China Airlines
2019 Investor Conference

November 25, 2019
TSE：2610

LegalDisclaimer• The information contained in this presentation,
including all forward-looking information, issubject to change without notice, whether as aresult of new information, further events orotherwise, and China Airlines(the “Company”)
undertakes no obligation to publicly update orrevise the information contained in thispresentation.

• No guarantees regarding the completeness,accuracy, and reliability of information contained
are made explicitly or implicitly. They are notintended to represent complete statement of theCompany, industry or future development.

2Agenda

1. Operating Results of First Three
Quarters in 2019
2. Aviation Industry Outlook
3. Passenger Performance andStrategies
4. Cargo Performance and Strategies
5. Operating Fleet

3

Operating Results of First
Three Quarters in 20194

Operating Performance - 3rd Quarter
Consolidated Financial Statistics

TWD 100 Million
2018 Q3

2019 Q3YoY %Operating Revenue

451.97430.05-4.85%Net Operating Income

18.95

14.62

-22.85%Net Income After Tax

12.27

4.96

-59.58%Net Income Attributable toOwners of the company

10.81

3.40

-68.55%

Earnings Per Share (TWD)

0.20

0.06

-70.00%Net Income Attributable to Owners of the company(Exclude adopting IFRS 16 “Leases” impact)2018 Q3
Net Income Attributable toOwners of the company
Reconcile：adopting IFRS 16 “Leases” impact
Adjusted Net Income Attributable toOwners of the company

TWD 100 Million
2019 Q3

YoY %

10.81

3.40-68.55%

01.73-10.81

5.13-52.54%
5

Operating Performance - First Three Quarters
Consolidated Financial Statistics

TWD 100 Million

2018 Q1-Q3

2019 Q1-Q3

YoY %1,262.07

1,263.02

0.08%

Net Operating Income

30.93

27.96

-9.60%Net Income After Tax

16.29

0.58-96.44%

Net Income (Loss) Attributable toOwners of the company

12.69-3.46-

Earnings (Losses) Per Share (TWD)

0.23

-0.06

-

Operating Revenue

Net Income Attributable to Owners of the company(Exclude adopting IFRS 16 “Leases” impact)2018 Q1-Q3
Net Income (Loss) Attributable toOwners of the company
Reconcile：adopting IFRS 16 “Leases” impact
Adjusted Net Income Attributable toOwners of the company

TWD 100 Million
2019 Q1-Q3

YoY %

12.69

-3.46

-

05.68

-

12.69

2.22-82.51%
6

Composition of Op. Revenue - CI
Other Op.

2019
Q1-Q3

PassengerRevenue

66%

Cargo
Revenue
29%
Revenue
5%

2018
Q1-Q3

Passenger
Revenue

64%

Cargo
Op.
31% Other
Revenue
Revenue
5%•In the first three quarters of 2019, Passenger, Cargo and other operating revenues

accounted for 66%, 29% and 5% respectively.

7Composition of Op. Expenses - CI
Rental &Depreciation
16.6%

Maintenance
13.3%

Others30.7%

Airport &Personnel
Ground Handling
13.7%
13.6%

P a x S e r vi c e

FuelSales&General Adm.

2019
Q1-Q3

3.5%

4.4% 4.0%

Rental &Depreciation
16.8%

Maintenance
12.0%

Others32.7%

Airport &Personnel
Ground Handling
13.8%
13.1%

P a x S e r vi c e

FuelSales&General Adm.

2018Q1-Q3

3.4%

4.0% 4.0%•In the first three quarters of 2019, Fuel cost accounted for 30.7% of operating
expenses mainly due to the decrease in oil prices.

8

Financial Risk Management – Fuel (CI)
Fuel Cost
2018 Q1-Q3

2019 Q1-Q3

YoY%

Jet Fuel (MOPS)USD/BBL

85.37

77.69

-9.0%

Fuel Consumption

10KBBL

1,327.66

1,300.39-2.05%

Fuel Expend

TWD/100Million

358.43334.00-6.82%

Hedging Loss

TWD/100Million0.02

0.09

350%

Total Fuel Cost

TWD/100Million

358.45334.09-6.80%

Fuel Hedging
YearHedging%2019 Q1-Q3

3.3%

9Financial Risk Management –Currency of Revenue and ExpenditureRev.

2018 Q1-Q3

100%

Exp.
4%

13%

2%

3%
6%

6%

Rev.
2%
2%

2019 Q1-Q3

Exp.
4%

12%

2%

3%

2%
2%

7%

5%
6%

8%

8%

8%

44%
14%

17%

49%

48%

45%

50%

39%

38%

0%

TWD

USD

JPY

CNY

HKD

EUROthers
10Aviation Industry Outlook

11World Economic Outlook•The Chung-Hwa Institution for Economic Research (CIER) forecasts globaleconomic growth of 2.77% in 2019, compared to 3.19% in 2018, marking thesecond consecutive year of decline.

•Amid a global slowdown in economic growth, the major economies- America,Eurozone, China and Japan- will experience a deceleration of growth in 2020.

Major Economies 2019→2020 Economic Growth Rate
1.08%→0.79%
U.K.

Canada
1.41%→1.76%

Eurozone
1.04%→1.03%

U.S.

1.69%→1.91%
Russia
1.41%→2.05%
South Korea

6.23%→5.93%

JapanChina

2.59%→1.82%

India
6.57%→6.76%

Brazil
0.59%→1.49%

South Africa
0.68%→1.59%

0.75%→0.36%
Taiwan
1.93%→2.00%
Indonesia
Malaysia
Philippine
ThailandSingapore
Brunei
Cambodia
Australia
2.08%→2.53% Laos
MyanmarVietnam

ASEAN
4.94%→5.02%
4.40%→4.41%
5.98%→6.03%
3.38%→3.29%
1.38%→1.88%
4.30%→4.20%
6.90%→6.62%
6.50%→6.50%
6.70%→6.90%
6.57%→6.45%

Source: CIER

12

Passenger Traffic Continues to Grow
•According to IATA mid-year report, the growth rate of global and Asia-Pacific

RPK is estimated to be 5% and 6.3% respectively at the end of 2019.
RPK growth is expected to slow down worldwide in 2019 while the growth rate ofAsia-Pacific remains strong.
(Billion) RPKGlobal

Asia Pacific

10,000

8,760
8,343

3,500

7,772

8,000

Millions

•

7,193
6,693

6,000
4,940

5,252

5,561

5,882

3,057

6,253

2,876
2,500

2,631
2,375
2,138

4,000

2,000

1,465

1,562

1,676

1,811

1,951
1,500

500

0
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: IATA Statistics Fact Sheet

13

Air Cargo Growth Slows Down
•IATA suggests global freight volume will stay flat in 2019 and Asia Pacific
FRTK volumes contracted due to the mounting trade tensions in the region
and a economic slowdown in Mainland China.
(Billion)

FRTK

300

Global100

Asia Pacific
253

250
217
203

203

201

222263

263

231

90

205

85

200

8180

83

150

77

75
73
100

71
68

95

7274

75
70
65

67

60

50

55
500
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: IATA WATS

14

Passenger Performance and Strategies

15

Passenger Performance
Revenue
TWD 71.1 Billion

Composition by Region
TransPacific
Ocean
15%

TWD 72.88 Billion▲2.5%

Australia/Hong Kong
New7%
ZealandEurope6%10%SoutheastAsia
18%

MainlandChina15%2018 Q1-Q3•

NortheastAsia
29%

2019 Q1-Q3

Passenger revenue increased by 2.5%, reaching TWD 72.88 billion in the first threequarters of 2019.
•Northeast Asia accounted for the largest share (29%) of revenue, followed bySoutheast Asia with revenue share of 18%.

16

Passenger Operation Index
ASK (MN)
39,314

Load Factor
39,255
79.6%

▼0.2%

2018 Q1-Q3

2019 Q1-Q3

2018 Q1-Q3

Yield (TWD)

80.7%

2.27

▲1.1ppt2019 Q1-Q3

2018 Q1-Q3

▲1.3%

2.30

2019 Q1-Q3

ASK decreased by 0.2% while the load factor and yield increased by 1.1ppt
and 1.3% respectively in the first three quarters of 2019.

17

Political & Economic Outlook

Influence to TW marketalert

moderate

BreixtJapan–South Korea trade dispute According to NATs research, the The dispute is not ending temporarily. It impacts global

willingness of travel is not impacted amongsupply chain, especially high-tech industry.

most people in the UK.

 TIER indicates the limited gain from relocations.

 TW’s investment amount in the UK takes

 According to Korean media JTBC, air ticket sales dropped

the 1st place among EU, achieves 42.3%.

38% in JP market and rose 38% in TW market.

mild

The unstable GBP currency and social
issues will be impact for TW investment.

2020 Tokyo Olympics
 The Olympics triggers
prosperous tourism market.

US-China trade war
 Air freight goes weak due to long-term effect of trade war
 IHS Markit indicates TW GDP would decrease 0.03-

TW president election
 Entry Permit of PRC may open issuing after 520.
 Market demand rises due to CNY & election.

0.04% if US & China GDP declined 0.1% respectively.

Geopolitics

 TW exports to PRC will reduce 1.78% & to US will rise Political issues in EU, Middle East, HK and

2.16% if US imposes 10~25% tariff to PRC & PRC

terrorisms, racial conflicts etc. often directly

imposes 5~25% tariff to US.

affect aviation industry.
Source: MOEA、IATA、TIER、CIER、TTB

18

Flight Network
Trans Pacific Ocean ASK▼4.1%
Ontario/Los Angeles 17 flights/week offer

Europe ASK▲3.7% *better service and gain more market share.

Demand steadily grows in Taiwan outbound37 flights per week with 6 destinations

market with direct flight service.

22 flights per week with 5 destinations

Northeast Asia ASK▲4.2%
The extra or charter flights to Northeast Asia

Mainland China ASK▼1.8%

will be arranged to generate more revenue.
232 flights per week with 17 destinations

Mainland China market experiences thenegative growth due to the latest Restricted
Policy.
124 flights per week with 28 destinations

Hong Kong ASK▼4.8%
While local unrest due to anti-extradition toChina remains, duly adjust capacity supply.

Southeast Asia ASK▲1.5%

128 flights per week with 1 destinations

Inbound visitors from Southeast Asia increase

substantially resulting from the implementationof New Southbound Policy.
167 flights per week with 15 destinations

Australia & New Zealand ASK▼5.5%
Increase frequency to maintain competitiveedge.
22 flights per week with 4destinations* 2019 Q-Q3 ASK YoY %19

Newly Increased Flights Description
February

Increased services from Taipei to Palau from 2 times
weekly to 3 times weekly, and advanced to 4 times
weekly from June

March

Increased services from Taipei to Nagoya from 12 times
weekly to 2 daily

April

Increased services from Taipei to Phnom Penh from 5times weekly to daily

October

Increased services from Taipei to Los Angeles fromdaily to 10 times weekly, and mounted to 17 times
weekly services into Greater Los Angeles Area

October

Increased services from Taipei to Melbourne from 3times weekly to 4 times weekly

20

Secure Taiwan Market by Multiple Brands
Capacity
Development

SteadyGrowthIPO

Fleet Size

10

SustainableBusiness• Creating multiple financing
opportunities

111111• Establishing firm value• Increasing public awareness622014 2015 2016 2017 2018 2019

160Revenue

Operating PerformanceProfit/(Loss) before Tax• Strengthening corporate
governanceTWD 100Million

140
120
100

87.75

8068

60

43.36

40

19.67
20

5.64

9.95

0-5.73(20)

2015-7.83
2016

2017

2018

Forecast

Budget2019

2020

21

Cooperation with Other Airlines•China Airlines cooperates with more than 20 interline partners.

•In 2019, the new added interline routes are mainly in Northeast Asia, Southeast
Asia and Mainland China.

22

Technology along The Journey•CI has been developing a comprehensive e-commerce channel. The online trading
volume has increased by 30%, in which mobile trading accounted for 21%.
Passenger Technology Adoption in 2018Passenger Demand For Mobile Service
Alerts on Flights and Gates

Bag Collection Notification
Report Mishandled Bags
Route to Check-in, Gates,Lounge
Track Bags on Apps

Booking Check-in Bag Tag Self-bag
Drop

Passport DwellTimeBoardingOnBag
Board Collection

ID Identification

CI Mobile APP 3.0
Itinerary Management
E-Bulletin Board

Self Check-in Baggage Counter

Facebook Customer ServiceBaggage Tracking System
Source：SITA

23

Cargo Performance and Strategies

24Cargo Performance
Revenue

Composition by Region
Australia/
New
Zealand 2%

TWD 34.72 Billion

Europe 12%

TWD 31.50 Billion▼9.3%

Hong Kong2%

Northeast
Asia 7%Trans
PacificOcean
54%

MainlandChina 7%

Southeast
Asia 16%2018 Q1-Q3•

2019 Q1-Q3

Cargo revenue totaled TWD 31.50 billion, a 9.3% decrease, in the first threequarters of 2019.

•Trans Pacific Ocean accounted for the largest share(54%) of revenue, followed bySoutheast Asia and Europe with revenue share of 16% and 12% respectively.
25

Cargo Performance Index
FATK (MN)
6,058

Load Factor

Yield (TWD)

5,860

▼3.3%

71.4%

66.3%

8.03

2019 Q1-Q3

2018 Q1-Q3▼5.1ppt

2018Q1-Q3
2018年前三季

2019Q1-Q3
2019年前三季2018 Q1-Q3

▲1.0%

8.11

2019 Q1-Q3

FATK decreased by 3.3% and the load factor dropped 5.1 ppt while yield grewby 1.0% in the first three quarters of 2019.

26

Flight Network

孟買

6 flights per week
Europe FATK ▼9.2%

54 flights per week
Regional FATK ▼1.8%

36 flights per week
Trans Pacific Ocean
FATK ▼6.4%* 2019 Q-Q3 FATK YoY %27

Newly Increased Flights Description
March

Launched a new 2 times weekly freighter service toNagoya with the additional stopover of flight returning toTaipei from Los Angeles and San Francisco.

September

Launched a new one time weekly freighter service toZhengzhou

October

Increased freighter services to Chongqing to 2 times
weeklyNovember

Launched a new 2 times weekly freighter service toMumbai with the stopover shift of flight between Taipeiand Amsterdam.

28

Special Cargo•

China Airlines Cargo has become the first carrier in Taiwan to be certified by theIATA Center of Excellence for Independent Validators in Pharmaceutical Logistics(CEIV Pharma).

From semi-conductors to all-terrain vehicles andaerospace parts, CI assist with outsize cargo
shipment worldwide by nose-loading 744F.

Pharmaceutical logistics is a longstanding
business that began growing in 2016 at a rateof 30% per year.

29Interline Cooperation
Express Operators• Short Term
CI can arrange part-charters,
backloads and other commerciallyinnovative solutions for ad-hoc,peak season and project cargo.

Other Airlines
Cooperate with other airlines todevelop Mid-Asia and Latin
American markets.

• Long Term
CI has secured contracts for thefollowing routes with express
operators.
Shanghai-New York, Osaka-Chicago, TokyoHonolulu, Taipei-Frankfurt, and Taipei- Los Angeles30

Operating Fleet31

Operating Fleet as of September 2019•

As of September 2019, CI operates 88 aircraft, including 70 passenger aircraft and18 freighters, and 48 of which are self-owned and 40 are operating leased.

Aircraft TypeOwned Leased

777-300ER-10747-400

4-A350-900

14-

A330-300

815

737-800

415

747-400F (Freighter)18-

Number of aircraft in fleet

484032

Fleet Planning•

To maximize fuel efficiency, CI is expected to receive the first of 6 777F in 2020 andthe first of 25 A321neo in 2021.

Freighter
By replacing 744F with 777Fto achieve cost efficiency
and increase payloadcapacity

Passenger
By replacing 737-800 with
A321neo in regional markets toestablish operational excellence

33Thank you

2019.11China Airlines│No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City, Taiwan
TEL│03.399.8888