China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theYears Ended December 31, 2019 and 2018 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, 2019 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

Hsieh, Su-Chien
March 18, 2020

-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, 2019 and 2018, 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, 2019 and 2018, 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, 2019. 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-

The key audit matters in the audit of the consolidated financial statements of the Group are statedbelow:
Passenger Revenue Recognition
In accordance with IFRS 15 “Revenue from Contracts with Customers”, passenger sales areaccounted for as contract liabilities before relevant transportation services are provided. After
providing the related services, contract liabilities are reclassified to passenger revenue. For the year
ended December 31, 2019, passenger revenue was NT$111,413,435 thousand. Refer to Notes 4 and
27 to the accompanying consolidated financial statements for related detailed information.
Since relevant sales can only be recognized as passenger revenue when passengers actuallyboarded, confirmation from each passenger holding the ticket who actually boarded involves acomplicated process; therefore, we identified passenger revenue recognition as a key audit matter.
The main audit procedures that we performed included the following:1.

We understood and tested the internal control related to the process of revenue from passenger,
including manual and automatic control.

2.

We understood and tested the effectiveness of the information system related to the process ofpassenger revenue.

3.

We sampled several flight tickets, which were flown and recognized as revenue, to verify
whether the boarding date matched the date recorded on the tickets, from advanced sales
tickets.

Initial Application of IFRS 16 (Leases) - Aircraft
In accordance with IFRS 16 “Leases”, aircraft leases initially classified as finance leases under IAS
17 should be recognized as Right-of-use assets and lease liabilities in the consolidated balances
sheet. As of December 31, 2019, the carrying amount of Right-of-use assets and lease liabilities(including financial liabilities for hedging) relating to aircraft leases are NT$62,052,701 thousand
and NT$60,114,778 thousand, respectively. Refer to Notes 4 and 21 to the accompanying
consolidated financial statements for related detailed information.
China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes, fifteen
A330-300 planes, fifteen 737-800 planes, ten A320-200 planes, six ERJ190 planes and three
ART72-600 planes for operation. Because the lease term of aircraft is higher and the amount ofrental is higher, the percentage of right-of-use assets and lease liabilities of the aircraft in the
consolidated balance sheets is high. The parameters and lease terms are determined by the
management, and the calculation of the lease liabilities will affect the carrying amount anddepreciation expense of the right-of-use assets and lease liabilities (including financial liabilities forhedging) relating to aircrafts. Therefore, we identified initial application of IFRS 16 - Aircrafts as a
key audit matter.
The main audit procedures that we performed included the following:1.

We understood and tested the effectiveness of the information system related to the calculationof lease liabilities.

-3-

2.

We selected one of the rental payments schedule of the aircraft from the lease calculation
system, to recalculate amount of the lease liabilities balance and financial cost andamortization of right-of-use, and related carrying amount. Also, we selected several aircraft
lease contracts from the carrying amounts of aircraft lease liability, and checked if there wasany difference between rental in the aircraft rental payment schedule and lease term in thecontracted rentals. And we checked if the lease term used the rental payment schedule wasconsistent with the contract.

Other Matter Audit by Other Independent Auditors
We did not audit some subsidiaries which were included in the consolidated financial statements.
The financial statements and disclosed information were audited by other independent auditors, andour audit opinion is based solely on the audit report of other independent auditors.
As of December 31, 2019, total assets of these subsidiaries amounted to NT$13,337,093 thousand
dollars, representing 4.55% of the total assets. For the year ended December 31, 2019, revenue
from these subsidiaries amounted to NT$9,513,321thousand dollars, representing 5.65% of thetotal revenue.
Other Matter Parent Company Only Financial Statements
We have also audited the parent company only financial statements of China Airlines, Ltd. as ofand for the years ended December 31, 2019 and 2018 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.
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.
-4-

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.

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, 2019 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.

-5-

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

Deloitte & Touche
Taipei, Taiwan
Republic of China
March 18, 2020

Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated
financial position, financial performance and cash flows in accordance with accounting principles
and practices generally accepted in the Republic of China and not those of any other jurisdictions.
The standards, 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.

-6-

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

2019
Amount%2018
Amount%$ 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

$ 24,937,537
206,001
3,856,660
32,906
10,038,528
9,043
879,191
18,9488,654,710
46,154
4,147,882

11
2
4
4
2

51,822,342

18

52,827,560

23

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

132,191
2,200,149
163,107,718
2,075,345
1,210,796
5,152,070
3,430,753

1
71
1
1
2
1

241,225,637

82

177,309,022

77$ 293,047,979

100$ 230,136,582

100

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6, 19 and 33)
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 29)
Inventories, net (Notes 4 and 11)
Non-current assets held for sale (Notes 4, 5 and 12)
Other assets - current (Notes 6 and 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 35)
Right-of-use assets (Notes 4, 21 and 35)
Investment properties (Notes 4 and 16)
Other intangible assets (Notes 4 and 17)
Deferred income tax asset (Notes 4, 5 and 29)
Other assets - non-current (Notes 18, 21, 32 and 34)
Total non-current assets
TOTAL

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term debts (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 29)
Lease liabilities - current (Notes 3, 4 and 21)
Provisions - current (Notes 4 and 24)
Contract liabilities - current (Note 23)
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 35)
Capital lease obligations - current portion (Notes 4, 21, 32 and 35)
Other current liabilities (Note 33)

221
560
1,594,487
532,815
14,146,198
164,181
321,075
19,546,455
4,445,900
15,709,487
633,398
3,855,115

1
6
9
2
7
2

26

60,949,892

27

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
-

28,473,710
60,686,148
1,903,665
8,473,464
188,447
2,945
8,803,382
607,845

12
26
1
4
4
-

Total non-current liabilities

156,564,335

53

109,139,606

47

Total liabilities

232,915,862

79

170,089,498

74

54,209,846
2,488,907

19
1

54,209,846
1,241,21424-

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

351,923
118,810
1,144,928
1,615,661
58,223(43,372)

1
1-

56,553,772

20

57,081,572

25

3,578,345

1

2,965,512

1

60,132,117

21

60,047,084

26$ 293,047,979

100$ 230,136,582

100

Total current liabilities
NON-CURRENT LIABILITIES
Derivative financial liabilities for hedging - non-current (Notes 3, 4, 21 and 33)
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)
Deferred tax liabilities (Notes 4 and 29)
Lease liabilities - non-current (Notes 3, 4, 21 and 25)
Capital lease obligations - non-current (Notes 4, 21, 32 and 35)
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
Legal reserve
Special reserve
Unappropriated retained earnings (accumulated deficits)
Total retained earnings
Other equity
Treasury shares
Total equity attributable to owners of the Company
NON-CONTROLLING INTERESTS (Note 26)
Total equity
TOTAL

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

-7-$

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

3
1
5
1
7
3
5
1

76,351,527$

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)%

2018
Amount%$ 168,444,160

100$ 170,711,607

100

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

151,757,232

90

153,504,076

90

GROSS PROFIT

16,686,928

10

17,207,531

10

OPERATING EXPENSES (Notes 4, 25 and 27)

14,021,107

8

13,185,148

8

OPERATING PROFIT

2,665,821

2

4,022,383

2718,988-

606,4531(473,812)(3,340,119)(2)(534,848)(1,379,985)(1)

332,305-367,246-(2,762,638)(2)(941,134)-

PRETAX PROFIT (LOSS)(96,817)-

3,081,249

2

INCOME TAX EXPENSE (Notes 4, 5 and 29)

578,185-

808,565

1

NET (LOSS) INCOME(675,002)-

2,272,684

1(17,705)-

23,884-

79,392-930-(781,793)-(851,866)-(32,102)-(33,242)-

145,166(607,042)-

187,881(672,413)(Continued)

REVENUE (Notes 4, 27 and 34)

NON-OPERATING INCOME AND LOSS
Other income (Notes 4, 8 and 27)
Other gains and losses (Notes 10, 12, 14, 15, 27
and 31)
Finance costs (Notes 9, 27 and 32)
Share of the profit of associates and joint ventures(Note 14)
Total non-operating income and loss

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:(Loss) gain on hedging instruments subject tobasis adjustment (Notes 4, 27 and 33)
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 26)
Share of other comprehensive loss of associates
and joint ventures accounted for using theequity method (Notes 4, 15 and 31)
Income tax relating to items that will not bereclassified subsequently to profit or loss
(Note 28)

-8-

2019
AmountCHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2019
AmountItems that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations (Notes 4 and 27)
Gain on hedging instruments not subject to basis
adjustment (Notes 4, 27 and 33)
Income tax relating to items that may bereclassified subsequently to profit or loss
(Note 28)$

NET INCOME ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests

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

EARNINGS PER SHARE (NEW TAIWANDOLLARS; Note 30)
Basic
Diluted%(72,952)-

1,411,623--

85,341-(268,871)
1,069,800-(17,858)
94,050-462,758-(578,363)-$(212,244)-$

1,694,321

1$(1,199,798)
524,796(1)
1$1,790,361
482,323

1-$(675,002)-$

2,272,684

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

1,258,035
436,2861-$(212,244)-$

1,694,321

1$$(0.22)(0.22)

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

-9-

$

%

26,567

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

2018
Amount

$
$

0.33
0.32

(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Company

Retained Earnings

BALANCE AT JANUARY 1, 2018

Share Capital

Capital Surplus

Legal Reserve

Special Reserve

UnappropriatedEarnings(Accumulated
Deficits)$ 54,709,846

$

$

$

$

799,999

206,092-

1,458,313

Exchange
Differences on
Translating
Foreign Operations$(34,986 )Unrealized Gain
(Loss) on
Available-for-saleFinancial Assets
$

1,774

Other Equity
Unrealized Gain on
Financial Asset atFair Value
Through Other
Comprehensive
Income$-Cash Flow Hedges$(74,429 )Gain (Loss) on
Hedging
Instruments

Treasury Shares
Held by
Subsidiaries

$

$

-

Non-Controlling
Interests

Total(43,372 )$ 57,023,237$

Total Equity

2,134,282$ 59,157,519

Effect of retrospective application and retrospective
restatement

-

-

-

-

60

-

(1,774 )42,351

74,429(74,429 )-

40,637-

40,637BALANCE AT JANUARY 1, 2018 AS RESTATED

54,709,846

799,999

206,092-

1,458,373(34,986 )-

42,351-(74,429 )(43,372 )

57,063,874

2,134,282

59,198,156

Issuance of convertible bonds-

409,978

-

-

-

-

-

-

-

-

-

409,978-

409,978

Basis adjustments to gain on hedging instruments

-

-

-

-

-

-

-

-

-

12,118-

12,118-

12,118

Appropriation of 2017 earnings
Legal reserve
Special reserve
Cash dividends - $0.2181820086 per share--

145,831-

118,810-(145,831 )(118,810 )(1,193,670 )

-

-

-

-

-

-

(1,193,670 )-(1,193,670 )Changes in capital surplus from dividends distributed tosubsidiaries

-

630

-

-

-

-

-

-

-

-

-

630

-

630

Net income for the year ended December 31, 2018

-

-

-

-

1,790,361

-

-

-

-

-

-

1,790,361

482,323

2,272,684

Other comprehensive income (loss) for the year ended
December 31, 2018, net of income tax

-

-

-

-

(645,495 )

25,322-

268-

87,579-(532,326 )(46,037 )(578,363 )Total comprehensive income for the year ended
December 31, 2018

-

-

-

-

1,144,866

25,322-

268-

87,579-1,258,035

436,286

1,694,321

Gain or loss on non-controlling interest

-

-

-

-

-

-

-

-

-

-

-

-

565,963

565,963

Treasury shares acquired

-

-

-

-

-

-

-

-

-

-

(469,393 )(469,393 )-(469,393 )(500,000 )

30,607

-

-

-

-

-

-

-

-

469,393---

Treasury shares retired
Cash dividends from subsidiaries paid to non-controllinginterests

-

-

-

-

-

-

-

-

-

-

-

-

(171,019 )(171,019 )

54,209,846

1,241,214

351,923

118,810

1,144,928(9,664 )-42,619-25,268(43,372 )

57,081,572

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 tosubsidiaries

-

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-controllinginterests

-

-

-

-

-

-

-

-

-

-

-

-

611,841

611,841

Non-controlling interests arising from acquisition ofsubsidiaries

-

-

-

-

-

-

-

-

-

-

-

-

(416,438 )(416,438 )Loss of control of subsidiaries

-

-

-

-

-

8,368

-

105

-

-

-

8,473

(24,957 )(16,484 )

12,967$ (1,777,225 )(43,372 )$ 56,553,772

3,578,345$ 60,132,117

BALANCE AT DECEMBER 31, 2018

BALANCE AT DECEMBER 31, 2019

$ 54,209,846$

2,488,907$

466,416$$(54,707 )The accompanying notes are an integral part of the consolidated financial statements.

- 10 -$-$

107,262$-$

1,143,678$$

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

2019
CASH FLOWS FROM OPERATING ACTIVITIES(Loss) Income before income tax
Adjustments for operating activities:
Depreciation expenses
Amortization expenses
Expected credit loss recognized on trade receivables
Net gain on fair value changes of financial assets and liabilities held
for trading
Interest income
Dividend income
Share of profit of associates and joint ventures(Gain) loss 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 on non-current assets held for saleImpairment loss recognized on property, plant, equipment
Loss on inventories and property, plant and equipment
Net (gain) loss on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized on sale - leasebacks
OthersAmortization of unrealized gain on sale-leasebacks
Changes 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
Dividends received- 11 -$(96,817)2018$

3,081,249

32,601,400
198,237
24,096

19,325,083
191,979
49,824(27,580)(417,446)(21,422)(332,305)(32,460)(11,168)(330,710)(9,603)(367,246)
270,597(7,656)
10,462572,026(59,987)
3,340,119
4,608,924
103,775(1,484)-(450,195)
368,992
75,43750,000623,022298,787
1,379,985
3,386,052(13,888)(278,741)

269,682

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
401,190355,311(9,359)(1,304,948)
253,540(100,400)(288,941)
15,763
993,434(97,753)535,2113,256,101(3,310,089)
73,958(205,340)
2,698
28,001,754
301,465
228,636(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)Interest paid
Income tax paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of amortized cost financial assets
Disposal of amortized cost financial assets
Proceeds from disposal of non-current assets held for sale
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in long-term lease receivable
Increase 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)
Acquisition of subsidiaries (Note 30)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIESPayments for buy-back of ordinary shares
Decrease in short-term debts
Proceeds from issuance of bonds payable
Repayments of bonds payable
Proceeds from long-term borrowings
Repayments of long-term borrowings and capital lease obligations
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
Cash dividends paid to non-controlling interests
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES- 12 -

20192018$ (3,124,960)(335,544)$ (1,319,690)(185,208)

37,526,612

27,026,957(2,089,871)
3,447,202
35,692(3,316,078)
71,194(440,443)
218,547(15,658,898)(172,639)
38,636(3,460,496)
1,621,546
688,427(4,608,600)
333,284(265,335)
391,487(14,991,412)(785)(184,223)
59,726

1,866,474-(35,525)(17,413)-

136,769(16,053,122)(20,279,612)

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)(469,393)(120,000)
10,512,000(2,700,000)
18,285,457(28,587,288)
126,578(70,204)(1,193,040)(171,019)(17,614,558)(4,386,909)(336,941)(8,231)(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(In Thousands of New Taiwan Dollars)

2019
NET INCREASE IN CASH AND CASH EQUIVALENTS$

3,521,991

2018$

2,352,205

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

24,937,537

22,585,332

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 28,459,528$ 24,937,537

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

- 13 -(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(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 the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of December 31, 2019 and 2018, CADF and NDF
both 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, 2020.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports
by Securities Issuers (FSC) and the International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)
endorsed and issued into effect by the FSC
Except for the following, the initial application of the amendments to the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by
the FSC did not have material impact on the Group’s accounting policies:
IFRS 16 “Leases”
IFRS 16 provides a comprehensive model for the identification of lease arrangements and theirtreatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4“Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer
to Note 4 for information relating to the relevant accounting policies.
Definition of a lease
The Group elected to apply the guidance of IFRS 16 in determining whether contracts are, or contain, alease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as
containing a lease under IAS 17 and IFRIC 4 are not be reassessed and accounted for in accordancewith the transitional provisions under IFRS 16.

- 14 -

The Group as lessee
The Group recognizes right-of-use assets, or investment properties if the right-of-use assets meet thedefinition of investment properties, and lease liabilities for all leases on the consolidated balance sheets
except for those whose payments under low-value and short-term leases are recognized as expenses ona straight-line basis. On the consolidated statements of comprehensive income, the Group presents thedepreciation expense charged on right-of-use assets separately from the interest expense accrued onlease liabilities; interest is computed using the effective interest method. On the consolidated statementsof cash flows, cash payments for the principal portion of lease liabilities are classified within financing
activities; cash payments for the interest portion are classified within operating activities. Prior to theapplication of IFRS 16, payments under operating lease contracts, including property interest qualified
as investment properties, were recognized as expenses on a straight-line basis. Cash flows for operatingleases were classified within operating activities on the consolidated statements of cash flows. Leased
assets and finance lease payables were recognized on the consolidated balance sheets for contracts
classified as finance leases.
Lease liabilities were recognized on January 1, 2019 for leases classified as operating leases under IAS
17. Lease liabilities are measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at
an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease
payments. The Group applies IAS 36 to all right-of-use assets.
For leases classified as finance leases under IAS 17, the carrying amount of right-of-use assets and leaseliabilities on January 1, 2019 was determined as the carrying amount of the leased assets and financelease payables as of December 31, 2018.
If the Group determines that a sale and leaseback transaction does not satisfy the requirements of IFRS
15 to be accounted for as a sale of an asset, it is accounted for as a financing transaction. If it satisfies
the requirements to be accounted for as a sale of an asset, the Group recognizes only the amount of any
gain or loss which relates to the rights transferred to the buyer-lessor. Prior to the application of IFRS
16, the leaseback portion is classified as either a finance lease or an operating lease and accounted for
differently.
The Group does not reassess sale and leaseback transactions entered into before January 1, 2019 todetermine whether the transfer of an underlying asset satisfies the requirements in IFRS 15 to beaccounted for as a sale. Upon initial application of IFRS 16, the aforementioned transitional provision
for a lessee is applied to the leaseback portion. In addition, for asset accounted for as a sale and afinance lease under IAS 17, the Group continues to amortize any gains on sales over the lease term.

- 15 -

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on
January 1, 2019 was 2.58%. The difference between the (i) lease liabilities recognized and (ii) operatinglease commitments on December 31, 2018 is explained as follows:
The future minimum lease payments of non-cancellable operating leasecommitments on December 31, 2018

$ 78,030,370

Undiscounted amount on January 1, 2019

$ 78,030,370

Discounted amount using the incremental borrowing rate on January 1, 2019
Add: Finance lease payable on December 31, 2018
Add: Adjustments as a result of a different treatment of extension and termination
options
Add: Other
Less: Derivative financial instruments for hedging$ 67,420,164
633,775

Lease liabilities recognized on January 1, 2019

$ 36,296,387

8,191,127
1,970,829(41,919,508)

The Group as lessor
The Group does not make any adjustments to leases in which it is a lessor and accounts for those leases
under IFRS 16 starting from January 1, 2019.
The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16
is set out as follows:

As OriginallyStated on
January 1, 2019

Adjustments
Arising from
InitialApplication

Restated on
January 1, 2019

Prepayments for leases
Refundable deposits
Right-of-use assets
Property, plant and equipment

$

$

$

Total effect on assets$ 165,058,453$ 77,582,030$ 242,640,483

Lease liabilities - current
Lease liabilities - non-current
Finance lease payables
Accrued rent payable
Financial liabilities for hedging - current
Financial liabilities for hedging - non-current$

633,775
90
560
-

$

$

Total effect on liabilities$

634,425$ 77,582,030- 16 -

861,045
1,089,690
163,107,718(861,045)(25,617)78,499,374(30,682)

3,924,776
32,371,611(633,775)(90)
5,947,449
35,972,059

1,064,073
78,499,374
163,077,036

3,924,776
32,371,611
5,948,009
35,972,059$ 78,216,455

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
Effective Date
Announced by IASBNew IFRSs

Amendments to IFRS 3 “Definition of Business”
January 1, 2020 (Note 1)
Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 2)
Reform”
Amendments to IAS 1 and IAS 8 “Definition of Materiality”
January 1, 2020 (Note 3)
Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after their respective effective dates.
Note 2: Business combinations that began after January 1, 2020 and acquisition of assets after the
aforesaid date are subjected to the amendment.
Note 3: The amendment is applied for the annual period beginning after January 1, 2020.
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)

New IFRSs
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 IAS 1 “Clarify the Classification of Liabilities as
Current or Non-current”
Note:

To be determined by IASB
January 1, 2021
January 1, 2022

Unless stated otherwise, the above New IFRSs are effective for annual reporting periods
beginning on or after their respective effective dates.

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.

- 17 -

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:
1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;2) 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); and3) Level 3 inputs are unobservable inputs for an asset or liability.
Current and Non-current Assets and Liabilities
Current assets include:
1) Assets held primarily for the purpose of trading;2) Assets expected to be realized within 12 months after the reporting period; and
3) 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:1) Liabilities held primarily for the purpose of trading;2) 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
3) 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.

- 18 -

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 (i.e. foreign currencies) are recognized at the rates of exchange prevailingat 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.
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.

- 19 -

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.
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.

- 20 -

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.
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.

- 21 -

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.
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.

- 22 -

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.
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.

- 23 -

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.
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.

- 24 -

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 Group entity 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 Group entity 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.
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.

- 25 -

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 Company enters into some derivative transactions that aim to manage interest rates, foreign exchange
rates, fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging
transactions are defined as cash flow hedges. When entering into hedging transactions, the Company has
prepared official documents that describe the hedging relationship between hedging instruments and items
which have been hedged, the objective of risk management, the hedging strategy, and the way to evaluate
the effectiveness of the hedging instrument.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.
The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period as when the hedged item affects profit or loss. If a hedge of a forecasted transaction
subsequently results in the recognition of a non-financial asset or a non-financial liability, the associatedgains and losses that were recognized in other comprehensive income are removed from equity and areincluded in the initial cost of the non-financial asset or non-financial liability.
Starting from 2018, the 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.

- 26 -

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
2019
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.
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.

- 27 -

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.
2018
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.
a. Financial leases
The Group as lessee
Assets held under finance leases are initially recognized as assets of the Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.
Minimum lease payments are apportioned between finance expenses and reductions of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case, they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are
incurred.
b. Sales and leasebacks
For a sale and leaseback transaction, if it meets the condition whereby all the risks and rewards ofownership of the leased asset are essentially transferred to the lessee, the sale and leaseback transaction
is classified as a finance lease. If part of the significant risks and rewards of ownership of the leased
asset remain with the lessor (i.e. the buyer), the sale and leaseback transaction is classified as an
operating lease.
1) Financial leases
This transaction does not actually dispose of the assets. The accounting treatment used is to treat thetransaction as if it did not occur, and the assets are continuously recognized at the book value of theasset before sale.

- 28 -

2) Operating leases
If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If the selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of the selling pricewhich is above fair value shall be deferred and amortized over the period of the lease.
c. Operating leases
1) The Group as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the lessee’s
benefit from the use of the leased asset.
2) The Group as lessee
Operating lease payments are recognized as expenses on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rentals arising under operating leases arerecognized as expenses in the period in which they are incurred.
In the event that lease incentives are received when entering into operating leases, such incentives
are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction ofrental expense on a straight-line basis, except where another systematic basis is more representativeof the time pattern in which economic benefits from the leased asset are consumed.
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.

- 29 -

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.
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.
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.

- 30 -

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.
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 JUDGEMENTS 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.

- 31 -

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.
Depreciation of Property, Plant and Equipment - Flight Equipment
Flight equipment is depreciated on a straight-line basis at rates that can be used to write down their cost to
their estimated residual values at the end of their useful lives. The estimates of the useful lives and residual
values of the flight equipment are made by the Group on the basis of past experience and fleet operation
performance in the industry. Due to changes in the fleet plan, the board of directors of the Company has
decided to change the expected useful lives of four 747-400 (GE) from 20 to 16-17 years since January 1,
2018 in order to meet the economic benefits and number of years of consumption. It is estimated that the
depreciation expense will increase by approximately NT$770 million annually.
Defined Benefit Obligations
The present value of defined benefit obligations at the end of the reporting period are calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgment 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
2019
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

$

2018

483,951
7,206,938$

413,1397,770,200

16,565,821
4,202,818

15,784,323
969,875$ 28,459,528$ 24,937,537

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- 32 -

2019

2018

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

0%-1.9%0.59%-3.55%
0.63%-3.30%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
December 31
2019

2018

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

$

434

$

-

511,758

206,001$ 512,192$ 206,001$$

Financial liabilities held for trading
Derivative financial instruments (not under hedge accounting) foreign exchange forward contracts

11,749221

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

NTD/USD

2019.01.02-2019.01.31

NTD30,923/USD1,000

December 31, 2018
Buy forward contracts

8. FINANCIAL ASSETS AT FVTOCI
Investments in Equity Instruments
December 31
2019

2018

$ 182,356$ 110,445

26,865

21,746$ 209,221$ 132,191

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.

- 33 -

9. FINANCIAL ASSETS AT AMORTIZED COST
December 31
2019

2018

$ 2,355,095$ 3,856,660$$

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

105,586-

The interest rates for time deposits with original maturities of more than 3 months ranged from 0.60% to1.30% and 0.40% to 1.36% as of 2019 and 2018.

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE
December 31
2019
Notes receivable$299,2452018$

598,824

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss$

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

9,667,010(227,306)
9,439,704

8,520,834$ 10,038,528

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.
- 34 -

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, 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$

Not Past Due

Up to 30 Days

31 to 60 Days

61 to 90 Days

Over 90 Days

Expected credit loss rate

0.06%

0.06%

3.67%

21.78%

97.5%

Gross carrying amount
Loss allowance (lifetime
ECLs)$ 7,856,048$ 1,424,421(4,546)(856)

Amortized cost

$ 7,851,502$ 1,423,565$

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$

December 31, 2018$

103,498$(3,796)$

99,702

76,415$(16,642)$

59,773

Total

206,628$ 9,667,010(201,466)(227,306)

5,162$ 9,439,704$

The movements of the loss allowance of trade receivables were as follows:
For the Year Ended December 31
2019
2018
Balance at January 1
Add: Net remeasurement of loss allowance
Less: Amounts written off
Foreign exchange gains and losses
Loss of control of subsidiaries$ 227,306
24,096(32,717)(3)(17)$ 181,868
49,824(2,975)(1,411)-

Balance at December 31, 2018

$ 218,665$ 227,306

11. INVENTORIES
December 31

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
Others20192018$ 7,578,125
571,601
283,933
36,454$ 7,847,082
556,365
227,975
23,288$ 8,470,113$ 8,654,710

The operating costs recognized for the years ended December 31, 2019 and 2018 included losses from- 35 -

inventory write-downs of $327,919 thousand and $371,275 thousand, respectively.

12. NON-CURRENT ASSETS HELD FOR SALE
December 31
2019Long-term equity investments held for sale - Asian Compressor
Technology Services

$

2018

-

$ 46,154

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft
according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original
book value which was higher than the expected sale price and which was recognized as an impairment loss.
However, the actual loss shall be identified by the actual sale price.
In 2019 and 2018, the Company recognized impairment losses of $0 thousand and $75,436 thousand,respectively. In 2019 and 2018, the Company recognized disposal losses of $10,462 thousand and $368,992
thousand, respectively. 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.
Dynasty Holidays
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
2019
2018

Air transportation
Aircraft maintenance

77
100

100
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

Travel businessAirport services

20
49

51
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- 36 -

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, 2019 and2018 of these subsidiaries was reported according to reports that were not reviewed by independent
auditors.
The Group paid $243,743 thousand on March 7, 2018 to acquire an additional 18% of the issued sharecapital of Kaohsiung Catering, Ltd. (Kaohsiung Catering). The Group’s holding of the issued share capitalof Kaohsiung Catering exceeds 50%; therefore, Kaohsiung Catering is listed as a subsidiary because theGroup has control over the investee. For the disclosure of the Group’s acquisition of Kaohsiung Catering,please refer to Note 30.
The board of directors of the Company decided to sell part of the equity of Dynasty Holidays to H.I.S.
Taiwan Co., Ltd. on January 21, 2019, and completed the transaction on January 31, 2109. After the sale ofthe equity, the Group’s holding of the issued share capital decreased from 51% to 20%. Dynasty Holidays
was classified as an associate since the Group lost control of the subsidiary. Therefore, the relevant assets
and liabilities were not consolidated in the current period, and only the profit and loss from January 1, 2019
to January 31, 2019 was consolidated. For the information about the disposal of the subsidiary, please refer
to Note 31.
In order to prepare the listing of Tigerair Taiwan Co., Ltd. and comply with the rules relating to theexamination for public listing, the release of the shares of Tigerair Taiwan Co., Ltd. held by the Company
and Mandarin Airlines was resolved in the shareholders’ meeting of the Company on June 25, 2019, and in
the shareholders’ meeting of Mandarin Airlines on June 27, 2019. The shares shall be subscribed by all
shareholders of the Company and Mandarin Airlines on the basis of the percentage of shareholdings. For
the subscribed shares that the original shareholders waived or for the undersubscribed portion, the chairman
was authorized to contact specific persons to subscribe. The subscription price was set at $41 per share. In
October 2019, the stock price was fully paid and the shares were completely delivered and transferred. The
proceeds from disposal were $1,866,474 thousand, and the related gain on disposal was $1,254,633
thousand and recognized in the capital surplus account.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
December 31

Investments in associates
Investments in jointly controlled entities

2019

2018

$ 1,208,495
1,015,298$ 1,217,863
982,286$ 2,223,793$ 2,200,149

a. The amount of investment in associates were as follows:
December 31
2019

2018

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

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

497,362442,891
233,417
44,193$ 1,217,863

At the end of the reporting period, the proportion of ownership and voting rights in associates held by- 37 -

the Group were as follows:
Proportion of Ownership andVoting Rights
December 31
2019
2018

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

20%
20%
28%
28%
35%

20%
51%
28%
28%
35%

Note:Dynasty Holidays was list as an associate on January 1, 2019.
The investment income of associates accounted for using the equity method were as follows:
2019
China Aircraft Services
Kaohsiung Catering Services
Dynasty Holidays
Airport air Cargo Terminal (Xiamen)
Airport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

2018

$ 10,365
15
21,53525,146
3,387
93,375$ 60,448$

6,402
15,113
22,57132,196
6,895$ 83,177

Other comprehensive income of associates accounted for using the equity method in 2019 and 2018 areboth losses in the amounts of $0 thousand.
The financial statements used as a basis of the amounts of and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2019 and 2018 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.
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
December 31
2019
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

$- 38 -

2018

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

805,157
166,901
2,358
7,870

$ 1,015,298$

982,286

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
2019
2018
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

51%
55%
49%
51%

51%
55%
49%
51%

The Group entered into a joint venture agreement with the Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both parties havethe majority power in the board of directors to pose a motion for veto, and therefore the Group does nothave control.
To enhance the Group’s maintenance capabilities, the Company established a joint venture with the USNORDAM Aerospace Group in December 2017, planning to provide thrust reversers and composite
repair services in Asia under the NORDAM brand. NORDAM has filed for Chapter 11 bankruptcy
reorganization in the USA on July 22, 2018 to solve the business disputation with their cooperative
partner, so their company operation was not impacted. As a result, NORDAM Asia suspended its
operation from October 5, 2018 to October 4, 2019 and resumed business on October 4, 2019. The
Company increased the capital of NORDAM Asia by $35,525 thousand in November 2019.
To expand the Group’s catering business, Kaohsiung Catering entered into a joint venture agreementwith a Japanese brand company to invest in Delica International Co, Ltd., with the Japanese brandcompany having the right to make decisions on operations, and therefore, the Group does not havecontrol.
Details of investment income attributable to investment in jointly controlled entities were as follows:
For the Year Ended December 31
2019
2018
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.

$ 256,899
15,030(70)(2)$ 267,413
16,695(41)
2$ 271,857$ 284,069

Other comprehensive income of associates accounted for using the equity method in 2019 and 2018 arelosses in the amounts of $(32,101) thousand and $(33,242) thousand, respectively.
The financial statements used as a basis of the amounts of and related information on the investments
accounted for using the equity method and the share of profit or loss and other comprehensive incomeof those investments for the years ended December 31, 2019 and 2018 were all independently audited,
except of 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 consolidated financial statements.

- 39 -

15. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Equipment
under FinanceLeasesBuildings

FlightEquipment

13,698,308
57,998(11,803)(227)
28,991$ 263,427,144
2,684,337(20,307,375)
13,661,640-

220,318

229,384

OthersTotal

Cost
Balance at January 1,
2018
Additions
Disposals
Reclassification
Net exchange difference
Gain of acquisitions
through businesscombinations
Balance at December 31,
2018$922,626
16,234$76,704$

26,187,556(1,811,222)
1,428,463
211

$

-

16,230,011
1,868,212(313,727)
103,296
3,003$ 320,465,645
4,610,547(22,444,127)
15,193,172
48,43926,985553,391$

1,015,564$

13,993,585$ 259,695,130$

25,805,008$

17,917,780$ 318,427,067

$

-

$

(6,137,495)(433,450)
10,049(13,977)$ (136,594,765 )(15,960,477)
19,814,544(50,000)
9,283,041-$ (14,142,872)(2,023,924)
1,532,046(72)$(9,972,982)(906,953)
292,136(11,655)(2,543)$ (166,848,114)(19,324,804)
21,648,775(50,000)
9,271,386(16,592)$-$(6,574,873)$ (123,507,657 )$ (14,634,822)$ (10,601,997)$ (155,319,349)$

1,015,564$

7,418,712$ 136,187,473$

11,170,186$

7,315,783$ 163,107,718$

1,015,564(13,065)$

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

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

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

Accumulated depreciationand impairment
Balance at January 1,
2018
Depreciation expense
Disposals
Impairment loss
Reclassification
Net exchange difference
Balance at December 31,
2018
Balance at December 31,
2018, net value
Cost
Balance at January 1,
2019
Additions
Disposals
Reclassification
Net exchange difference
Loss of control ofsubsidiaries
Balance at December 31,
2019-(4,474)$

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
Balance at December 31,
2019, net value

$

-

$

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

1,002,499$

9,055,523$ 130,191,522

$

-

$

$ 145,886,971- 40 -

5,637,427

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 Group recognized impairment losses on aircraft equipment in 2018 of $50,000 thousand. The fair value
was determined based on aircraft conditions and market estimates.
Refer to Note 35 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 2019 and 2018:
December 31
2019

2018

Increase in property, plant and equipment
Capitalized interest paid

$ 3,322,492(6,414)$ 4,610,547(1,947)Purchase of property, plant and equipment paid

$ 3,316,078$ 4,608,600

16. INVESTMENT PROPERTIES
December 31

Carrying amount
Investment properties

2019

2018

$ 2,075,068$ 2,075,345

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.

- 41 -

The fair value of the investment properties held by the Group was $2,506,230 thousand as of both
December 31, 2019 and 2018, respectively. In addition, management assessed that there is no significant
difference in the fair value of December 31, 2019 and 2018.
The above fair value valuation was performed by independent qualified professional valuers, and the future
income evaluated by management was based on market transactions.
All of the Group’s investment properties were held under freehold interest.
Cost

Accumulated

Net Value

Balance at January 1, 2018
Depreciation expense$ 2,082,390-$(6,766)(279)$ 2,075,624(279)

Balance at December 31, 2018

$ 2,082,390$(7,045)$ 2,075,345

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

Accumulated
Amortization

Net Value-$ (1,020,257)(181,943)$ 1,019,345
184,223(181,943)

186,197-(10,036)(540)(7)

176,847
12,331(7)

17. OTHER INTANGIBLE ASSETS

Computer
Software Cost

Relationship
Between
Clients

Balance at January 1, 2018
Additions
Amortization expenses
Acquisitions through businesscombinations
Reclassification
Effects of exchange rate changes$ 2,039,602
184,223-$

Balance at December 31, 2018

$ 2,237,382$

186,197$ (1,212,783)$ 1,210,796

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

686
12,871-

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

- 42 -

18. OTHER ASSETS
December 31
2019

2018

Current
Temporary payments
Prepayments
Restricted assets
Others$296,759
1,690,368
14,618653,966$

556,860
3,028,808
18,623
543,591$

2,655,711$

4,147,882$

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

529,963
1,603,400
1,089,690
100,141
19,33588,224$ 13,171,063$

3,430,753

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
A350-900, ATR72-600, A321neo, A320neo and B777F aircrafts. For details on the aircraft purchase
contracts, refer to Note 36.

19. BORROWINGSa. Short-term debts
December 31
2019

2018

Bank loans - unsecured$ 380,000

Interest rates

0.95%-1.07%$-

b. Long-term borrowings
December 31
2019Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discount$Less: Current portion

Interest rates- 43 -

1,929,827
34,064,099

2018$

9,354,457
36,330,211

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

30,770,000
59,03376,395,635
15,709,487$ 53,514,891$ 60,686,148

0.55%-1.73%

0.92%-1.46%

For information on secured bank loans which were secured by buildings, machinery equipment andflight equipment, refer to Note 35.
Bank loans (New Taiwan dollars) are repayable quarterly, semiannually or in lump sum upon maturity.
Related information is summarized as follows:
December 31

Periods

2019

2018

2008.2.262030.4.25

2007.5.242030.4.25

The Group has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs,
with various maturities until December 2021, were used by the Group to guarantee commercial papers
issued. As of December 31, 2019 and 2018, the commercial papers were issued at discount rates of
1.1300%-1.3380% and 1.0693%-1.2960%, respectively.

20. BONDS PAYABLE
December 31
2019Unsecured 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 - fifth-time issues
Convertible bonds - sixth-time issues$

Less: Current portion and put option of convertible bonds

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

2018$

5,500,000
4,700,000
5,000,000
2,350,000
3,500,000
4,500,000
1,695,900
5,673,710
32,919,610
4,445,900$ 22,052,625$ 28,473,710

Conditions

Rate
(%)

Related issuance conditions were as follows:

Category

PeriodFive-year private unsecured bonds - issued at parin January 2013; repayable in January 2017and 2018; 1.6% interest p.a., payable annually.

2013.01.172018.01.17

Seven-year private unsecured bonds - issued at
par in January 2013; repayable in
January 2019 and 2020; 1.85% interest p.a.,payable annually.
Five-year unsecured bonds - issued at par in
May 2016; repayable in May 2020 and 2021;
1.19% interest p.a., payable annually.

2013.01.172020.01.17

2016.05.262021.05.26- 44 -

Principal repayable in
1.60
January of 2017 and2018; indicator rate;
payable annually.
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.
(Continued)

Category

PeriodFive-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 annually
Five-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 annually

2016.09.272021.09.27

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; 1.8245% discount rate p.a.

2013.12.262018.12.26

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

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

2018.11.302025.11.30

2019.06.212024.06.21

Conditions

Rate
(%)

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 annuallyPrincipal 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 2018
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 held a face value of $300,000 thousand, and the amount was eliminated in the consolidated
financial statements.

- 45 -

The Company issued the fifth issue of 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 100.75% face value on the third
anniversary of the offering date. Because the holders can exercise selling rights on December 26, 2016,
the Company reclassified the bonds payable to “current portion of bonds payable” in December 2015.
The Company paid $994,705 thousand to the holders of the bonds payable who exercised the put
options, and the difference between the payment amount and carrying amount recognized was a loss on
the bonds payable buy back of $41,943 thousand, for which the Company reclassified the remaining
face value to non-current assets.
c. The Company may redeem the bonds at face value between March 26, 2014 and November 16, 2018
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$12.24, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of August 14, 2018, there was adjustment the conversion price to NT$11.38, corporate bonds with aface value of $3,316,800 thousand had been converted to 270,985 thousand units of ordinary shares.
e. The convertible bonds has expired on December 26, 2018, the Company has fully repayable in January
8, 2019, the related capital surplus - share option has reclassified as capital surplus - other.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.8245% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,000,000(518,621)

Liability component at the date of issuance$ 5,481,379

The Company issued the sixth issue of its unsecured convertible bonds, and the issuance conditions were as
follows:
a. The holders may demand a lump-sum payment for the bonds upon maturity.
b. The holders can request that the Company repurchase their bonds at face value on the third anniversaryof the offering date. The holders can exercise the right to sell on January 30, 2021.
c. The Company may redeem the bonds at face value between April 30, 2018 and December 20, 2022
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the former dividend
date and the date of the dividend declaration on record), holders may convert the bonds to theCompany’s ordinary shares. The initial conversion price was set at NT$13.2, which is subject toadjustment if there is a capital injection by cash, share dividend distribution, and the proportion of cash
dividends per share in market price exceeding 1.5%. Because the Company distributed cash dividends
as of July 29, 2019, the conversion price was adjusted to NT$12.6.

- 46 -

The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - options. The effective interest rate of the liability component
was 1.3821% per annum on initial recognition.
Proceeds from issuance
Equity component$ 6,012,000(409,978)Liability component at the date of issuance$ 5,602,022

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

21. LEASING
2019
a. Right-of-use assets - 2019
December 31,
2019
Carrying amounts
Land
Buildings
Flight equipment
Other equipment$

8,153,382
824,955
62,052,701
2,579$ 71,033,617
For Year Ended
December 31,
2019
Additions to right-of-use assets
Depreciation for right-of-use assets
Land
Buildings
Flight equipment
Other equipment$

5,863,625$

376,425
798,933
10,721,575
2,157$ 11,899,090
b. Lease liabilities - 2019
December 31,
2019
Carrying amounts
Current
Non-current$ 2,340,873$ 15,801,724- 47 -

Range of discount rate for lease liabilities (include US lease hedging instruments):
December 31,
2019
Land
Buildings
Flight equipment
Other equipment

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

c. Financial liabilities under hedge accounting
The Group specifics a part of US lease contract as a hedging instruments to avoid exchange fluctuations
is US dollar passenger revenue, and applies the accounting treatment of cash flow hedging. The lease
information is as follows:
Maturity Date
December 31, 20192021.4.15-2028.5.15

Subject

Carrying Value

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

8,577,482
42,420,205

Influence of comprehensive income

For the year ended December 31, 2019

Recognized in
Other
Comprehensive
IncomeReclassified toIncome$1,457,058$ (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, six ERJ190 planes and three
ART72-600 planes for operation, lease period are 6 to 12 years from February 2006 to May 2028. The
rental pricing method is partly a fixed amount of funds, and some of them are floating rents, floating
rents 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 opening of credit letter due to rental of planes:
December 31,
2019
Refundable deposits
Credit guarantees$

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 $873,293 thousand on December 31,
2019.
Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For
details, please refer to Note 36.
- 48 -

e. The Company signed a rental contract for six A321neo with Air Lease Corporation, which is expected
to be introduced between 2021 and 2022.
The Company signed a rental letter of intent for eight A321neo with CALC Lease Corporation, which is
expected to be introduced in 2022.
Tigerair Taiwan Co., Ltd. signed a rental letter of intent for eight A321neo with ICBC Lease
Corporation, which is expected to be introduced in 2021.
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 by sale-and-leaseback 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 for each aircraft are 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,
2019
Short-term and low price lease payment
Total of lease cash outflow$
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.
20181) Sale-leaseback finance leases
December 31,
2018
Minimum lease payments - flight equipment
Within one year
Beyond one year and within five years$ 596,000-

Present value of minimum lease payments$ 596,000

Interest rates

1.0680%

The Group had leased one A330-300 aircraft under sale-leaseback finance leases as of December
31, 2018. The lease terms started from June 2006 to April 2019. During the lease terms, the Groupretained all risks and rewards attached to the aircraft and engines and enjoyed the same substantive
rights as those prior to the transactions. The interest rates underlying all obligations under thesefinance leases were floating. Therefore, the minimum lease payments under the sale-leaseback
aircraft contracts do not include interest expenses.

- 49 -

2) Finance leases
Taiwan Air Cargo Terminal Co. (“TACT”) entered into a terminal construction contract. Refer toNote 36 for the terms of the contract. Dynasty Holiday Co., Ltd. signed a long-term equipment lease
contract, and the lease contract is a finance lease contract.
December 31,
2018
Minimum lease payments - cargo terminal and other
Within one year
Beyond one year and within five years$

37,9982,974
40,972(629)$

40,343$37,3982,945$

40,343

Less: Finance costs
Present value of minimum lease payments
Present value of minimum lease payments cargo terminal and other
Within one year
Beyond one year and within five years

Discount rate

4.756%

Total amount of present value of minimum lease payments
Current
Noncurrent$ 633,398
2,945$ 636,343

3) Operating lease arrangements (include sale-leaseback operating leases)
For the operating lease arrangements, please refer to the consolidated financial statements for theyear ended December 31, 2018.
As of December 31, 2018, the refundable deposits paid by the Group under operating lease
contracts were $693,466 thousand. Some of the guarantees were secured by credit guarantees, andoutstanding credit guarantees as of December 31, 2018 were $1,682,774 thousand.
The future minimum lease payments for the non-cancelable operating lease commitments were as
follows:
December 31,
2018
Up to 1 year
Over 1 year to 5 years
Over 5 years$ 11,785,442
44,559,429
21,685,499$ 78,030,370- 50 -

The lease payments recognized in expense for the current period were as follows:
For the Year
Ended
December 31,
2018
Minimum lease payments$ 11,735,495

22. OTHER PAYABLES
December 31
2019
Fuel costs
Ground service expenses
Repair expenses
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expenses
Others$2018

3,723,213
1,262,878
1,208,875
219,660
2,040,718
1,122,532
509,520
3,100,576$ 13,187,972$

3,822,018
1,167,214
1,031,700
266,268
2,237,409
1,151,578
484,341
3,985,670$ 14,146,198

23. CONTRACT LIABILITIES/DEFERRED REVENUE
December 31
2019
2018
Contract
Contract
Liabilities
Liabilities
Frequent flyer programs
Advance ticket sales$

Current
Non-current

2,895,535
20,401,549$

2,493,551
18,956,569$ 23,297,084$ 21,450,120$ 21,060,773
2,236,311$ 19,546,455
1,903,665$ 23,297,084$ 21,450,120

24. PROVISIONS
December 31
2019

2018

Operating leases - aircraft$ 10,371,857$

8,794,539

Current
Non-current$

360,393
10,011,464$

321,075
8,473,464$ 10,371,857$

8,794,539- 51 -

Aircraft Lease
Contract
Balance at January 1, 2018
Additional provisions recognized
Usage
Effect of exchange rate changes$

8,489,308
3,386,052(3,310,089)
229,268

Balance at December 31, 2018$8,794,539

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

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.

25. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Group adopted a pension plan under the Labor Pension Act (the “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.

- 52 -

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans
were as follows:
December 31
2019

2018

Present value of funded defined benefit obligation
Fair value of plan assets$ 18,457,304(9,022,269)$ 17,464,856(8,661,474)

Deficit (net defined benefit liabilities)$$

9,435,035

8,803,382

Movements in net defined benefit liabilities (assets) were as follows:
Present Valueof the Defined
BenefitObligation

Fair Value ofthe Plan Assets

Net Defined
BenefitLiabilities(Assets)

Balance at January 1, 2018
Service cost
Current service cost
Net interest expense (income)
Recognized in profit or loss
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
Actuarial (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, 2018
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
Others$ 16,149,382$ (8,047,817)$

1,384,213
163,283
1,547,496(82,595)(82,595)

1,384,213
80,6881,464,901-(236,287)(236,287)

15,538-15,538344, 716-

344, 716

727,899
1,088,153(1,210,839)(109,336)
17,464,856
1,321,600
161,808
1,483,408(236,287)(1,486,550)
1,210,839(19,064)(8,661,474)(86,234)(86,234)

727,899
851,866(1,486,550)(128,400)
8,803,382
1,321,600
75,574
1,397,174-(308,223)(308,223)

15,959-15,959440,374-

440,374

633,683
1,090,016(1,452,632)(128,344)(308,223)(1,418,970)
1,452,632-

633,683
781,793(1,418,970)(128,344)

Balance at December 31, 2019

$ 18,457,304$ (9,022,269)- 53 -$

8,101,565

9,435,035

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.
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

2019

2018

0.63%-1.10%
1.00%-2.50%

0.86%-1.35%
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
2019
Discount rate(s)0.5% increase
0.5% decrease
Expected rate(s) of salary increase
0.5% increase
0.5% decrease

$

2018

(939,308)
1,000,771$

969,324(927,180)(777,193)
841,488
811,485(760,793)

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
2019

2018

The expected contributions to the plan for the next year

$ 930,963$ 916,927

The average duration of the defined benefit obligation

8-11 years

8-12 years- 54 -

26. EQUITY
a. Share capital
Ordinary shares
December 31

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

2019

2018

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

6,000,000$ 60,000,000$ 54,209,846

b. Capital surplus
December 31
2019Issuance 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$

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

2018

$

315,1143,303
33,513
11,747955
409,978
466,604$ 1,241,214

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
According to amended Company Act, where the Company made profit in a fiscal year, the profit shallbe 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 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 demand, 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.

- 55 -

The Company shall set aside profits as a legal reserve untill the legal reserve amounts to the authorized
capital. The legal reserve could be used for making good the 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
shares with due consideration of finance, marketing and management requirements in accordance withthe laws and regulations.
The distribution of dividends should be resolved and recognized in the shareholders’ meeting in thefollowing year.
1) Appropriation of earnings in 2017
The appropriation of earnings for 2017 was resolved in the shareholders’ meeting on June 27, 2018.
The appropriations and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Special reserve
Cash dividends$

145,831
118,810
1,193,670

Dividends Per
Share (NT$)$0.2181820086

2) Appropriation of earnings in 2018
The appropriation of earnings for 2018 was resolved in the shareholders’ meeting on June 25, 2019.
The appropriation and dividends per share were as follows:
Appropriationof Earnings
Legal reserve
Cash dividends$

114,493
1,136,278

Dividends Per
Share (NT$)$0.20960737

Company reversed special reserve of $105,843 thousand.
3) Offsetting deficits in 2019
On March 18, 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 deficits for 2019 is subject to the resolution of the shareholders in theshareholder’s meeting to be held on June 23, 2020.

- 56 -

d. Other equity items
The movement of other equity items is as follows:

Balance at January 1,
2018
Adjustments on initial
application of IFRS 9
Balance at January 1,
2018 after IFRS 9
adjustments
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at
FVTOCI
Effect of change in tax
rate
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodTransfers of initialcarrying amount ofhedged items
Balance at December 31,
2018
Balance at January 1,
2019
Exchange differences ontranslating foreign
operations
Cumulative loss onchanges in fair value ofhedging instruments
Cumulative gain onchanges in fair value ofhedging instruments
reclassified to profit orloss
Unrealized gain on
financial assets at
FVTOCI
Effects of income tax
Other comprehensive
income (loss)
recognized in the
periodDisposal of subsidiaries
Transfers of initialcarrying amount ofhedged items
Balance at December 31,
2019

Exchange
Differences on
Translating
Foreign
Operations

Unrealized
Gain (Loss) on
Available-forsale Financial
Assets

Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI

Cash Flow
HedgesGain (Loss) on
Hedging
Instruments

$

$

$

$

$

(34,986)

1,774-(74,429)

-

Total

$

(107,641)-(1,774)42,351

74,429(74,429)

40,577(34,986)-

42,351-(74,429)(67,064)

29,897----29,897----

77,43577,435----31,731

31,731

-

-

930

-

-

930

1,198
(5,773)-(1,209)
547

-

2,530
(24,117)2,519(29,343)

25,322-

268-

87,579113,169

-

-

-

-

12,118

12,118$(9,664)$-$42,619$-$25,268$58,223$(9,664)$-$42,619$-$25,268$58,223$(65,246)

-

-

-

-

(65,246)

-

-

-

-

1,378,603

1,378,603

-

-

-

-

20,01420,014

11,835-79,392(14,854)-(279,604)

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

64,538105-

1,119,013-

1,130,140
8,473

-

-

-

-

(603)

(603)

-

$ 1,143,678$ 1,196,233(54,707)$-- 57 -$

107,262$

e. Non-controlling interests
For the Year Ended December 31
2019
2018
Beginning balance
Net 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 gain (loss) arising on changes in fair value ofhedging instruments reclassified to profit or loss
Effect on income tax
Disposal of subsidiaries
Disposal of part equity of subsidiaries
Acquisition of non-controlling interests in subsidiaries
Dividends paid by subsidiaries
Ending balance$ 2,965,512
524,796(7,706)(100,136)(13,227)$ 2,134,282
482,323(3,330)(69,654)
(46)

8,528
22,586(89,955)(24,957)
619,387(416,438)

105
26,888(72,925)565,963(171,019)$ 3,578,345$ 2,965,512

f. Treasury shares
Treasury shares are the Company’s shares held by its subsidiaries as of December 31, 2019 and 2018
were as follows:(Shares in Thousands)

Purpose of Treasury Shares

Buy Back toWrite off

Number of shares, January 1, 2018
Addition during the year
Reduction during the year

Company’s
Shares Held by
Its Subsidiaries

Total

50,000(50,000)

2,889
-

2,889
50,000(50,000)

Number of shares, December 31, 2018

-

2,889

2,889

Number of shares, January 1, 2019
Addition during the year
Reduction during the year

-

2,889
-

2,889
-

Number of shares, December 31, 2019

-

2,889

2,889

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 18,796
7,376$ 18,796
7,376$ 26,172$ 26,172(Continued)

December 31, 2019
Mandarin Airlines
Dynasty Aerotech International Corp.

2,075
814

- 58 -

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 22,821
8,956$ 22,821
8,956$ 31,777$ 31,777(Concluded)

December 31, 2018
Mandarin Airlines
Dynasty Aerotech International Corp.

2,075
814

The above acquisitions by subsidiaries of the Company’s shares in previous years was due toinvestment planning.
The shares of the Company held by its subsidiaries were treated as treasury shares. The subsidiaries can
exercise shareholders’ right on these treasury shares, except for the right to subscribe for theCompany’s new shares and voting rights.
To maintain the Company’s credit standing and shareholders’ rights and interests, the board of directors
decided to buy back shares of the Company from Taiwan Stock Exchange at a price from $9 to $14 pershare. The expected period of purchase is from August 10, 2018 to October 9, 2018. As of 50,000
thousand shares had been repurchased. The treasury shares held by the Company has retired on
December 18, 2018, share capital decreases $500,000 thousand, additional paid-in capital in excess of
par-ordinary share decreases $2,906 thousand and additional paid-in capital - treasury share increases$33,513 thousand. Under the Securities Exchange Act, the treasury shares held by the Company cannot
be pledged and are not entitled to dividends distribution and voting rights, etc.

27. NET INCOME
a. Revenue
For the Year Ended December 31
2019
2018
Passenger
Cargo
Others$ 111,413,435
43,793,256
13,237,469$ 108,345,648
49,847,065
12,518,894$ 168,444,160$ 170,711,607

b. Other income
For the Year Ended December 31
2019
2018
Interest income
Subsidy income
Dividend income
Others- 59 -$ 417,446
38,621
21,422
241,499$ 330,710
11,2009,603
254,940$ 718,988$ 606,453

c. Other gains and losses
For the Year Ended December 31
2019
2018
(Loss) gain on disposal property, plant and equipment(Loss) gain on non-current assets held for saleNet gain (loss) on financial assets at FVTPL
Gain (loss) on disposal of investments
Gain (loss) on foreign exchange, net
Impairment loss on non-current assets held for saleImpairment loss on property, plant and equipment
Loss on sale and - leaseback
Others$32,460(10,462)
27,5807,656(141,611)(103,775)(285,660)$ (270,597)(368,992)
11,168450,195
41,843(75,437)(50,000)(273,028)$ (473,812)$ (534,848)

d. Finance costs
For the Year Ended December 31
2019
2018
Interest expense
Bonds payable
Bank loans
Interest on obligations under financial leases
Loss on derivatives designated as hedging instruments in cash
flow hedge accounting relationships reclassified from equity
to profit or loss$

429,457
771,280-$

412,422
949,483
18,0802,139,382-$ 3,340,119$ 1,379,985

Capitalization interest$$

Capitalization rate

1.01%-1.35%

46,52841,925

1.16%-1.45%

e. Depreciation and amortization expense
For the Year Ended December 31
2019
2018
Property, plant, equipment
Right of use assets
Investment properties
Intangible assets$ 20,702,033
11,899,090
277
198,237$ 19,324,804
279
191,979

Depreciation and amortization expense$ 32,799,637$ 19,517,062

An analysis of depreciation by function
Operating costs
Operating expenses$ 30,927,997
1,673,403$ 18,648,142
676,941$ 32,601,400$ 19,325,083(Continued)- 60 -

For the Year Ended December 31
2019
2018
An analysis of amortization by function
Operating costs
Operating expenses$

12,380185,857$

10,597
181,382$

198,237$

191,979(Concluded)

f. Employee benefits expense
For the Year Ended December 31
2019
2018
Post-employment benefits
Defined contribution plan
Defined benefit plan

Other employee benefits
Salary expenses
Personnel service expenses

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

574,809
1,397,174$

538,915
1,464,901$

1,971,983$

2,003,816$ 20,813,757
5,506,867$ 20,910,604
5,791,627$ 26,320,624$ 26,702,231$ 23,699,685
4,592,922$ 23,857,265
4,848,782$ 28,292,607$ 28,706,047

According to the Company’s articles, the Company accrued employees’ compensation at rates of noless than 3% of the net profit before income tax and employees’ compensation, and accrued profit
bonus at a certain rate of profit before tax on the basis of the collective agreement signed with the China
Airlines Employees Union. The employees’ compensation and profit bonus for the year ended
December 31, 2018 was $51,656 thousand and $594,810 thousand. For the year ended December 31,
2019, the Company has experienced a deficit, and therefore, no employee’s compensation 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 employees’ compensation and remuneration of directors and supervisors resolved by
the Company’s board of directors in 2019 and 2018 is available on the Market Observation Post System
website of the Taiwan Stock Exchange.

- 61 -

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
2019
2018
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
Effect of income tax
Income tax expense recognized in profit or loss$$

523,670(5,546)
378$

264,527
10,59235

35,1491,465,482

24,534-

1,861(933,932)

578,185$

808,565

A reconciliation of accounting profit and income tax expense is as follows:
For the Year Ended December 31
2019
2018
Profit before tax
Income tax expense calculated at the statutory rate (% for 2019,20% for 2018)
Effect on different tax of subsidiaries govern by other region
Effect on adjustment to income tax
Non-deductible expenses in determining taxable income
Tax-exempt income
Income tax on unappropriated earnings (5%)
Income basic tax
Oversea 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$

(96,817)$ 3,081,249$(19,362)
1,680

$

$

616,250
7,391

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

20,662(25,730)35
22,786586,135(5,546)

1,088,650
10,592

24,534(334)

1,861(933,932)-

578,185$

808,565

The Income Tax Law of the ROC was amended and, starting from 2018, the corporate income tax rate
was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable tounappropriated earnings was reduced from 10% to 5%.

- 62 -

b. Income tax recognized in other comprehensive income
2019

2018

Deferred tax
Recognized in other comprehensive income
Translation 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
Effect of income tax$

Total income tax recognized in other comprehensive income

13,454(14,854)$(4,657)547(278,664)
156,359-(24,128)
187,368
10,893$ (123,705)$ 170,023

c. Deferred tax assets and liabilities
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)- 63 -

For the year ended December 31, 2018

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$ 1,381,538$$

Exchange
Difference$

Acquisition
Consolidated

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plans
Frequent flyer
programs
Maintenance reserves
Allowance for
reduction of
inventory
OthersLoss carryforwards

180,560

195,742

-

$

7,212

$ 1,765,052

426,106
1,507,285

83,954
304,563---510,060
1,811,848

239,115
1,143,871
821,417

96,596(397,832)(821,417)(18,546)
-

479
-

1,427
-

335,711729,399$ 5,152,070$ 5,519,332$(553,576)$

177,196

$

479

$

8,639

$

$

(898)

$

-

$

-

$

-

Deferred tax liabilities
Temporary differences
Unrealized foreignexchange gains
Depreciation difference
from fixed assets
Others (Note)

31,010165,630
$

Note:

915

197,555(31,010)
11,743$(20,165)

7,173
$

7,173

3,884
$

3,884

$

$

-

17
188,430$

188,447

Included adjustments on initial application due to tax rate changes $6,873 thousand fromIFRS 9.

Deductible temporary differences, and unused loss carryforwards for which no deferred tax assets havebeen recognized in the consolidated balance sheets.
December 31
2019
Loss carryforwards
2019
2021
2022
2025
2026
2027
2028
2029

Difference in depreciation- 64 -

2018$

2,899,496
619,799
18,124
546,899
68,415
1,706,913
955,250$ 11,790,770
2,899,496
620,769
18,124
818,198
68,415
1,513,001-$

6,814,896$ 17,728,773$

1,348,096$

90,350

d. Unused tax loss carryforwards as of December 31, 2019 were as follows:
UnusedAmountExpiry Year
China Airlines, Ltd.
2021
2022
2026
2028
2029

$ 2,899,496
619,799
202,699
1,519,941
760,157$ 6,002,092

Mandarin Airline Co., Ltd.
2026
2028

$

312,724
83,821$

396,545$

18,124
31,476
68,415
103,151
195,093$416,259

Taiwan Aircraft Maintenance And Engineering Co., Ltd.
2025
2026
2027
2028
2029

e. Income tax assessment
The income tax returns for 2017 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
2019
2018
Basic earnings per share
Diluted earnings per share$$(0.22)(0.22)

$
$

0.33
0.32

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

$ (1,199,798)$ 1,790,361-

81,463

Earnings used in the computation of diluted earnings per share$ (1,199,798)$ 1,871,824- 65 -

For the Year Ended December 31
2019
2018
Thousand unit
Weighted average number of ordinary shares in computation of basic
earnings per share
Effect of potentially dilutive ordinary shares:
Convertible bonds
Employees’ compensation or bonuses issued to employees
Weighted average number of ordinary shares used in thecomputation of diluted earnings per share

5,418,096

5,453,579-

457,4818,821

5,418,096

5,919,881

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. BUSINESS COMBINATIONSAs stated in Note 14, the other disclosures of the Group’s acquisition of Kaohsiung Catering on March 7,
2018 are as follows:a. Acquisition-related cash amounting to $243,743 thousand.
b. Assets acquired and liabilities assumed at the date of acquisition.
AssetsCurrent assets (included cash and cash equivalents of $380,512)
Property, plant and equipment
Intangible assets
Other assets
Total assets
Liabilities
Identifiable net assets$

918,033
553,390
186,883
49,4791,707,785(486,356)$ 1,221,429

c. The Company acquired the control of Kaohsiung Catering (the date of acquisition), and the 35.78%
equity held by the equity method was remeasured at the fair value of the acquisition date and thedifference recognized in gain on disposal of investment is $69,671 thousand.
d. The non-controlling interest of Kaohsiung Catering (46.33% of equity) was valued $565,888 thousand;at the fair value of the identifiable net assets attributed to the non-controlling interest on the date ofacquisition.
e. The bargain purchase benefit of $26,615 thousand of Kaohsiung Catering (the date of acquisition) was
measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s
previously held equity interests in the acquiree over the net of the acquisition-date amounts of theidentifiable assets acquired and the liabilities assumed.

- 66 -

f. Impact of acquisitions of the Group
From the acquisition date, the operating results from the acquired Company, which are included in the
consolidated statements of comprehensive income, are as follows:
Kaohsiung
Catering
Revenue
Profit$ 1,823,950$ 229,665

Had these business combinations been in effect at the beginning of the annual reporting period, theGroup’s revenue from continuing operations would have been $171,039,102 thousand and the profit
from continuing operations would have been $2,310,159 thousand. This pro-forma information is forillustrative purposes only and is not necessarily an indication of the revenue and results of operations of
the Group that actually would have been achieved had the acquisition been completed on January 1,
2018, nor is it intended to be a projection of future results.

31. DISPOSAL OF SUBSIDIARIESOn January 21, 2019, the board of directors of the Company decided to sell part of Dynasty Holidays to
H.I.S. Taiwan Co., Ltd. for disposal price of $34,036 thousand and a disposition of $7,656 thousand. Afterthe disposal, the proportion of ownership decrease from 51% to 20%, loss control to the subsidiary.
a. Consideration received from disposals
Consideration received in cash and cash equivalents$ 34,036

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

Net assets disposed of$ 50,934

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

Gain on disposal

$

7,656

d. Net cash inflow on disposal of subsidiaries
Consideration received in cash and cash equivalents
Less: Cash and cash equivalent balances disposed of$ 34,036(51,449)$ (17,413)- 67 -

32. 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.

33. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments
1) 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
2019

2018

Carrying
AmountFair Value

Carrying
AmountFair Value$ 32,052,625
67,663,783$ 32,062,874
67,663,783$ 33,919,610
76,395,635$ 31,651,865
74,404,225

Financial liabilities
Bonds payable
Loans and debt

Some long-term borrowings and capital lease obligations are floating-rate financial liabilities, so
their carrying amounts are their fair values. As of December 31, 2019 and 2018, the fair values oflong-term borrowings and private bonds with fixed interest rates are estimated at the present valueof expected cash flows discounted at rates of 0.67% and 0.68%, respectively, prevailing in themarket for long-term borrowings (Level 2). Fair values of bond payable trading in OTC and basedon quoted market prices (Level 1).
2) Fair value measurements recognized in the balance sheets
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:a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;b) 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- 68 -

c) 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, 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

-

$

Total

-

434

$

511,758-434$

511,758

$

434

$

-

$

512,192

$

-

$

-

$

26,865$

26,865--

182,356

182,356

$

-

$

-

$

209,221$

209,221

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

December 31, 2018
Level 1
Financial assets at
FVTPL
Domestic money
market funds$

206,001- 69 -

Level 2$

Level 3

-

$

Total

-

$

206,001(Continued)

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

Level 2-$

Level 3

-

-

$

-

Total

21,746$

110,445

21,746
110,445

$

-

$

-

$

132,191$

132,191

Financial liabilities at
FVTPL
Derivative
instruments

$

-

$

221

$

-

$

221

Financial assets forhedging$-$

28,005

$

4,901

$

32,906

Financial liabilities forhedging

$

-

$

560

$

-

$

560
(Concluded)

There were no transfers between Levels 1 and 2 in the current periods.
d) Valuation techniques and inputs applied for Level 2 fair value measurement
Financial Instruments
Derivatives - foreign exchange
forward contracts andinterest rate swaps

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.

e) 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.

- 70 -

The movements of Level 3 financial instruments are as follows:

Multiplicator

Liquidity
Discount

0.75-13.23
0.74-15.29

80%
80%

Derivative
Instruments

EquityInstruments

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

Balance at January 1, 2018
Adjustments on initial application of IFRS 9
Other comprehensive income recognized during theperiod$-Balance at December 31, 2018$

December 31, 2019
December 31, 2018$

84,07547,510

4,901

606

4,901

$ 132,191

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.
b. Categories of financial instruments
December 31
2019

2018

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

512,192
9,626
41,479,556
209,221$206,001
32,90640,496,618
132,191

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

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

221
560
127,271,892

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, other financial assets 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.

- 71 -

c. 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.
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 a one US
dollars 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 a increase in pre-tax profit and increase in pre-tax othercomprehensive income gain and losses for the year ended December 31, 2019 of $105,266
thousand and $1,612,256 thousand and a decrease in pre-tax profit and decrease in pre-tax othercomprehensive income gain and loss for the year ended December 31, 2018 of $91,397
thousand and $13,620 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.
- 72 -

For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notionalamount, useful life and underlying asset) of the foreign exchange forward contracts and theircorresponding hedged items are the same, the Group performs a qualitative assessment of theeffectiveness, and it is expected that the value of the foreign exchange forward contracts and thevalue of the corresponding hedged items will systematically change in the opposite direction in
response to movements in the underlying exchange rates.
The following table summarizes the information relating to the hedges of foreign currency risk.
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 prepaymentsforward 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

Carrying AmountAsset
Liability

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

$

38

$

8,491

32

10,19377

18,385The abovementioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals in U.S. dollars,
aviation fuel and aircraft prepayments) are $(8,453) thousand, $(10,161) thousand and$(18,308) thousand, respectively.
December 31, 2018
Hedging Instruments
Cash flow hedge
Aircraft rentals forward exchange
contracts

Currency

NTD/USD

Notional
AmountMaturity

Forward Rate

NTD2,265,231/
USD13,620

2019.1.72019.12.26

28.3-30.9

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging/liabilities forhedging$ 28,005$

560

The above mentioned hedging instruments continue to be applied to hedging accounting. The
book value of other equity which belongs to each hedging item (aircraft rentals in U.S. dollars
and Aircraft prepayment) are $27,445 thousand.
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:

Increase in operating costs or exchange loss.

- 73 -

AmountReclassified toProfit and Lossand theAdjusted Line
Item

(Note)

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.
For the year ended December 31, 2018
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedge
Aircraft rentals
Aircraft prepayments

Note:

$

AmountReclassified toProfit and Lossand theAdjusted Line
Item

80,44023,884$ (22,415)-$ 104,324$ (22,415)(Note)

Increase in operating costs.

And the amount of gains and losses on hedging instruments for the year ended December 31,
2018 reclassified from profit or loss to prepayments for equipment was $12,118 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

2019

2018

$ 91,414,806
77,821,887$ 34,919,610
75,031,978

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 one yard (25 basis) points higher 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.
Had interest rates increased one yard (25 basis) points higher and had all other variables been
held constant, the Group’s pre-tax profit for the year ended December 31, 2018 would havedecreased by $187,580 thousand.
- 74 -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, 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

$

9,479

$

3,955

Hedge accounting is continued to be applied to the abovementioned hedging instruments
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $5,524 thousand.
December 31, 2018
Hedging Instrument
Cash flow hedges fuel options

Currency

USD

Notional
Amount

NT$4,901

Maturity

2019.1.312019.12.31

Forward Rate

US$72-US$88

Line Item in
Balance Sheet

Carrying AmountAsset
Liability

Financial assets forhedging

$

4,901

$

-

Hedge accounting is continued to be applied to the abovementioned hedging instruments
continue to be applied to hedging accounting. The carrying amount of other equity which
belongs to each hedging item (fuel payments) is $4,901 thousand.
For the year ended December 31, 2019
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedges - fuel options
Note:

$

623

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

Increase in operating costs.

For the year ended December 31, 2018
Hedging Gain
(Loss)
Recognized in
Other
Comprehensive
IncomeComprehensive Income
Cash flow hedges - fuel options
Note:

$

Increase in operating costs.

- 75 -

4,901

AmountReclassified toProfit and Lossand theAdjusted LineItem$

(9,421)(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
2019
2018
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%

$

-

$

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.
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.

- 76 -

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

1.16131.90583.11312.2573-

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 to 5 Years

Over 5 Years$$

8,949,194

December 31, 2018
The Weighted
Average
Effective
Interest Rate(%)
Lease liabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Hedging instruments
Bonds payable

1.3104

Less than 1
Year$641,5243,024-

1.8105

14,853,360

42,143,959

20,810,464

0.1034
1.39052,000,517
239,138
5,999,321

30,835,449

1,051,418$ 23,733,860$ 72,982,432$ 21,861,882- 77 -

Loan commitments
December 31

Unused bank loan limit (unsecured)

2019

2018

$ 18,422,000$ 17,337,000

34. RELATED-PARTY TRANSACTIONS
The transactions, accounts 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
Kaohsiung Catering Services
China Aircraft Service
Airport Air Cargo Terminal (Xiamen) Co., Ltd.
Airport Air Cargo Service (Xiamen) Co., Ltd.
Eastern United International Logistics (Hong Kong)
China Pacific Catering Services
China Pacific Laundry Services
NORDAM Asia Ltd.
Delica International Co., Ltd.
China Aviation Development Foundation
Others

Associate (become associate in January 2019)
Subsidiary (become subsidiary in March 2018)
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

For the Year Ended December 31
2019
2018
$

25,457$28,670$$1,239
42,457$$523
41,410c. Purchases
For the Year Ended December 31
2019
2018

Related Party Type
Major shareholder of the Company
Associate
Joint venture investment$
56,474$ 414,106$ 1,911,091- 78 -$
64,188$ 501,609$ 1,912,995

d. Accounts receivable - related parties (generated by operations)
December 31
Related Party Type2019

Joint venture investment
Major shareholder of the Company

2018

$

7,760
2,588

$

7,589
1,454

$

10,348$

9,043

The receivables are not guaranteed, and there is no allowance for doubtful accounts related to accounts
receivable - related parties. The payment periods of such accounts were within 30 to 90 days, and there
are no overdue payments.
e. Accounts payable - related parties (generated by operations)
December 31
Related Party Type2019

Associate
Joint venture investment
Major shareholder of the Company

2018

$

51,333484,700
5,982$

54,948474,4993,368$

542,015$532,815

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 on usage
hours. In 2019 and 2018, the Company had paid rentals of about $56,474 thousand and $64,188
thousand, respectively.
g. Endorsements and guarantees
December 31
2019

2018

Authorized
AmountActualAmount Used

Authorized
AmountActualAmount Used

$ 3,850,000
1,080,000
3,012,668
2,000,000$ 2,129,400
685,444
1,279,827$ 3,850,000
1,080,000
1,081,792
2,000,000$ 2,339,700
418,491
605,457

The Company
CAL Park
Taiwan Air Cargo Terminal
Tigerair Taiwan
Taiwan Air Craft Maintenance- 79 -

h. Compensation of key management personnel
For the Year Ended December 31
2019
2018
Short-term employee benefits
Post-employment benefits$

39,6932,362$

44,551
3,295$

42,055$47,846

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

35. 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

2019

2018

$ 31,260,801
71,033,617$ 42,066,242-

130,052

169,925$ 102,424,470$ 42,236,167

36. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2019, except for the disclosures stated in other notes, the Group had commitments andcontingent liabilities (except for those mentioned in other notes) as follows:a. For operation needs, the board of directors of Mandarin Airlines resolved to enter into a contract to buy
six ATR72-600 aircraft, and the total list price of the six aircraft was $120,000 thousand. The expected
delivery period ranges from June 2018 to June 2020, as of December 31, 2019, four of the aircraft has
been handed over to the company, and the total list price of the lefts two aircraft was $40,000 thousand,which has been paid in the amount of US$8,314 thousand (recognized as prepayments for aircraft).
b. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. 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.

- 80 -

As of December 31, 2019, TACT had signed the following construction contracts with unrelatedparties:

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan

Cargo Terminal Expansion Construction Consultant
Contract

Contract
Amount (VAT
Included)$ 552,285

As of December 31, 2019, the cumulated consultant service expense and construction equipment had
amounted to $481,776 thousand (VAT included) and $5,212,622 thousand (VAT included),
respectively. Upon completion of the projects, the amount of $468,755 thousand (VAT included) and$5,200,780 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments were recognized under construction in progress.
Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation when thechartered operating license expires.
TACT should pay royalties to Taoyuan Airport Corporation and the CAA during the charteredoperation period. The calculation is based on annual sales (including operating and non-operating
revenue but excluding the rental revenue from specific districts), and Taoyuan Airport Corporation and
the CAA have the option to adjust the royalty rates every 3 years starting from the date of transfer of thechartered operation rights on the basis of actual revenue and expenditures. The current royalty rate is
6%.
c. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights on
this contract from the CAA. The contract is effective for 50 years (consisting of the development stage
and operating period) from the contract date. Three years before contract expiry date, CAL Park has thefirst option to renew the contract once with a 20-year extension.
CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.
CAL Park should pay land rentals on the date of the registration of surface rights. The rental rates forthe development stage differ from those for the operation period. The rental rates should follow Article
No. 2 of the “Regulations for Favorable Rentals Regarding Public Land Lease and Superficies inInfrastructure Projects,” which states that rental calculation in the development stage should include theland value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of theamount based on the National Building Land Rental Standard plus land value tax, value-added tax andthe necessary maintenance fee.
During the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment execution proposal. If the sales and business tax declared and filed by a business entity
for a single year exceeds 10% of the operating revenue as estimated in the financial plan in its
investment execution proposal, CAL Park should pay additional royalties at 10% of this excess.

- 81 -CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry date of the chartered period. If CAA decides not to keep thebuilding and equipment on the base area, CAL Park should remove all related building and equipment
within three months after the expiry date.
d. The Company failed to mediate labor disputes with the labor union. After obtaining the right to strike,the labor union went on strike on February 8, 2019, and the flights resumed normal operation on
February 14, 2019. A total of 214 flights was cancelled and the accumulated revenue loss was about$500 million. The initial estimated compensation for customer losses and other expenditures were about$54 million (recognized as operating cost).
e. 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, 2019, the list price has been paid in the amount of US$17,014 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.
f. 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 30, 2019, the list price has been paid in the amount of US$241,650 thousand (recognized as
prepayments for aircraft).
g. In September 2019, Tigerair Taiwan Co., Ltd. signed a contract with Airbus S.A.S. to purchase sevenA320neo aircraft and an option to purchase two A320neo aircraft. The total list price of the sevenaircraft is US$729,746 thousand, and the list price of the option to purchase two aircraft is US$208,499
thousand. The expected delivery period of the seven aircraft ranges from 2025 to 2028. As of December
30, 2019, the list price has been paid in the amount of US$9,324 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.

37. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
By the end of January 2020, the Coronavirus that originated from Wuhan, the capital city of Hubei province
in China, became a pandemic. The Company has complied and continues to comply with the travel alerts
issued by the Taiwan Centers for Disease Control and has cancelled flights between several countries like
China, Hong Kong, Japan and Korea. Other flights have flexible capacity depending on the reduction ofdemand. So far, the air transport services for passengers have been severely affected. In addition toadjusting the operation, the Company also takes measures about funding assistance, human resources,
reducing expenditure, and asks the government for help in three main areas including guarantee for its
operation, relief from the burden, and a recovery plan.

- 82 -

38. 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, 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

Exchange Rate

Carrying
Amount532,196
20,519302,930
6,479,942
394,50330.7692
35.21133.92310.27784.4803$ 16,375,237
722,514
1,188,425
1,800,967
1,767,491

441,798
7,806
79,716
5,586,337
150,536

30.7692
35.21133.92310.27784.4803

13,593,777
274,873
310,978
1,552,067
674,446

Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY
December 31, 2018
Foreign
Currencies (InThousands)
Financial assets
Monetary items
USD
EUR
HKD
JPY
CNY

$

Financial liabilities
Monetary items
USD
EUR
HKD
JPY
CNY

- 83 -

For the years ended December 31, 2019 and 2018, the Group’s net foreign exchange gain (losses) were$(141,611) thousand and $41,843 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 group entities.

39. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided: None
2) Endorsements/guarantees provided: Table 1 (attached)
3) Marketable securities held: Table 2 (attached)4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: Table 3 (attached)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)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 8)
b. Investment in mainland China: Table 7 (attached)c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 8 (attached)- 84 -

40. 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, 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$$$ 209,397,850$ 15,915,060(6,317,254)

2,665,821
417,446(96,817)$ 218,995,656
2,223,793
71,828,530

Total assets$ 293,047,979

AirTransportation

For the Year Ended December 31, 2018
Adjustments
Othersand Write-offs

Operating revenue$ 167,370,925$ 10,430,156$(7,089,474)

Operation profit and losses
Interest revenue
Investments income accounted forusing the equity method
Revenue
Financial costs
Expenses$$$(24,617)2,617,116

1,429,884

Total$ 170,711,607$

4,022,383
330,710367,246
157,301(1,379,985)(416,406)

Profit before income tax
Identifiable assets
Investments accounted for using
the equity method
Assets$ 168,444,160

332,305495,249(3,340,119)(667,519)

Profit before income tax
Identifiable assets
Investments accounted for using
the equity method
AssetsTotal$$ 154,007,329$ 11,036,945

138,787

3,081,249$ 165,183,062
2,200,149
62,753,370

Total assets$ 230,136,582- 85 -

b. Geographical segment
The geographical segment information of the Company and its subsidiaries in 2019 and 2018 are listed
below:For the Year Ended December 31, 2019

Operating revenue
Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
ExpensesAmerica

Northeast Asia

Southeast Asia

EuropeAustralia$

40,324,160$

39,232,038$

33,354,405$

15,638,657$

7,073,170$

21,790,943$(507,237 )$

2,537,003$(3,497,592 )($

868,091 )$(139,573 )$

1,913,140

Domestic

Adjustment andEliminations

Consolidation$

18,146,403$(7,115,616 )$ 168,444,160$

3,314,617($

86,446 )China

2,665,821
417,446

332,305495,249(3,340,119 )(667,519 )Profit before
income tax
Identifiable assets
Investments
accounted forusing the equity
methodAssets$$$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

For the Year Ended December 31, 2018

Operating revenue
Operation profit
and losses
Interest revenue
Investments
incomeaccounted forusing the equity
methodRevenue
Interest expense
ExpensesAmerica

Northeast Asia

Southeast Asia

EuropeAustralia$

43,278,890$

38,464,450$

34,132,301$

16,092,452$

6,760,146$

22,114,227$

582,721$2,717,255$(2,412,823 )($

756,263 )$(904,416 )$2,454,935

Domestic

Adjustment andEliminations

Consolidation$

16,958,615$(7,089,474 )$ 170,711,607$

2,365,591($

24,617 )China

4,022,383
330,710367,246
146,667(1,369,351 )(416,406 )Profit before
income tax
Identifiable assets
Investments
accounted forusing the equity
methodAssets$$$1,328,004$

15,520$94,631

$

2,796

$

2,619

$

10,174$ 163,590,530$

138,787

3,081,249$ 165,183,061

2,200,149
62,753,372

Total assets$ 230,136,582- 86 -TABLE 1

CHINA AIRLINES, LTD. AND INVESTEESENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counterparty
Endorsement/
Guarantee
Provider

No.

0

Name

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

Taiwan Aircraft Maintenanceand Engineering Co., Ltd.

Nature of Relationship100% subsidiary
54% subsidiary
77.17% subsidiary bydirect and indirect
holdings
100% subsidiary

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

ActualBorrowingAmount$ 11,310,754
11,310,754
11,310,754$ 3,850,000
1,080,000
3,055,475$ 3,850,000
1,080,000
3,012,668$ 2,129,400
685,444

11,310,754

2,000,000

2,000,000

1,279,827

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.

- 87 -

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

-

6.81
1.91
5.33

$ 28,276,886
28,276,886
28,276,886

Y
Y
Y

N
N
N

N
N
N

-

3.54

28,276,886

Y

N

N

TABLE 2

CHINA AIRLINES, LTD. AND INVESTEESMARKETABLE SECURITIES HELDDECEMBER 31, 2019
(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.

SharesChina Airlines

Relationshipwith the Holding
Company-

Financial Statement AccountNumber 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

December 31, 2019
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount
(%)
Value

$

73,628
7,363
26,865
-

13.59
11.00
15.00
0.02

2,074,628

18,796-$Note

80,991
26,865-Note 1-

18,796-

101,365

2.59
5.45

101,365

Note 2
Note 2-

81,124
89,14581,06546,035---

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
Allianz Global Investors Taiwan Money Market Fund
Capital Money Market Fund-

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

7,816,048
497,740
6,444,010
2,842,146

81,124
89,14581,06546,035

SharesTransAsia Airways-

Financial assets at FVTPL - current

2,277,786-

Beneficial certificatesFuh Hwa Emerging Market Short-term Income FundFuh Hwa Global Bond Fund-

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

1,671,657
1,233,211

20,25318,045-

20,25318,045-814,152

7,376

-

7,376

-

349,523

4,748

-

4,748

-

SharesChina Airlines
Beneficiary certificates
Taishin 1699 Money Market Fund

Parent company Financial assets at FVTOCI - non-current-

Financial assets at FVTPL - current

0.4(Continued)- 88 -

Holding Company Name

Kaohsiung Catering Services

Tigerair Taiwan Co., Ltd.

Marketable Security Type and Issuer/Name

Relationshipwith the Holding
Company

Financial Statement AccountBeneficiary 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

Government bondPhilippines government bond-Amortized cost financial assets

Number of
Shares/Units

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

December 31, 2019
Percentage of Market Value
Carrying
Ownership
or Net Asset
Amount
(%)
Value

$

85,88670,423
15,035-299

Not applicable$

85,88570,423
15,035

Note

-

299

Note 1: The subsidiary’s net asset value was $80,991 thousand, which included ordinary shares and preference shares as of and for the year ended December 31, 2019.
Note 2: The Company does not issue shares because it is a limited company.
Note 3: The table only lists financial assets that are IFRS 9 regulated.
(Concluded)- 89 -TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

China Airlines, Ltd.

Type and Name ofMarketable Securities(Note 1)

Financial Statement
Account

Counterparty(Note 2)

SharesTigerair Taiwan Co., Ltd. Investments accounted for (Note 5)
using the equity method

Relationship(Note 2)

Non-related party

Beginning Balance
Number ofAmountShares-$Acquisition (Note 3)
Number ofAmountShares--$-Number of
Shares-

Disposal (Note 3)
Carrying
AmountAmount$-$-Gain (Loss) on
Disposal$-Ending Balance
Number ofAmountShares-$-

Note 1:

The marketable securities in this table refer to shares, bonds, beneficial certificates and the securities derived from the above items.

Note 2:Marketable securities which are recognized as investments accounts for using the equity method are required to be filled in the second column.

Note 3The cumulative amount of acquired and disposed of marketable securities are required to be calculated separately to determine whether they are at least NT$300 million or 20% of the paid-in capital.

Note 4Paid-in capital refers to paid-in capital of the indicated parent company. If the shares issued by an issuer have no par value or a par value other than NT$10 per share, the threshold of 20% of paid-in capital, as set out in the preceding item, shall be replaced by 10% of equity attributable toowners of the indicated parent company, as stated in the respective balance sheet.

Note 5:

Subsidiaries planning initial public offering release stocks.

- 90 -TABLE 4

CHINA AIRLINES, LTD. AND INVESTEESTOTAL 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, 2019
(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

524,457
445,472(1,971,462)
242,114(373,811)
152,9141,220,422
561,443
349,602231,288
135,687(101,421)
216,368
120,088
1,791,003
169,400

0.39
0.33
1.35
0.18
0.26
0.11
0.90
0.42
0.26
0.17
0.10
0.07
0.16
0.09
1.33
0.13

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

Taiwan Air Cargo Terminal
Taiwan Airport Services
Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan
Tigerair Taiwan
Taoyuan International Airport Service
Kaohsiung Catering Services
Hua Hsia
CAL Park
Cal Hotel
Global Sky Express
Eastern United International Logistics
China Pacific Laundry Services
China Pacific Catering Services
China Aircraft Services

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

Purchase
Purchase
Sale
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase

Mandarin Airlines

Taiwan Airport Services

Same parent company

Purchase

189,853

2.56

Cal Hotel

CAL Park

Same parent company

Purchase

114,281

Tigerair Taiwan

Taoyuan International Airport Service

Same parent company

Purchase

197,179- 91 -

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

Abnormal Transaction

-

-

-

1 months

26.07
2.53

$

Note

(1.52)(2.90)
1.83(9.21)
0.49(1.16)(12.90)(3.70)(1.41)(1.50)
0.05(0.87)(0.75)(17.26)(1.03)--(41,017)(77,970)
158,123(247,997)
42,642(31,210)(347,127)(99,649)(37,860)(127)(40,293)
3,888(23,430)(20,118)(464,582)(27,679)--(27,760)(3.74)-

1 months

-

-

(382)

(0.53)-

1 months--(24.389)(3.66)--TABLE 5

CHINA AIRLINES, LTD. AND INVESTEESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2019
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 158,123

Note

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines

Parent company

247,997

China Pacific Catering Services

China Airlines

Parent company

Taoyuan International Airport Service

China Airlines

Parent company

Note:

Amount$Action Taken

Amounts Received
in Subsequent
PeriodAllowance for
Bad Debts--$ 158,123

Note

-

-

245,364-

464,582

3.90

-

-

311,356-

347,127

3.43

-

-

340,924-

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

- 92 -$-TABLE 6

CHINA AIRLINES, LTD. AND INVESTEESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2019
(In thousands of New Taiwan Dollars and Foreign Currencies in Thousands, Unless Stated Otherwise)

Investment Amount
Investor Company

Investee Company

Location

Main Business and Product

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

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

Dynasty Aerotech International Corp.

Taoyuan, Taiwan

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

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

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

Aircraft maintenance

Mandarin Airlines

Tigerair Taiwan Co., Ltd.
Taiwan Airport Services

Taipei, Taiwan
Taipei, Taiwan

Air transportation and maintenance of aircraft
Airport services

CAL-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Kaohsiung Catering
Services

Delica International Co., Ltd.

Kaohsiung, Taiwan

Catering business

China Airlines, Ltd.

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

Note 2:

Represents the 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 cause by acquisition.

December 31,
2019

December 31,
2018

$

$

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

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

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

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
47.35
53.67
100.0055.00

77,27077,270100.0088,31326,265
20,4002,500
1,648,387
1,350,000

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

100.00
20.00
25.00
69.45
100.0037,9752,450

3,797,500

154,330
11,658200,000
11,658HK$US$

77,270JPY

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

10,200- 93 -

Balance as of December 31, 2019
Percentage
Number ofof
Carrying
Shares/Units Ownership
Amount(%)

JPY$

1,552,310
1,494,603
1,517,946
1,276,546
801,071
737,245559,562460,213461,263
276,134
661,170479,259
168,547

Net Income(Loss) of theInvestee

Investment
Income (Loss)

$

$

1,163
204,018
271,552
41,262
511,121291,52230,820195,347
51,828156,861
292,632
16,78727,327

Note

47,694
191,322
146,642
41,262
256,899
142,846
30,819183,490
10,36574,274
142,886
18,02015,030Note 4
Notes 1 and 4
Note 4
Notes 2 and 4
Note 5Note 4-17,00816,857

Notes 1 and 4

25,26810,004
7,294
1,946,328
921,989

(480)
(894)
6,392
808,718(206,151)

(384)
(480)
1,598
699,039(206,149)

Note 4Note 4-49.00

37,813

(144)

(70)

-

15,433,000
469,755

7.72
1.08

216,2436,281

808,718
156,861

77,587
1,689

-

3,329

1,050,000

35.00

42,717

9,678

3,387

-

5,877

-

100.00347,551

23,107

23,107Note 3

10,2001,020,000

51.00

7,867

(4)

(2)

-

TABLE 7

CHINA AIRLINES, LTD. AND INVESTEESINVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2019
(In thousands of New Taiwan Dollars/Renminbi/US Dollars)

China Airlines

Investee Company Name

Main Business andProduct

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof January 1,
2019

Investment Flow

Outflow

Inflow

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

Forwarding and storage $ 10,95,480
of air cargo(RMB 254,480)

Indirect(Note 1)$
125,705 $(US$4,186)

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

Forwarding and storage
60,267of air cargo(RMB 14,000)

Indirect(Note 1)

58,482
1,947)-(US$

Taikoo (Xiamen) Landing
Gear Services

Landing gear
2,495,195
maintenance services (US$ 83,090)

Indirect(Note 1)64,601
2,151)-(US$HAECO Composite
Structures (Jinjiang)

Composite material

Indirect(Note 1)

19,099
636)

-

(US$

(US$

350,240
11,663)

Accumulated Investment in
Mainland China as ofDecember 31, 2019

Investment Amount
Authorized by Investment
Commission, MOEA

Limit on Investment$267,886 (US$8,920)$650,192 (Note 3)$36,079,270 (Note 4)

Accumulated
Outflow ofInvestment
from Taiwan asof December 31,
2019

-

$

-

% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

Carrying
Amountas ofDecember 31,
2019

Investment
Gain (Loss)$
125,705 $76,711(US$4,186) (RMB 17,107)

14.00

58,482
89,573
1,947) (RMB 19,975)

14.00

(US$

64,601
2,151)

-

2.589

-

(US$

19,099
636)

-

5.45

-

(US$

-

-

-

Accumulated
InwardRemittance ofEarnings as ofDecember 31,
2019$
10,795 $223,683 $(RMB 2,395) (RMB 51,962) (US$86,2082,802)(Note 2)

12,606124,071
2,796) (RMB 28,822) (US$26,933875)(Note 2)

(RMB

(RMB

-

-

42,7189,923)-(Continued)- 94 -

Taiwan Airport Services

Investee Company

Main Business andProduct

Accumulated
Outward
Remittance for
Method ofPaid-in Capital
Investment
Investment
from Taiwan asof January 1,
2019

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

Forwarding and storage $ 1,095,480
of air cargo(RMB 254,480)

Indirect(Note 5)$
120,671 $(US$
4,018)

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

Forwarding and storage
60,267of air cargo(RMB 14,000)

Indirect(Note 5)

(US$

57,8601,927)

Remittance of Funds

OutwardAccumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2019

Inward

-

$

-

-

$
120,671 $
76,711(US$
4,018) (RMB 17,107)

14.00

57,86089,573
1,927) (RMB 19,975)

14.00

(US$

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2019

Investment Amounts Authorized by
Investment Commission, MOEA

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

$178,532 (US$5,945)$178,532 (US$5,945)$349,906 (Note 4)

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

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2019

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2019$
10,740 $222,478 $
114,304(RMB 2,395) (RMB 51,682) (US$3,806)(RMB

12,540124,279
2,796) (RMB 28,870) (US$42,2401,407)

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 2019 amounted to US$2,801,749 and US$875,330.
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 of refer for the reporting period.
(Concluded)- 95 -TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIESFOR THE YEAR ENDED DECEMBER 31, 2019
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Financial Statement Account0

China Airlines, Ltd.

Mandarin Airlines
Mandarin Airlines
Tigerair Taiwan Co., Ltd.
Mandarin Airlines
Taoyuan International Airport Services
Taiwan Airport Service
Dynasty Aerotech International Corp.
Taiwan Air Cargo Terminal
CAL Park
Cal Hotel Co., Ltd.
Kaohsiung Catering Services
Mandarin Airlines
Mandarin Airlines
Taoyuan International Airport Services
Mandarin Airlines

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

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

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.

b

Sales revenue

2

Mandarin Airlines

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

b
c
b
b
b
b
b

3

Taoyuan International Airport Services

Tigerair Taiwan Co., Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

4

Taiwan Airport Service

5

Dynasty Aerotech International Corp.

AmountTransaction Criteria% of Total
Consolidated
Total Revenue
or Assets$ 1,728,158
243,304
373,811242,1141,220,422
445,472
349,602524,457
231,288
135,687
561,443
158,123
247,997
347,127
250,000

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

1.03
0.14
0.22
0.14
0.72
0.26
0.21
0.31
0.14
0.08
0.33
0.05
0.08
0.11
0.08

524,457

The same as ordinary transactions

0.31

Passenger costs
Airport service costs
Passenger revenue
Operating expenses
Accounts receivable - related parties
Financial assets at amortized costs
Notes payable and accounts payable - relatedparties

1,728,158
189,853
242,114
243,304
247,997
250,000
158,123

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

1.03
0.11
0.14
0.14
0.08
0.08
0.05

c
b
b

Airport service revenue
Airport service revenue
Accounts receivable - related parties

197,179
1,220,422
347,127

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

0.12
0.72
0.11

China Airlines, Ltd.
Mandarin AirlinesbcOperating revenue
Operating revenue

445,472
189,853

The same as ordinary transactions
The same as ordinary transactions

0.26
0.11

China Airlines, Ltd.

b

Operating revenue

349,602

The same as ordinary transactions

0.21(Continued)- 96 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship(Note 1)

Financial Statement Account

6

CAL Park

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

bc

Operating revenue
Operating revenue

7

Cal Hotel Co., Ltd.

China Airlines, Ltd.
CAL Parkbc8

Tigerair Taiwan Co., Ltd.

China Airlines, Ltd.
Taoyuan International Airport Services

9

Kaohsiung Catering Services

China Airlines, Ltd.

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

231,288
114,281

The same as ordinary transactions
The same as ordinary transactions

0.14
0.07

Operating revenue
Operating costs

135,687
114,281

The same as ordinary transactions
The same as ordinary transactions

0.08
0.07

b
c

Operating expenses
Airport service costs

373,811
197,179

The same as ordinary transactions
The same as ordinary transactions

0.22
0.12

b

Operating revenue

561,443

The same as ordinary transactions

0.18

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 written off in the consolidated financial statements.
Note 3: The Company only discloses transaction amounts or balances of more than $100,000 thousand.
(Concluded)- 97 -