balance at December 31, 2020

$ 2,082,390$(7,592)$ 2,074,798

Accumulated
Amortization

Net Value

17. OTHER INTANGIBLE ASSETS

Computer
Software Cost

Relationship
Between
Clients

Balance at January 1, 2019
Additions
Amortization expenses
Disposal of subsidiaries
Effects of exchange rate changes$ 2,237,382
172,639(3,858)-$186,197-$ (1,212,783)(198,237)
1,357
(5)

$ 1,210,796
172,639(198,237)(2,501)(5)

Balance at December 31, 2019

$ 2,406,163$

186,197$ (1,409,668)$ 1,182,692

Balance at January 1, 2020
Additions
Reclassification
Amortization expenses
Disposal
Effects of exchange rate changes$ 2,406,163
130,461(765,426)(7,554)-$

186,197-$ (1,409,668)
735,881(206,936)
7,243
(10)

$ 1,182,692
130,461(29,545)(206,936)
(311)
(10)

Balance at December 31, 2020

$ 1,763,644$

186,197$$ 1,076,351(873,490)

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

- 39 -

18. OTHER ASSETS
December 31
2020

2019

Current
Temporary payments
Prepayments
Restricted assets
Others$136,681348,554
11,065364,879$

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

861,179$

2,655,711$

5,725,340
2,216,049
1,138,943
240,467
18,07814,015$

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

9,352,892$ 13,171,063

Non-current
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersThe prepayments for aircraft comprised the prepaid deposits and capitalized interest from the purchase of
ATR72-600, A321neo, A320neo and B777F aircraft. For details on the aircraft purchase contracts, refer toNote 35.

19. BORROWINGSa. Short-term loans
December 31
2020

2019

Bank loans - unsecured$ 1,932,000$

380,000

Interest rates

0.92%-1.28%

0.95%-1.07%

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

Annual discount rate

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

0.99%-1.00%- 40 -

2019-

b. Long-term borrowings
December 31
2020
Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discount2019$ 23,470,696
39,584,540

Less: Current portion

Interest rates$

1,929,827
34,064,099

29,490,000
22,532
92,522,704
15,234,374

31,730,000
60,14367,663,783
14,148,892$ 77,288,330$ 53,514,891

0.81%-1.63%

0.55%-1.73%

For information on secured bank loans which were secured by buildings, machinery equipment andflight equipment, refer to Note 34.
Bank loans (New Taiwan dollars) are repayable quarterly, semiannually or in lump sum upon maturity.
Related information is summarized as follows:
December 31

Periods

2020

2019

2009.2.42032.6.30

2008.2.262030.4.25

The Group has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until March 2025, were used by the Group to guarantee commercial papers
issued. As of December 31, 2020 and 2019, the commercial papers were issued at discount rates of
1.0263%-1.1629% and 1.1300%-1.3380%, 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 Company applied for
project finance loans from financial institutions to maintain its operations; and special funds, credit
guarantees along with subsidized interest rates were provided by the government. The total amount of
the loans is $24,390,000 thousand, which shall be repaid within 2 years from the date of initial
drawdown. As of December 31, 2020, the Company had made a drawdown in the amount of$23,480,000 thousand.

- 41 -

20. BONDS PAYABLE
December 31
2020
Unsecured corporate bonds first-time issued in 2013
Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Unsecured corporate bonds first-time issued in 2017
Unsecured corporate bonds second-time issued in 2017
Unsecured corporate bonds first-time issued in 2018
Unsecured corporate bonds first-time issued in 2019
Convertible bonds - sixth-time issued$

Less: Current portion and put option of convertible bonds

2,350,000
2,500,000
1,000,000
2,600,000
4,500,000
3,500,000
5,832,859
22,282,859
11,982,859

2019$

2,750,000
4,700,000
5,000,000
2,350,000
3,500,000
4,500,000
3,500,000
5,752,625
32,052,625
10,000,000$ 10,300,000$ 22,052,625

Conditions

Rate
(%)

Related issuance conditions were as follows:

Category

PeriodSeven-year private unsecured bonds - issued at
par in January 2013; repayable in
January 2019 and 2020; 1.85% interest p.a.,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., payableannually.
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 parin October 2017; repayable in October 2021
and 2022; 1.45% interest p.a., payableannually.
Five-year private unsecured bonds - issued at parin November 2018; repayable inNovember 2022 and 2023; 1.32% interest p.a.,payable annually2013.01.172020.01.17

2016.05.262021.05.26
2016.09.272021.09.27

2017.05.192020.05.19
2017.05.192024.05.19
2017.10.122020.10.12
2017.10.122022.10.12

2018.11.302023.11.30- 42 -

Principal repayable in
1.85
January of 2019 and2020; indicator rate;
payable annually.
Principal repayable in May
1.19
of 2020 and 2021; interest
p.a. payable annually.
Principal repayable in
1.08
September of 2020 and2021; interest p.a. payableannually.
Principal repayable on due
1.20date; indicator rate;
payable annually.
Principal repayable on due
1.75date; indicator rate;
payable annually.
Principal repayable on due
1.14date; indicator rate;
payable annually.
Principal repayable in
1.45
October of 2021 and2022; indicator rate;
payable annually.
Principal repayable in
1.32
November of 2022 and2023; indicator rate;
payable annually(Continued)

Category

PeriodFive-year private unsecured bonds - issued at parin November 2018; repayable inNovember 2022 and 2023; 1.45% interest p.a.,payable annually
Five-year private unsecured bonds - issued at par
in June 2019; repayable in June 2023 and2024; 1.10% interest p.a., payable annually2018.11.302025.11.30

Seven-year private unsecured bonds - issued at
par in June 2019; repayable in June 2025 and2026; 1.32% interest p.a., payable annually2019.06.212026.06.21

Five-year convertible bonds - issued at discountin December 2013; repayable in lump sum
upon maturity; 1.3821% discount rate p.a.

2018.01.302023.01.30

2019.06.212024.06.21

Conditions

Rate
(%)

Principal repayable in
1.45
November of 2022 and2023; indicator rate;
payable annuallyPrincipal repayable in June
1.10
of 2023 and 2024;
indicator rate; payableannually
Principal repayable in June
1.32
of 2025 and 2026;
indicator rate; payableannually
Except for converting toshare capital or buying
back, principal repayable
in December of 2023
(Concluded)

The Company issued its 2016 first unsecured corporate bonds with a face value of $5,000,000 thousand,and the purchasers of the bonds included Mandarin Airlines Co., Ltd. and Sabre Travel Network (Taiwan)Co., Ltd., which had a face value of $150,000 thousand, and the amount was eliminated in the 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
on July 29, 2019, the conversion price was adjusted to NT$12.6.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,012,000(409,978)Liability component at the date of issuance$ 5,602,022- 43 -

The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 7, 2019. The cumulative face value of the bonds shall not exceed $3,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years.
During the period of public offerings, the stock market and the domestic capital market were volatile due toCoronavirus Pneumonia and the changes in the share price of the Company were unfavorable to the seventh
issue of the Company’s unsecured convertible bonds. After comprehensive consideration, the issuance wassuspended with the permission of the competent authority based on the best interest of the Company andthe shareholders’ equity.
The seventh issue of the Company’s unsecured convertible bonds was resolved by the board of directors of
the Company on August 6, 2020. The cumulative face value of the bonds shall not exceed $6,000,000
thousand. The bonds are issued at 100%-100.5% of the face value, and the issuance period is 5 years.

21. LEASING
a. Right-of-use assets
December 31
2020
Carrying amounts
Land
Buildings
Flight equipment
Other equipment

$

2019

7,813,335
1,394,386
50,644,652
9,164$ 59,861,537$

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

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

2,463,869$

5,863,625$

362,386
335,553
11,041,881
1,535

$

376,425
798,933
10,721,575
2,157$ 11,741,555$ 11,899,090

b. Lease liabilities
December 31

Carrying amounts
Current
Non-current- 44 -

20202019$ 2,525,957$ 13,279,792$ 2,340,873$ 15,801,724

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

Land
Buildings
Flight equipment
Other equipment

2020

2019

1.09%-1.80%
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%

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

December 31, 20192022.2.9-2028.5.15

2021.4.15-2028.5.15

Subject

Carrying Value

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

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

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

$ 2,099,550
1,457,058

Reclassified toIncome$352,674(24,029)

d. As lessees, China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes,
fifteen A330-300 planes, fifteen 737-800 planes, ten A320-200 planes, five 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 are according to benchmark ratio, the rent is revised every half year. When the lease expires, thelease agreements have no purchase rights.
The information of refundable deposits and issuance of letter of credit due to rental of planes:
December 31
2020
Refundable deposits
Credit guarantees$- 45 -

725,135
1,756,656

2019$

737,895
1,717,953

CAL Park, and Taoyuan International Airport Service signed a BOT contract with a land leaseagreement, for the details for the lease agreement, please refer to Note 35. The lease includes an option
to extend the lease, as it is not possible to extend the lease, the amount of the lease related to the period
covered by the option is not included in the lease liability. If the amount of the extended lease period is
included in the lease liability, the lease liability will increase by $885,657 thousand on December 31,
2020.
Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 35.
e. In September 2019, the Company signed a rental 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 February 2020, Tigerair Taiwan Co., Ltd. signed a rental letter of intent for eight A321neo withICBC Lease Corporation, which is expected to be introduced in 2021.
The Company also signed related aircraft purchase agreement, please refer to note 35 for details.
f. In order to revitalize assets and strengthen the financial structure, the Company sold five of its own
A330-300 aircraft to Altavair L.P. in September 2019 through sale and leaseback arrangement for$4,905,660 thousand. The lease term was 5 to 6 years and a loss of $103,775 thousand was incurred.
The lease agreement had no terms for lease renewal or offtake rights. The annual lease payments foreach aircraft are from US$5,389 thousand to US$5,437 thousand.
g. Other lease information
The Group uses operating lease agreement for investment properties, refer to Note 16.
For the Year Ended December 31
2020
2019
Short-term and low price lease payment
Total of lease cash outflow$
41,568$ (12,410,357)$
52,675$ (13,884,367)

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

22. OTHER PAYABLES
December 31
2020
Fuel costs
Ground service expenses
Repair expenses
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expenses
Others- 46 -

2019$

1,853,717
956,956
366,589
120,550
1,948,982
420,194
184,3632,454,906$

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

8,306,257$ 13,187,972

23. CONTRACT LIABILITIES/DEFERRED REVENUE
December 31
2020
Contract
Liabilities
Frequent flyer programs
Advance ticket sales
OthersCurrent
Non-current

2019
Contract
Liabilities$

2,671,203
2,659,093
168$

2,895,535
20,401,549-$

5,330,464$ 23,297,084$

3,569,360
1,761,104$ 21,060,773
2,236,311$

5,330,464$ 23,297,084

24. PROVISIONS
December 31
2020

2019

Operating leases - aircraft$ 14,534,286$ 10,371,857

Current
Non-current$$

164,800
14,369,486$ 14,534,286

360,393
10,011,464$ 10,371,857
Aircraft Lease
Contract

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

8,794,539
4,608,924(2,799,314)(232,292)

Balance at December 31, 2019

$ 10,371,857

Balance at January 1, 2020
Additional provisions recognized
Usage
Effect of exchange rate changes$ 10,371,857
6,075,077(1,308,170)(604,478)

Balance at December 31, 2020

$ 14,534,286

The Group leased flight equipment under operating lease agreements. Under the contracts, 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 of engine revolutions. The
Group had existing obligations to recognize provisions when signing a lease or during the lease term.
Tigerair Taiwan Co., Ltd. also leased flight equipment under operating lease agreements. In accordance tothe contract, Tigerair must pay maintenance reserves monthly according to the actual number of flight
hours.
- 47 -

25. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Group adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed
defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’
individual pension accounts at 6% of monthly salaries and wages.
Employees based in the United States and Japan of China Airlines Co., Ltd. and subsidiaries are
members of the United states and Japan government retirement benefit plans. Subsidiaries should
appropriate a specific portion to retirement benefit plans. The obligation to the government retirement
benefit plans of China Airlines Co., Ltd. and subsidiaries is to appropriate a specific portion amount.
b. Defined benefit plans
The defined benefit plan adopted by the Company and in accordance with the Labor Standards Law isoperated by the government. Pension benefits are calculated on the basis of the length of service andaverage monthly salaries of the six months before retirement. The Company and subsidiary contributeamounts equal to 2%-15% of total monthly salaries and wages to a pension fund administered by thepension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in thecommittee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If
the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees
who conform to retirement requirements in the next year, the Group is required to fund the difference in
one appropriation that should be made before the end of March of the next year. The pension fund ismanaged by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Group has no right toinfluence the investment policy and strategy.
The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans
were as follows:
December 31
2020

2019

Present value of defined benefit obligation
Fair value of plan assets$ 18,793,509(9,055,768)$ 18,457,304(9,022,269)

Deficit (net defined benefit liabilities)$$

9,737,741

9,435,035

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

Balance at January 1, 2019
Current service cost
Net interest expense (income)
Recognized in profit or loss

Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets$ 17,464,856
1,321,600
161,808
1,483,408$ (8,661,474)(86,234)(86,234)- 48 -Net Defined
BenefitLiabilities(Assets)$

8,803,382
1,321,600
75,574
1,397,174(Continued)

Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (gain) loss - changes indemographic assumptions
Actuarial (gain) loss - changes in financial
assumptions
Actuarial (gain) loss - experience
adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
OthersBalance at December 31, 2019
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (gain) loss - changes indemographic assumptions
Actuarial (gain) loss - changes in financial
assumptions
Actuarial (gain) loss - experience
adjustments
Recognized in other comprehensive income
Contributions from the employer
Benefits paid
OthersBalance at December 31, 2020

Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets

Net Defined
BenefitLiabilities(Assets)

$

$

$

-

(308,223)(308,223)

15,959-15,959440,374-

440,374

633,683
1,090,016(1,452,632)(128,344)
18,457,304
1,323,036
126,390
1,449,426(308,223)(1,418,970)
1,452,632(9,022,269)(63,554)(63,554)

633,683
781,793(1,418,970)(128,344)
9,435,035
1,323,036
62,836
1,385,872-(303,407)(303,407)

9,770

-

9,770

658,370-

658,370

34,417
702,557(1,638,230)(177,547)(303,407)(1,304,769)
1,638,230-

34,417399,150(1,304,769)(177,547)$ 18,793,509$ (9,055,768)$

9,737,741(Concluded)

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to thefollowing risks:
1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the
mandated management. However, in accordance with relevant regulations, the return generated byplan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of thedefined benefit obligation; however, this will be partially offset by an increase in the return on theplan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the
future salaries of plan participants. As such, an increase in the salary of the plan participants will
increase the present value of the defined benefit obligation.

- 49 -

The actuarial valuations of the present value of the defined benefit obligation were carried out by
qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as
follows:
December 31

Discount rate(s)Expected rate(s) of salary increase

2020

2019

0.32%-0.80%
1.00%-2.50%

0.63%-1.10%
1.00%-2.50%

If possible reasonable change in each of the significant actuarial assumptions will occur and all otherassumptions will remain constant, the present value of the defined benefit obligation would increase(decrease) as follows:
December 31
2020
Discount rate(s)0.25%/0.5% increase
0.25%/0.5% decrease
Expected rate(s) of salary increase
0.5% increase
0.5% decrease

$

2019

(438,527)
457,422$(939,308)
1,000,771

830,329(772,927)

969,324(927,180)

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

2019

The expected contributions to the plan for the next year

$ 916,627$ 930,963

The average duration of the defined benefit obligation

8-11 years

8-11 years

26. EQUITY
a. Share capital
Ordinary shares
December 31

Numbers of authorized shares (in thousands)
Amount of authorized shares
Amount of issued shares- 50 -

20202019

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

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

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

2019

$

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

The capital surplus from shares issued in excess of par (including additional paid-in capital fromissuance of ordinary shares and treasury share transactions) and the difference in sale price of shares ofsubsidiaries and book value may be used to offset deficits; in addition, when the Company has no
deficit, such capital surplus may be distributed as cash dividends or transferred to capital (but limited toa certain percentage of the Company’s paid-in capital on yearly basis).
The capital surplus from long-term investments, employee share options expired, dividends distributed
to subsidiaries and retirement of treasury shares may not be used for any purpose. Besides, capitalsurplus from conversion of employee shares and convertible bonds payable may not be used for any
purpose.
c. Appropriation of earnings and dividend policy
Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”),
where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes,
offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting
aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining
profit together with any undistributed retained earnings shall be used by the Company’s board of
directors as the basis for proposing a distribution plan, which is to distribute dividends and bonus noless than 50% of the remaining profit and undistributed retained earnings. The dividends and bonus
mentioned above can be distributed in the form of new shares or cash, and the cash dividends should be
no less than 30% of the total dividends.
Under the Company Act, if surplus earnings are distributed in the form of new shares, the distributionof shares shall be approved in the meeting of the board of directors; if such earnings are distributed in
the form of cash, the cash distribution shall be authorized after a resolution has been adopted by amajority vote at a meeting of the board of directors attended by two-thirds of the total number of
directors; and in addition, a report of such distribution shall be submitted to the shareholders’ meeting.
If the 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.

- 51 -

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 thecurrent year.
1) 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 offsetting of deficit for 2019 is subject to the resolution of the shareholders in their meeting to
be held on June 23, 2020.
2) Offsetting of deficit in 2020
On March 18, 2021, the board proposed to offset the accumulated deficit in 2020. The deficit
included a net income of $140,000 thousand and the beginning balance of undistributed retained
earnings of $0, negative adjustment of other retained earnings of $490,581 thousand, the remaining
amount of accumulated deficit was $350,581 thousand and was offset by capital reserve of$350,581 thousand.

- 52 -

d. Other equity items
The movement of other equity items is as follows:
Exchange
Differences on
Translation of
the Financial
Statements ofForeign
Operations
Balance at January 1, 2019
Exchange differences ontranslation of the financial
statements of foreign operations
Cumulative loss on changes in fairvalue of hedging instruments
Cumulative gain on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets
at FVTOCI
Effects of income tax
Other comprehensive income(loss) recognized in the period
Disposal of subsidiaries
Transfers of initial carrying
amount of hedged items$(9,664)

Balance at December 31, 2019$(54,707)

Balance at January 1, 2020
Exchange differences ontranslation of the financial
statements of foreign operations
Cumulative loss on changes in fairvalue of hedging instruments
Cumulative gain on changes in fairvalue of hedging instruments
reclassified to profit or loss
Unrealized gain on financial assets
at FVTOCI
Effects of income tax
Other comprehensive income(loss) recognized in the period
Transfers of initial carrying
amount of hedged items$(54,707)

Balance at December 31, 2020$

Unrealized Gain
(Loss) on
Financial Assets
at FVTOCI$

42,619Gain (Loss) on
Hedging
Instruments$

25,268

Total$

58,223(65,246)--(65,246)--

1,378,603

1,378,603--

20,01420,014

11,83579,392(14,854)(279,604)

79,392(282,623)(53,411)8,368

64,538105

1,119,013-

1,130,140
8,473

-

-

(603)

(603)

$

107,262$ 1,143,678$ 1,196,233$

107,262$ 1,143,678$ 1,196,233(99,774)--(99,774)--

1,921,255

1,921,255--(293,518)(293,518)

20,229(45,588)
9,685(365,745)(45,588)(335,831)(79,545)(35,903)

1,261,992

1,146,544--

200,989

200,989

71,359$ 2,606,659$ 2,543,766(134,252)- 53 -$

e. Non-controlling interests
For the Year Ended December 31
2020
2019
Beginning balance
Net (loss) income attributable to non-controlling interests
Foreign exchange differences
Actuarial gains and losses on defined benefit plans
Cash flow hedge on changes in fair value of hedging instruments
Cumulative (loss) gain arising on changes in fair value ofhedging instruments reclassified to profit or loss
Effect of income tax
Disposal of subsidiaries
Disposal of part equity of subsidiaries
Outstanding share options held by employees of subsidiaries
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries
Ending balance$ 3,578,345(419,814)
1,826
43,157
2,993$ 2,965,512
524,796(7,706)(100,136)(13,227)(1,600)(9,272)
37,10452
331,427(375,024)

8,528
22,586(89,955)(24,957)
619,387(416,438)$ 3,152,090$ 3,578,345

f. Treasury shares
Treasury shares are the Company’s shares held by its subsidiaries as of December 31, 2020 and 2019were as follows:(In Thousands of Shares)

Period of Treasury Shares

Number of
Shares,Beginning ofYear

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

Subsidiary

2,889
2,889
Shares(In Thousands)

Reduction
During the
Year
(814)
-

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

Carrying
AmountMarket Value

2,075$ 24,999$ 24,999

2,075
814

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

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

The above acquisitions by subsidiaries of the Company’s shares in previous years was due toinvestment planning. The shares of the Company held by its subsidiaries were treated as treasury shares.
The subsidiaries can exercise shareholders’ right on these treasury shares, except for the right tosubscribe for the Company’s new shares and voting rights.

- 54 -

Dynasty Aerotech International Corp. sold a total of 814 thousand shares of the Company in 2020 andthe disposal price was $6,854 thousand.

27. NET INCOME
a. Revenue
For the Year Ended December 31
2020
2019
Passenger
Cargo
Others$ 25,704,367
81,917,976
7,628,207$ 111,413,435
43,793,256
13,237,469$ 115,250,550$ 168,444,160

b. Other income
For the Year Ended December 31
2020
2019
Interest income
Subsidy income
Dividend income
Others$ 282,506
29,30923,043351,716$ 417,446
38,621
21,422
241,499$ 686,574$ 718,988

c. Other gains and losses
For the Year Ended December 31
2020
2019
Gain on disposal property, plant and equipment
Net gain on financial assets at FVTPL
Gain (loss) on foreign exchange, net
Impairment loss on flying equipment
Foreign investment impairment loss under equity method
Gain on disposal of investments
Loss on non-current assets held for sale
Loss on sale and leaseback
Others$13,3472,287
527,234(424,573)(46,757)(337,528)$ (265,990)- 55 -$

32,46027,580(141,611)
7,656(10,462)(103,775)(285,660)$ (473,812)

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

342,963930,083
1,784,917$

429,457
771,280
2,139,382$ 3,057,963$ 3,340,119

Capitalization interest$$

Capitalization rate

0.71%-1.92%

78,863

46,528

1.01%-1.35%

e. Depreciation and amortization expense
For the Year Ended December 31
2020
2019
Property, plant, equipment
Right of use assets
Investment properties
Intangible assets$ 19,425,422
11,741,555
270
206,936$ 20,702,033
11,899,090
277
198,237

Depreciation and amortization expense$ 31,374,183$ 32,799,637

An analysis of depreciation by function
Operating costs
Operating expenses$ 30,171,665
995,582$ 30,927,997
1,673,403$ 31,167,247$ 32,601,400$

14,312
192,624$

12,380185,857$

206,936$

198,237

An analysis of amortization by function
Operating costs
Operating expenses

f. Employee benefits expense
For the Year Ended December 31
2020
2019
Post-employment benefits
Defined contribution plan
Defined benefit plan

- 56 -$

551,154
1,385,872$

574,809
1,397,174$

1,937,026$

1,971,983(Continued)

For the Year Ended December 31
2020
2019
Other employee benefits
Salary expenses
Personnel service expenses

An analysis of employee benefits expense by function
Operating costs
Operating expenses$ 17,958,185
5,400,252$ 20,813,757
5,506,867$ 23,358,437$ 26,320,624$ 20,466,080
4,829,383$ 23,699,685
4,592,922$ 25,295,463$ 28,292,607(Concluded)

According to the Company’s articles, the Company accrues compensation of employees at rates of noless than 3% of the net profit before income tax and compensation of employees, and accrues profit
bonus at a certain rate of profit before tax on the basis of the collective agreement signed with the China
Airlines Employees Union. For the years ended December 31, 2020 and 2019, the Company has
experienced a deficit, and therefore, no compensation of employees is estimated.
Material differences between such estimated amounts and the amounts proposed by the board of
directors on or before the date that the annual consolidated financial statements are authorized for issue
are adjusted in the year that the bonuses and remuneration were recognized. If there is a change in the
proposed amounts after the annual consolidated financial statements were authorized for issue, thedifferences are recorded as a change in the accounting estimate.
Information on the compensation of employees and remuneration of directors and supervisors resolvedby the Company’s board of directors in 2020 and 2019 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 were as follows:
For the Year Ended December 31
2020
2019
Current tax
Current year
Prior year adjustment
Income tax on unappropriated earnings
Deferred tax
Current year
Adjustments to deferred tax attributable to changes in tax rates
and laws
Income tax expense recognized in profit or loss

- 57 -$ 118,814(29,845)628$ 523,670(5,546)378(551,574)

35,14987,99424,534$ (373,983)$ 578,185

A reconciliation of accounting profit and income tax expense is as follows:
For the Year Ended December 31
2020
2019
Profit before tax
Income tax expense calculated at the statutory rate (% for 2019,20% for 2018)
Effect of different tax of subsidiaries
Effect of adjustment to income tax
Non-deductible expenses in determining taxable income
Tax-exempt income
Income tax on unappropriated earnings (5%)
Basic income tax
Overseas income tax expense
Unrecognized loss carryforwards, investment tax credits andtemporary difference
Adjustments for prior years’ tax
Adjustments to deferred tax attributable to changes in tax rates
and laws
Adjustments to changes in tax rates and laws
Other
Income tax expense recognized in profit or loss

$ (653,797)$ (96,817)$ (130,759)(8,456)$ (19,362)
1,680

388,066(711,001)
628
16,244

16,936(45,861)
378
8,468
11,157

12,129(29,845)586,135(5,546)87,994
1,017

24,534(334)$ (373,983)$ 578,185

2020

2019

b. Income tax recognized in other comprehensive income

Deferred tax
Recognized in other comprehensive income
Translation of financial statements of foreign operations
Fair value changes of financial assets at FVTOCI
Hedging instruments fair value revaluation for cash flow
hedging
Actuarial gain or loss on defined benefit plan
Total income tax recognized in other comprehensive income- 58 -$

19,864
9,685$

13,454(14,854)(366,022)
79,830(278,664)
156,359$ (256,643)$ (123,705)

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

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$ 1,891,851
592,977
2,240,003
296,857
315,938$(15,520)(42,447)
282,021(41,590)367,228$

80,246
77,917$(17,281)$ 1,956,577
550,530
2,522,024
255,267
743,802$ 5,337,626$

549,692$

158,163$(17,281)$ 6,028,200$

81,777475,365$

81,656
4,456$

414,806$(34,976)$$

557,142$

86,112$414,806$(34,976)$ 1,023,084

Exchange
Difference

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserves
Allowance for reduction of inventory
OthersDeferred tax liabilities
Temporary differences
Unrealized foreign exchange gains
Others (Note)

163,433
859,651

For the year ended December 31, 2019

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$ 1,765,052
510,060
1,811,848
335,711729,399$(29,560)
82,917428,155(38,854)(429,580)$

156,359
15,113$

1,006$ 1,891,851
592,977
2,240,003
296,857
315,938$ 5,152,070$

13,078$

171,472$

1,006$ 5,337,626$

17
188,430$

81,760(8,999)$295,177$

757$

81,777475,365$

188,447$

72,761$

295,177$

757$

557,142

Exchange
Difference

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plans
Frequent flyer programs
Maintenance reserves
Allowance for reduction of inventory
OthersDeferred tax liabilities
Temporary differences
Unrealized foreign exchange gains
Others (Note)- 59 -

Deductible temporary differences, and unused loss carryforwards for which no deferred tax assets havebeen recognized in the consolidated balance sheets.
December 31

Loss carryforwards
2021
2022
2025
2026
2027
2028
2029
2030

2020

2019

18,124344,200
68,415671,529
1,645,438
852,281$ 2,899,496
619,799
18,124
546,899
68,415
1,706,913
955,250-$ 3,599,987$ 6,814,896$ 4,563,924$ 1,348,096$

Difference in depreciationd. Unused tax loss carryforwards as of December 31, 2020 were as follows:
UnusedAmountExpiry Year
China Airlines, Ltd.
2028
2029

$

495,779
1,439,287$ 1,935,066
Mandarin Airline Co., Ltd.
2026
2028
2030

$

312,724
72,589524,678$

909,991

Tigerair Taiwan Co., Ltd.
2030

$ 2,056,978

Taoyuan International Airport Services
2030$

556,790$

223,805(Continued)

Taiwan Airport Services
2030- 60 -

UnusedAmountExpiry Year
Sabre Travel Network (Taiwan)
2030$

75,188$114,975$

85,648$18,124
31,476
68,415
103,161
206,151
241,955$

669,282(Concluded)

Cal Hotel Co., Ltd.
2030
Kaohsiung Catering Services, Ltd.
2030
Taiwan Aircraft Maintenance And Engineering Co., Ltd.
2025
2026
2027
2028
2029
2030

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

29. EARNING PER SHARE
The numerators and denominators used in calculating earnings per share were as follows:
For the Year Ended December 31
2020
2019
Basic earnings (loss) per share
Diluted earnings (loss) per share$$

Earnings (loss) used in the computation of basic earnings per share
Effect of potentially dilutive ordinary shares:
Interest on convertible bonds (after tax)
Earnings (loss) used in the computation of diluted earnings (loss) pershare- 61 -

$

$

0.03
0.03

$
$

(0.22)(0.22)

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

140,000$ (1,199,798)

For the Year Ended December 31
2020
2019
In thousands
Weighted average number of ordinary shares in computation of basic
earnings per share
Effect of potentially dilutive ordinary shares:
Convertible bonds
Compensation of employees or bonuses issued to employees
Weighted average number of ordinary shares used in thecomputation of diluted earnings per share

5,418,776

5,418,096--

5,418,776

5,418,096

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

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 gain on disposal of $7,656 thousand.
After the disposal, the proportion of ownership decreased from 51% to 20%, and the Company lost controlof the subsidiary.
a. Consideration received from disposals
Consideration received in cash and cash equivalents$ 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

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$- 62 -

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

32. FINANCIAL INSTRUMENTS
a. Financial instruments not evaluated at fair value
Except as detailed in the following table, the management considers the carrying amounts offinancial assets and financial liabilities recognized in the financial statements as approximating theirfair values.
December 31
2020
Carrying
Amount$ 22,282,859

2019
Fair Value

Carrying
AmountFair Value$ 22,459,685$ 32,052,625$ 32,062,874

Financial liabilities
Bonds payable

Some long-term borrowings and capital lease obligations are floating-rate financial liabilities, so
their carrying amounts are their fair values. Fair values of bond payable trading in OTC are basedon 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 toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:
1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;2) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); and- 63 -

3) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).
December 31, 2020
Level 1
Financial assets at
FVTPL
Domestic money
market funds
Financial assets at
FVTOCI
Investments in equity
instruments
United shares domestic
Unlisted shares foreign

Level 2

Level 3

Total$

274,761

$

-

$

-

$

274,761

$

-

$

-

$

46,289$46,289--117,457

117,457

$

-

$

-

$

163,746$

163,746

Financial assets forhedging$

7,613,636

$

-

$

-

$

7,613,636

Financial liabilities forhedging$ 40,575,778

$

9,307

$

-

$ 40,585,085

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

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

Level 2

511,758$-

Level 3

-

$

434

Total

-

$

-

511,758434$

511,758

$

434

$

-

$

512,192

$

-

$

-

$

26,865$

26,865$-- 64 -$-

182,356$

209,221

182,356$

209,221(Continued)

Level 1

Level 2

Level 3

Total

Financial liabilities at
FVTPL
Derivative
instruments

$

-

$

11,749$-$11,749Financial assets forhedging

$

-

$

147

$

9,479

$

9,626

Financial liabilities forhedging$ 50,997,687$

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

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 Instruments
Derivatives instruments

Valuation Techniques and Inputs
Discounted cash flows.
Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period andcontract forward rates, discounted at a rate that reflects thecredit risk of various counterparties.

5) Valuation techniques and inputs applied for Level 3 fair value measurement
The fair values of foreign exchanges and fuel options are determined using option pricing
models where the significant unobservable inputs are implied fluctuation. Changes in theimplied fluctuations used in isolation would result in an increase or decrease in the fair value ofthe foreign exchange forward contracts and fuel options.
The domestic unlisted equity investment is based on the comparative company valuation toestimate the fair value. The main assumptions are based on the multiplier of the market price ofthe comparable 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 valueof the relevant financial instruments.
The movements of Level 3 financial instruments are as follows:

Multiplicator
December 31, 2020
December 31, 20190.79-16.32
0.75-13.23- 65 -

Liquidity
Discount80%80%Derivative
Instruments

EquityInstruments

Balance at January 1, 2020
Recognized in other comprehensive income

$

5,524
(5,524)$ 209,221(45,475)

Balance at December 31, 2020$-

$ 163,746

Balance at January 1, 2019
Recognized in other comprehensive income

$

4,901
623

$ 132,191
77,030

Balance at December 31, 2019

$

5,524

$ 209,221

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
December 31
2020

2019

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

274,761
7,613,636
45,898,091
163,746$

512,192
9,626
43,143,106
209,221

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

40,585,085
165,458,441

11,74951,038,711
144,459,429

Note 1: The balances include loans and receivables measured at amortized cost, which comprise cash
and cash equivalents, notes and accounts receivable, accounts receivable - related parties,
other receivables, refundable deposits and other restricted financial assets.
Note 2: The balances include financial liabilities measured at amortized cost, which compriseshort-term debts, short-term notes payable, notes and accounts payable, accounts payable related parties, other payables, bonds payable, long-term loans, lease liabilities payable, leaseliabilities, provisions, part of other current liabilities, part of other non-current liabilities andguarantee 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
rates, in exchange rates and in fuel prices, the Group has its operating costs stay within a specified
range by using appropriate financial hedging instruments and hedging percentages in accordance withthe “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 foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

- 66 -

In addition, the Group has a risk management committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging percentage. This
committee informs the Group of global economic and financial conditions, controls the entire financial
risk resulting from changes in the financial environment and fuel prices, and develops the strategy andresponse 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 foreign exchange forward
contracts, foreign currency option contracts, and interest swap contracts with fair values that arehighly negatively correlated to the fair values of hedged items and evaluates the hedging
effectiveness of these instruments periodically.
a) Foreign currency risk
The Group enters into foreign currency option contracts to hedge against the risks on change in
related exchange rates, enters into forward contracts to hedge against the risks on changes inforeign-currency assets, liabilities and commitments in the related exchange rates.
Sensitivity analysis
The Group was mainly exposed to the US dollar.
The following details the Group’s sensitivity to a one dollar increase or decrease in the New
Taiwan dollar (the functional currency) against the relevant foreign currencies (i.e. the US
dollar). This is the sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis included only outstanding foreign
currency denominated monetary items and foreign currency forward contracts designated as
cash flow hedges and adjusts their translation at the end of the reporting period for US$1
increase/decrease against the New Taiwan dollar.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be an increase in pre-tax profit and other comprehensive income forthe year ended December 31, 2020 of $345,440 thousand and $1,150,896 thousand and adecrease in pre-tax profit and other comprehensive income for the year ended December 31,
2019 of $105,266 thousand and $1,612,256 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.

- 67 -

The following table summarizes the information relating to the hedging of foreign currency risk.
December 31, 2020
Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts
Aviation fuel - forward
exchange contracts

Notional
AmountMaturity

NTD/USD

NTD 127,906/
USD4,371

2021.1.82021.11.9

28.5-29.7

NTD/USD

NTD 142,045/
USD5,000

2021.1.292021.5.28

29.9-29.8

Currency

Forward RateLine Item in
Balance Sheet

Carrying AmountAsset
Liability

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

$

-

$

-

3,513

5,794

The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (aircraft rentals in U.S. dollars and aviation fuel) was $(3,513)
thousand and $(5,794) thousand, respectively.
For the year ended December 31, 2020
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments
Maintenance cost

Note:

$

AmountReclassified toProfit and Lossand theAdjusted Line
Item

4,939
4,367
(101,570)-$

11,908(16,616)5$ (92,264)$(4,703)(Note)

Increase in operating costs or exchange loss.

The amount of gains and losses on hedging instruments for the year ended December 31, 2020
reclassified from profit or loss to prepayments for equipment was $119,878 thousand.
December 31, 2019
Notional
AmountMaturity

Forward Rate

NTD/USD

NTD509,507/
USD16,967

2020.1.212020.12.24

29.5-30.8

Aviation fuel - forward
exchange contracts

NTD/USD

NTD660,661/
USD22,000

2020.2.272020.11.30

29.7-30.7

Aircraft prepayments forward exchange
contracts

NTD/USD

NTD1,411,411/
USD47,000

2020.11.4

29.6-30.5

Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts

Currency

Line Item in
Balance Sheet

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

Carrying AmountAsset
Liability

$

38

$

8,491

32

10,19377

18,385The abovementioned hedging instruments applied hedge accounting. The book value of other
equity for each hedging item (aircraft rentals in U.S. dollars, aviation fuel and aircraft
prepayments) was $(8,453) thousand, $(10,161) thousand and $(18,308) thousand, respectively.

- 68 -

For the year ended December 31, 2019

Comprehensive Income

Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeCash flow hedge
Aircraft rentals
Aviation fuelAircraft prepayments$ (35,897)(10,161)(17,705)

$

9,137
(53)
-

$ (63,763)

$

9,084

Note:

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

Decrease in operating costs or exchange loss.

And the amount of gains and losses on hedging instruments for the year ended December 31,
2019 reclassified from profit or loss to prepayments for equipment was $(603) thousand.
b) Interest rate risk
The Group enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates. The risk is managed by the Group by maintaining an appropriate mix of
fixed and floating rate borrowings, and using interest rate swap contracts and forward interest
rate contracts.
The carrying amount of the Group’s financial assets and financial liabilities with exposure tointerest rates at the end of the reporting period were as follows.
December 31

Fair value interest rate risk
Cash flow interest rate risk

2020

2019

$ 68,883,667
112,324,305$ 91,414,806
77,821,887

Sensitivity analysis
The sensitivity analyses below were 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 by one yard (25 basis) points and all other variables been held
constant, the Group’s pre-tax profit for the year ended December 31, 2020 would havedecreased by $280,811 thousand.
Had interest rates increased by one yard (25 basis) points and had all other variables been held
constant, the Group’s pre-tax profit for the year ended December 31, 2019 would havedecreased by $194,555 thousand.

- 69 -c) Other price risk
The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters into
fuel swap contracts to hedge against adverse risks on fuel price changes.
December 31, 2020
Hedging Instrument
Cash flow hedges fuel options

Currency

USD

Notional
AmountMaturity

Forward Rate

-

-

-

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging - current/
liabilities for hedging current

$

-

$

-

Hedge accounting continues to be applied to the abovementioned hedging instruments. The
carrying amount of other equity for each hedging item (fuel payments) was $0.
For the year ended December 31, 2020

Comprehensive Income
Cash flow hedges - fuel options
Note:

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

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

Increase in operating costs.

December 31, 2019
Hedging Instrument
Cash flow hedges fuel options

Currency

USD

Notional
Amount

NT$5,524

Maturity

2020.3.312020.12.31

Forward Rate

US$49.65US$80.75

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging - current/
liabilities for hedging current

$

9,479

$

3,955

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

$

Increase in operating costs.

- 70 -

623

AmountReclassified toProfit and Lossand theAdjusted LineItem
$ (13,597)(Note)

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

$

1,479
(1,479)

$

-

$

-

$

7,973
-

2) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Group. The Group’s credit risk, primarily comes from accounts receivable
generated from operating activities and bank deposits generated from investing activities, fixed
investment income and other financial instruments, operation related credit risk and financial credit
risk are managed separately.
Operation - related credit risk
The Group has established procedures to management operations related credit risk to maintain thequality of accounts receivable.
To assess individual customers, the Group consider into the financial condition of the customers,
the credit rating agency rating, the Group’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, the Group
uses certain credit enhancement tools to reduce the credit risk of specific customers. Since thecustomers of the industry is dispersed and non-related, the credit risk concentration is not criticalaviation.
Financial credit risk
Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Group’s finance department. The Group’s trading partners and other parties were
well-performing banks and financial institutions, corporations, and government agencies, and so therisk of counterparties failing to discharge an obligation is low; therefore, there is no significant
credit risk.

- 71 -

3) Liquidity risk
The objective of the Group’s management of liquidity is to maintain cash and cash equivalents
sufficient for operating purposes, marketable securities with high liquidity and loan commitmentsthat are sufficient to ensure that the Group has adequate financial flexibility.
Unused Bank
Loan Limit(Unsecured)
The Group (China Airlines, Ltd., Mandarin Airlines and Tigerair Taiwan Co.,Ltd.)

$ 22,429,000

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.
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.
December 31, 2020
The Weighted
Average
Effective
Interest Rate(%)
Lease liabilities
Floating interest rate
liabilities
Derivative instruments
Bonds payable

1.1128Less than 1Year$

1.62693.04922.4622

3,494,299

1 to 5 Years

Over 5 Years$$

9,770,964

7,982,767

26,195,346
9,249,609
12,531,511

60,977,026
32,978,809
9,303,608

17,175,894
1,815,449
1,280,778$ 51,470,765$ 113,030,407$ 28,254,888- 72 -

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

1.1613

Less than 1Year

1 to 5 Years

Over 5 Years

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

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

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

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

1.90583.11312.2573

8,949,194

33. RELATED-PARTY TRANSACTIONS
The transactions, account balances, income and expenses between related parties were eliminated from theconsolidated report and, therefore, were not disclosed in this note. Except for the disclosures stated in othernotes, transactions between the Group and its related parties are disclosed below:
a. Related parties’ names and relationships
Name

Relationship with the Company

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

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

b. Operating income

Account Items
Other income

Related Party Type
Major shareholder of theCompany
Associate
Joint venture investment- 73 -For the Year Ended December 31
2020
2019
$

5,097

$

25,457$$122
22,445$$

1,239
42,457

c. Purchases
For the Year Ended December 31
2020
2019

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

11,417457,005
516,347$
56,474$ 414,106$ 1,911,091

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

Joint venture investment
Major shareholder of the Company

2019

$

1,667
-

$

7,760
2,588

$

1,667

$

10,348The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.
e. Accounts payable - related parties (generated by operations)
December 31
Related Party Type

2020

Associate
Joint venture investment
Major shareholder of the Company

2019

$

52,18776,380-$51,333484,700
5,982$

128,567$

542,015

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are notsecured.
f. Leases of properties (operating leases)
Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots, the Company paid the rental based on
usage hours. In 2020 and 2019, the Company had paid rentals of about $11,417 thousand and $56,474
thousand, respectively.
g. Endorsements and guarantees
December 31
2020

2019

Authorized
AmountActualAmount Used

Authorized
AmountActualAmount Used

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

The Company
CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenance- 74 -

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

33,376
2,525$

39,693
2,362$

35,901$42,055

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

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

Property, plant and equipment
Right-of-use assets
Restricted assets - non-current
Pledged certificate deposits

2020

2019

$ 34,170,076
59,861,537$ 31,260,801
71,033,617

302,807130,052$ 94,334,420$ 102,424,470

35. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2020, except for the disclosures stated in other notes, the Group had commitments andcontingent liabilities as follows:a. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. The terminal
expansion and improvements and the equipment installation and upgrade in the Taiwan Taoyuan
International Airport cargo terminal and Kaohsiung cargo terminal were expected to be completed in
the first 10 years of the COP. This construction project was approved by TACT’s board of directors in
2003. TACT filed an application for a 10-year extension of the COP for the cargo terminals in the
Taiwan Taoyuan International Airport and Kaohsiung International Airport and received the approval
from the Taoyuan Airport Corporation and CAA in July 2013 and July 2015, respectively.
The original total expenditure of the previous main construction project was $8,490,000 thousand.
However, TACT filed an arbitration for the total amount of expenditure in 2012 to revise the total
amount to $6,840,000 thousand.

- 75 -

As of December 31, 2020, TACT had signed the following construction contracts with unrelatedparties:

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan
Bin Li Construction Co.,
Ltd., Taiwan
Trade-Van Information
Services Co.

Cargo Terminal Expansion Construction Consultant
Contract
Cargo Terminal Expansion and Enhancement
Construction
TACT warehouse management system integrated
revision contract

Contract
Amount (VAT
Included)$ 552,285
275,000
30,000

As of December 31, 2020, the cumulated consultant service expense and construction equipment had
amounted to $487,645 thousand (VAT included) and $5,372,129 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,754 thousand (VAT included) and$5,306,700 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%.
b. 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.

- 76 -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.
c. 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
December 31, 2020, the list price has been paid in the amount of US$32,578 thousand (recognized as
prepayments for aircraft). In October 2019, the Company signed a contract with International AeroEngines Company to purchase four backup engines of A321neo. The total list price of the four engines
is US$60,289 thousand.
d. 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
December 31, 2020, two out of the six aircraft has been delivered, the list price had been paid in theamount of US$122,186 thousand (recognized as prepayments for aircraft), and the total list price of theremaining four aircraft is US$1,552,879.
e. In October 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 December
31, 2020, the list price has been paid in the amount of US$18,549 thousand (recognized as prepayments
for aircraft). In addition, in December 2019, Tigerair Taiwan Co., Ltd. signed a contract with
International Aero Engines Company to purchase two backup engines of A320neo aircraft. The total list
price of the two engines is US$27,345 thousand. As of December 31, 2020, the list price has been paidin the amount of US$2,988 thousand (recognized as prepayments for aircraft). In February 2020,
Tigerair Taiwan Co., Ltd. rented three A320-neo aircraft from Sky High 117 Leasing Company
Limited, one A320-neo aircraft from Sky High 118 Leasing Company Limited, one A320-neo aircraftfrom Sky High 119 Leasing Company Limited and one A320-neo aircraft from Sky High 120 Leasing
Company Limited. The total list price was around US$250,000 thousand and lease payment will changeon the basis of actual differences of the year. The aircraft was initially scheduled to be delivered
between 2021 and 2024. As of December 31, 2020, one aircraft that was supposed to be delivered in
2021 had been postponed.

36. IMPACT OF COVID-19
Since the outbreak of the Covid-19 in January 2020, the coronavirus has become a pandemic. The
pandemic has now spread around the world and most countries have not removed their travel restrictions.
Because the number of inbound and outbound passengers has decreased significantly, the Group adjusts the
proportion between passenger aircraft and cargo aircraft used in operations to comply with thegovernment’s epidemic prevention policy and cater to market demand. The Company reduces the frequencyof passenger air services that have been severely affected, uses the passenger aircraft to support the cargoflight arrangement and expands the function of all-cargo aircraft to maximize the opportunities from air
cargo business. Since March 2020, cargo has become the main source of revenue for the Group.

- 77 -

The Group continues to adjust the response measures according to the situation. In addition, to ensure theadequate liquidity, the Group also implements measures for human resource management such as
postponing the hiring of newcomers, relaxing the application of special leave, loosening the restrictions onleave without pay, encouraging employees to take leave, adjusting working hours and salaries, etc. The
Group’s policies to control spending include suspension of non-urgent capital expenditures, reduction inand postponement of payments.
Also, the Group received several remedy measures such as government subsidy for operation and reduction
on rent. In 2020, because of the Covid-19, the Group received subsidy of $1,293,388 thousand for the
airport landing fees and parking fees, etc. The subsidy for housing and land rental, and salary expenses was$961,208 thousand, recognized as deduction from other income and expenses.
The Group has obtained relief loan from the government. Refer to Note 19 for details on the amount of loan
and its allocation.

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

Exchange Rate

Carrying
Amount702,507
18,250344,577
3,475,525
560,252

28.4091
34.8432
3.66030.27504.3440$ 19,957,598
635,899
1,261,257
955,769
2,433,737

2,208,214
6,513
73,825
3,725,514
144,37628.4091
34.8432
3.66030.27504.344062,733,383
226,949
270,223
1,024,509
627,168

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 78 -

December 31, 2019
Foreign
Currencies (InThousands)

Exchange Rate

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

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

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

For the years ended December 31, 2020 and 2019, the Group’s net foreign exchange gain (losses) were$527,234 thousand and $(141,611) thousand, respectively. It is impractical to disclose net foreign exchange
gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions
and functional currencies of the entities in the Group.

38. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided: Table 1 (attached).
2) Endorsements/guarantees provided: Table 2 (attached).
3) Marketable securities held: Table 3 (attached).
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: None.
5) Acquisitions of individual real estates at costs or price of at least NT$300 million or 20% of thepaid-in capital: None
6) Disposals of individual real estates at costs or prices of at least NT$300 million or 20% of thepaid-in capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 4 (attached)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 5 (attached)- 79 -

9) Names, locations, and related information of investees over which the Company exercises
significant influence: Table 6 (attached)10) Derivative financial transactions (Notes 7 and 32)
b. Investment in mainland China: Table 7 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 8 (attached)d. Information of major shareholders: Table 9 (attached)

39. SEGMENT INFORMATION
a. Segment information
The Group mainly engages in air transportation services for passengers and cargo; the services include
airport service, storage service, and other air transportation services which are below the financial
threshold for an operating segment of the Group. Therefore, the Group’s main reportable segment is airtransportation. The accounting policies of the reportable segment are consistent with the accounting
policies described in Note 4.
Air
Transportation

For the Year Ended December 31, 2020
Adjustments
Othersand Write-offs

Operating revenue$ 112,031,124$

7,263,997$(4,044,571)

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses$$(509,281)$(84,604)

2,778,301$ 115,250,550$

2,184,416
282,506(200,834)
711,308(3,057,963)(573,230)

Profit before income tax
Identifiable assets
Investments accounted for using
the equity method
AssetsTotal$$ 194,219,132$ 15,319,185(6,120,289)(653,797)$ 203,418,029
1,970,802
78,805,253

Total assets$ 284,194,084- 80 -

Air
Transportation

For the Year Ended December 31, 2019
Adjustments
Othersand Write-offs

Operating revenue$ 164,492,453$ 11,067,323$(7,115,616)

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses$$$(86,446)

1,302,647

1,449,620

Total$ 168,444,160$

2,665,821
417,446
332,305495,249(3,340,119)(667,519)

Profit before income tax$

Identifiable assets
Investments accounted for using
the equity method
Assets$ 209,397,850$ 15,915,060(6,317,254)(96,817)$ 218,995,656
2,223,793
71,828,530

Total assets$ 293,047,979

b. Geographical segment
The geographical segment information of the Company and its subsidiaries in 2020 and 2019 is listed
below:For the Year Ended December 31, 2020

Operating revenue$

America

Northeast Asia

Southeast Asia

53,248,499$$

10,515,272

21,782,132

Europe$9,736,725

Australia$

4,377,261

China$

7,374,972$

Domestic

Adjustment andEliminations

Consolidation

12,260,260$$ 115,250,550(4,044,571 )Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
Expenses$(200,834 )
711,308(3,057,963 )(573,230 )Profit before
income tax
Identifiable assets
Investments
accounted forusing the equity
methodAssets2,184,416
282,506$$

1,336,074$

168,356$

213,936$

20,984$

15,383$53,322$ 207,730,263$(6,120,289 )(653,797 )$ 203,418,029

1,970,802
78,805,253

Total assets$ 284,194,084

For the Year Ended December 31, 2019

Operating revenue$

America

Northeast Asia

Southeast Asia

40,324,160$$

39,232,038

33,354,405

Europe$15,638,657

Australia$

7,073,170

China$

21,790,943$

Domestic

Adjustment andEliminations

Consolidation

18,146,403$$ 168,444,160(7,115,616 )Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
Expenses$

332,305495,249(3,340,119 )(667,519 )Profit before
income tax
Identifiable assets
Investments
accounted forusing the equity
methodAssets2,665,821
417,446$$

1,399,591$

222,584$

154,074$

26,707

$

8,985

$

50,948$ 223,450,021$(6,317,254 )(96,817 )$ 218,995,656

2,223,793
71,828,530

Total assets$ 293,047,979- 81 -TABLE 1

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

Lender1

Cal-Dynasty International

Borrower

Financial
Statement
Account

Dynasty Hotel of Notes receivable
Hawaii, Inc.

RelatedParty

HighestBalance for
the PeriodY$ 103,244

EndingBalance$

99,432

ActualBorrowingAmount
$28,409Interest Rate
(%)

2.25

Nature ofFinancing

Short-term
financingfacility isnecessary

Note 1:

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

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

- 82 -

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

Allowance for
Impairment
Loss
$

-

Collateral
Item

Value

$

-

Financing
Limit for
Each
Borrower

Aggregate
FinancingLimit$ 144,128$ 288,256

NoteTABLE 2

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

Counterparty
Endorsement/
Guarantee
Provider

No.

0

Name

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

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

Nature of Relationship100% owned subsidiary
75.86% owned subsidiaryby direct and indirect
holdings
100% owned subsidiary

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

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

11,511,896

2,000,000

2,000,000

1,336,000

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

Note 1:

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

Note 2:

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

- 83 -

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

-

6.69
4.62

$ 28,779,741
28,779,741

Y
Y

N
N

N
N

-

3.47

28,779,741

Y

N

N

TABLE 3

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

Holding Company Name

Marketable Security Type and Issuer/Name

China Airlines (“Parent company”)

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

Mandarin Airlines

Cal-Asia Investment

Sabre Travel Network (Taiwan)

Taiwan Airport Services

Dynasty Aerotech International Corp.

Kaohsiung Catering Services

SharesChina Airlines

Relationshipwith the Holding
Company-

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

Number of
Shares/Units

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

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

Parent company Financial assets at FVTOCI - non-current$

106,779
10,67829,704
-

13.59
11.00
15.00
0.02

2,074,628

24,999-$Note

117,457

Note 1

29,704---24,999-16,5852.59
5.45

16,585Note 2
Note 2-

42,24755,411---

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

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

Beneficiary certificatesFranklin Templeton SinoAm Money Market FundFSITC Money Market Fund-

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

4,051,153
308,094

42,24755,411

SharesTransAsia Airways-

Financial assets at FVTPL - current

2,277,786-

Beneficiary certificates
Taishin 1699 Money Market Fund-

Financial assets at FVTPL - current

349,523

4,771

-

4,771

-

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

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

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

86,281
70,94915,103-86,281
70,94915,103-Note 1: The subsidiary’s net asset value was $117,457 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2020.
Note 2: The Company does not issue shares because it is a limited company.
Note 3: The table only lists financial assets that are in accordance with IFRS 9.

- 84 -

0.40

TABLE 4

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

China Airlines, Ltd.
(“China Airlines”)

Related Party

Nature of Relationship

Purchase/
Sale$

Amount% of
Total

Payment Terms

Unit Price

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

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

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

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

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

Purchase
Purchase
Sale
Sale
Purchase
Purchase
Purchase
Sale
Purchase
Purchase

Mandarin Airlines

Taiwan Airport Services
Tigerair Taiwan

Same parent company
Same parent company

Purchase
Purchase

152,475
149,048

4.14
4.05

Cal Hotel

CAL Park

Same parent company

Purchase

102,220

48.59- 85 -

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

Abnormal Transaction

-

-

-

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

-

-

-

(76)

(0.25)--TABLE 5

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

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

Mandarin Airlines

China Airlines

Parent company$ 101,725

NoteTaoyuan International Airport Service

China Airlines

Parent company

215,542

3.71

Note:

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

- 86 -

Action Taken
-

-

-

-

Amounts Received
in Subsequent
Period$56,870215,542

Allowance for
Bad Debts$-

TABLE 6

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

Investment Amount
Investor Company

Investee Company

Location

Main Business and Product

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

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

Dynasty Aerotech International Corp.

Taoyuan, Taiwan

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

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

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

Aircraft maintenance

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation and maintenance of aircraft
Airport services

CAL-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Kaohsiung Catering
Services

Delica International Co., Ltd.

Kaohsiung, Taiwan

Catering business

China Airlines, Ltd.

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

Note 2:

Represents the 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.

December 31,
2020

December 31,
2019

$

$

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

77,27077,270100.00136,630

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

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

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

37,9752,450

3,797,500

49.00

37,767

(93)

(46)

-

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

5.51
1.08

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

-

HK$

3,329

1,050,000

35.00

51,11639,82913,940

-

US$

5,877

-

100.00373,442

22,35522,355 Note 3

10,2001,020,000

51.00

7,871

4

10,200- 87 -$

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

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.0055.00

JPY

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

Investment
Income (Loss)

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

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

Net Income(Loss) of theInvestee

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

77,270JPY

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

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

2-

TABLE 7

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

China Airlines

Investee Company Name

Main Business andProduct

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

Investment Flow

Outflow

Inflow

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

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

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

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

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

Indirect(Note 1)

55,325
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

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

Indirect(Note 1)

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

Composite material

Indirect(Note 1)

18,068
636)

-

(US$

(US$

331,335
11,663)

Accumulated Investment in
Mainland China as ofDecember 31, 2020

Investment Amount
Authorized by Investment
Commission, MOEA

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

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2020

-

$

-

% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

Carrying
Amountas ofDecember 31,
2020

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

14.00

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

14.00

(US$

61,1142,151)

-

2.589

-

(US$

18,068
636)

-

5.45

-

(US$

-

-

-

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

(RMB

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

-

(RMB

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

16,585
3,818) (US$10,128357)(Continued)- 88 -

Taiwan Airport Services

Investee Company

Main Business andProduct

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

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

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

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

Forwarding and storageof air cargo
(RMB

(US$

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

Remittance of Funds

Outward

Inward-54,737
1,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2020

$

-

-

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

14.00

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

14.00

(US$

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

Investment Amounts Authorized by
Investment Commission, MOEA

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

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

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2020

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

9,558
135,128
2,237) (RMB 31,107) (US$59,426
2,092)

Note 1: China Airlines, Ltd. the “Company” invested in CAL-Asia Investment, which, in turn, invested in a company located in mainland China.
Note 2: The inward remittance of earnings in 2020 amounted to US$3,536,561 and US$1,560,538.
Note 3: The amount comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.
Note 4: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjustment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.
Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.
Note 6: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates for the reporting period.
(Concluded)- 89 -TABLE 8

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

Company Name

Related Party

Natural of
Relationship(Note 1)

Financial Statement Account0

China Airlines, Ltd.

Global Sky Express
Mandarin Airlines
Tigerair Taiwan Co., Ltd.
Taoyuan International Airport Services
Taiwan Airport Service
Dynasty Aerotech International Corp.
Taiwan Air Cargo Terminal
CAL Park
Mandarin Airlines
Taoyuan International Airport Services
Mandarin Airlines

a
a
a
a
a
a
a
a
a
a
a

Cargo revenue
Other operating revenue
Other operating revenue
Airport service costs
Airport service costs
Airport service costs
Other operating costs
Other operating costs
Accounts payable - related parties
Accounts payable - related parties
Bonds payable - non-current

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.

b

2

Mandarin Airlines

Taiwan Airport Service
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

3

Taoyuan International Airport Services

4

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

137,081
123,469
240,768
1,043,264
107,482352,214659,596
209,701
101,725
215,542
125,000

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

0.12
0.11
0.21
0.91
0.09
0.31
0.57
0.18
0.03
0.07
0.04

Sales revenue

659,596

The same as ordinary transactions

0.57

c
b
b
b

Airport service costs
Operating expenses
Accounts receivable - related parties
Financial assets at amortized costs

152,475
123,469
101,725
125,000

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

0.13
0.11
0.03
0.04

China Airlines, Ltd.
China Airlines, Ltd.

bb

Airport service revenue
Accounts receivable - related parties

1,043,264
215,542

The same as ordinary transactions
The same as ordinary transactions

0.91
0.07

Taiwan Airport Service

China Airlines, Ltd.
Mandarin AirlinesbcOperating revenue
Operating revenue

107,482
152,475

The same as ordinary transactions
The same as ordinary transactions

0.09
0.13

5

Dynasty Aerotech International Corp.

China Airlines, Ltd.

b

Operating revenue

352,214The same as ordinary transactions

0.31

6

Global Sky Express

China Airlines, Ltd.

b

Operating expense

137,081

The same as ordinary transactions

0.12

7

CAL Park

China Airlines, Ltd.
Cal Hotel Co., Ltd.

bc

Operating revenue
Operating revenue

209,701
102,220

The same as ordinary transactions
The same as ordinary transactions

0.18
0.09

8

Cal Hotel Co., Ltd.

CAL Parkc

Operating costs

102,220

The same as ordinary transactions

0.09

9

Tigerair Taiwan Co., Ltd.

China Airlines, Ltd.

b

Operating expenses

240,768

The same as ordinary transactions

0.21(Continued)- 90 -

Note 1: The three directional types for transactions by business relationship between China Airlines, Ltd. and its subsidiaries are as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were eliminated in the consolidated financial statements.
Note 3: The Company only discloses transaction amounts or balances of more than $100,000 thousand.
(Concluded)- 91 -TABLE 9

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

SharesNumber ofPercentage ofSharesOwnership (%)

Name of Major Shareholder

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

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

34.44
9.59

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

- 92 -