CAL - Interim / Quarterly Report 2021

China Airlines, Ltd. and Subsidiaries

Consolidated Financial Statements for the Nine Months Ended September 30, 2021 and 2020 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and the Shareholders China Airlines, Ltd.

Introduction

We have reviewed the accompanying consolidated balance sheets of China Airlines, Ltd. and its subsidiaries (collectively, the “Group”) as of September 30, 2021 and 2020, the related consolidated statements of comprehensive income for the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and 2020, the consolidated statements of changes in equity and cash flows for the nine months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

We did not review the financial statements of some subsidiaries included in the consolidated financial statements of the Group, but such statements were reviewed by other auditors. Our conclusion, insofar as it relates to the amounts included in the consolidated financial statements for these subsidiaries, is based solely on the report of other auditors. The total assets of these subsidiaries were NT$14,102,966 thousand and NT$11,025,331 thousand, which represented 5.11% and 3.88% of the consolidated total assets as of September 30, 2021 and 2020, respectively; and for the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and 2020, the total revenue of these subsidiaries were NT$44,914 thousand, NT$175,653 thousand, NT$71,470 thousand and NT$1,813,945 thousand, which represented 0.13%, 0.66%, 0.08% and 2.12% of the consolidated total revenues, respectively.

Scope of Review

Except as explained in the following paragraph, we conducted our reviews in accordance with the Statement of Auditing Standard No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As disclosed in Notes 13 and 14 to the consolidated financial statements, the financial statements of some non-significant subsidiaries included in the consolidated financial statements referred to in the first paragraph and some investments accounted for using the equity method were not reviewed. As of September 30, 2021 and 2020, the combined total assets of these non-significant subsidiaries were NT$20,132,953 thousand and NT$21,447,628 thousand, respectively, representing 7.30% and 7.55%, respectively, of the consolidated total assets, and combined total liabilities of these non-significant subsidiaries were NT$11,194,422 thousand and NT$11,453,273 thousand, respectively, representing 5.34% and 5.07%, respectively, of the consolidated total liabilities; for the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and 2020, the amounts of the combined comprehensive income (loss) of these non-significant subsidiaries were NT$4,506 thousand, NT$(126,107) thousand, NT$(228,649) thousand and NT$(481,583) thousand, respectively, representing 0.17%, 37.52%, (19.58%) and 28.41%, respectively, of the consolidated total comprehensive income. As of September 30, 2021 and 2020, the aforementioned investments accounted for using the equity method were NT$1,576,556 thousand and NT$2,009,318 thousand, respectively; and for the three months ended and for the nine months ended September 30, 2021 and 2020, the amounts of the Group’s share of the profit of such investments accounted for using the equity method were NT$(85,146) thousand and NT$(57,013) thousand, NT$(382,599) thousand and NT$(176,235) thousand, respectively.

Qualified Conclusion

Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had the financial statements of the non-significant subsidiaries and investments accounted for by using the equity method as described in the preceding paragraph been reviewed, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of September 30, 2021 and 2020, and its consolidated financial performance for the three months ended September 30, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the nine-month periods ended September 30, 2021 and 2020 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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

Deloitte & Touche Taipei, Taiwan Republic of China

November 4, 2021

Notice to Readers

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

For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4, 6 and 31) Financial assets at fair value through profit or loss - current (Notes 4, 7 and 31) Financial assets at amortized cost - current (Notes 4, 9 and 31) Financial assets for hedging - current (Notes 4, 6 and 31) Notes and accounts receivable, net (Notes 4, 5, 10 and 31) Notes and accounts receivable - related parties (Notes 31 and 32) Other receivables (Note 31) Current tax assets (Notes 4 and 28) Inventories, net (Notes 4 and 11) Non-current assets held for sale (Notes 4, 5 and 12) Other current assets (Note 18) Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income - non-current (Notes 4, 8 and 31) Financial assets at amortized cost (Notes 4, 9 and 31) Investments accounted for using the equity method (Notes 4 and 14) Property, plant and equipment (Notes 4, 5, 15 and 33) Right-of-use assets (Notes 4, 21 and 33) Investment properties (Notes 4 and 16) Other intangible assets (Notes 4 and 17) Deferred income tax asset (Notes 4, 5 and 28) Other non-current assets (Notes 18, 21, 31 and 33) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Notes 19 and 31) Short-term bills payable (Note 19) Financial liabilities for hedging - current (Notes 4, 21 and 31) Contract liabilities - current (Notes 4, 5 and 23) Notes and accounts payable (Note 31) Notes and accounts payable - related parties (Notes 31 and 32) Other payables (Notes 22 and 31) Current tax liabilities (Notes 4 and 28) Lease liabilities - current (Notes 4 and 21) Provisions - current (Notes 4, 24 and 31) Bonds payable and put options of convertible bonds - current portion (Notes 4, 20 and 31) Loans and debts - current portion (Notes 19, 31 and 33) Other current liabilities (Note 31) Total current liabilities NON-CURRENT LIABILITIES Financial liabilities for hedging - non-current (Notes 4, 21 and 31) Bonds payable - non-current (Notes 4, 20 and 31) Loans and debts - non-current (Notes 19, 31 and 33) Contract liabilities - non-current (Notes 4 and 23) Provisions - non-current (Notes 4, 24 and 31) Current tax liabilities - non-current (Notes 4 and 28) Deferred tax liabilities (Notes 4 and 28) Lease liabilities - non-current (Notes 4 and 21) Accrued pension costs (Notes 4, 5 and 25) Other non-current liabilities (Note 31) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 20 and 26) Share capital Capital surplus Retained earnings (accumulated deficits) Unappropriated retained earnings (accumulated deficits) Other equity Treasury shares Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS (Note 26) Total equity TOTAL		September 30, 2021 (Reviewed) Amount % $ 36,894,146 13 169,479 - 1,390,573 1 2,248,631 1 11,917,344 4 2,401 - 616,732 - 58,957 - 8,815,952 3 89,956 - 1,053,770 1 63,257,941 23 91,180 - 515,504 - 1,576,556 1 132,002,259 48 56,761,245 21 2,074,597 1 1,155,876 - 6,646,240 2 11,805,438 4 212,628,895 77 $ 275,886,836 100 $ 1,952,000 1 - - 8,405,330 3 3,271,347 1 1,280,033 - 112,507 - 9,981,557 4 903,585 - 2,640,078 1 2,775,946 1 1,300,000 - 13,808,717 5 1,633,453 1 48,064,553 17 27,728,396 10 16,566,263 6 76,614,499 28 916,379 - 14,962,826 6 43,590 - 960,631 - 13,267,766 5 9,735,660 4 590,122 - 161,386,132 59 209,450,685 76 57,404,844 21 1,772,185 1 1,450,737 - 2,694,122 1 (30,875) - 63,291,013 23 3,145,138 1 66,436,151 24 $ 275,886,836 100		December 31, 2020 (Audited) Amount % $ 27,125,937 10 274,761 - 6,551,693 2 7,613,636 3 9,697,511 4 1,667 - 801,134 - 67,549 - 8,788,105 3 89,296 - 861,179 - 61,872,468 22 163,746 - 311,596 - 1,970,802 1 141,481,694 50 59,861,537 21 2,074,798 1 1,076,351 - 6,028,200 2 9,352,892 3 222,321,616 78 $ 284,194,084 100 $ 1,932,000 1 8,088,882 3 8,129,752 3 3,569,360 1 1,354,237 1 128,567 - 8,306,257 3 216,602 - 2,525,957 1 164,800 - 11,982,859 4 15,234,374 5 1,016,068 - 62,649,715 22 32,455,333 11 10,300,000 4 77,288,330 27 1,761,104 1 14,369,486 5 87,181 - 1,023,084 - 13,279,792 5 9,737,741 4 530,745 - 160,832,796 57 223,482,511 79 54,209,846 19 1,187,327 - (350,581) - 2,543,766 1 (30,875) - 57,559,483 20 3,152,090 1 60,711,573 21 $ 284,194,084 100		September 30, 2020 (Reviewed)
						Amount % $ 26,638,850 10 491,271 - 5,458,047 2 9,505,860 3 8,418,269 3 1,537 - 640,205 - 66,991 - 8,048,111 3 79,143 - 1,864,090 1 61,212,374 22 122,512 - 388,270 - 2,009,318 1 134,897,356 47 62,866,981 22 2,074,864 1 1,088,194 - 5,678,175 2 13,686,945 5 222,812,615 78 $ 284,024,989 100 $ 1,932,000 1 8,468,278 3 8,516,507 3 4,394,318 1 2,072,167 1 109,953 - 8,480,982 3 178,279 - 2,499,005 1 221,320 - 11,562,586 4 16,468,455 6 1,197,423 - 66,101,273 23 35,774,370 13 11,600,000 4 72,681,739 26 1,998,350 1 13,565,971 5 101,711 - 823,805 - 13,530,522 5 9,308,126 3 470,289 - 159,854,883 57 225,956,156 80 54,209,846 19 1,187,327 - (2,023,555) (1) 1,876,805 1 (30,875) - 55,219,548 19 2,849,285 1 58,068,833 20 $ 284,024,989 100

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

(With Deloitte & Touche auditors’ review report dated November 4, 2021)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited)

REVENUE (Notes 4, 27 and 32) COSTS (Notes 4, 11, 17, 21, 24, 25, 27 and 32) GROSS PROFIT OPERATING EXPENSES (Notes 4, 25 and 27) OPERATING PROFIT (LOSS) NON-OPERATING INCOME AND EXPENSES Other income (Note 27) Other gains and losses (Notes 15 and 27) Finance costs (Notes 27 and 31) Share of the profit or loss of associates and joint ventures (Note 14) Total non-operating income and expenses PROFIT (LOSS) BEFORE INCOME TAX INCOME TAX (BENEFIT) EXPENSE (Notes 4 and 28) NET INCOME (LOSS) FOR THE PERIOD OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Gain (loss) on hedging instruments subject to basis adjustment Unrealized gain (loss) on investments in equity instruments at fair value through other comprehensive income Income tax related to items that will not be reclassified subsequently to profit or loss (Note 28)		For the Three Months EndedSeptember 30	For the Three Months EndedSeptember 30	For the Three Months EndedSeptember 30		For the Nine Months	EndedSeptember 30	EndedSeptember 30
		2021		2020		2021		2020
		Amount % $ 34,474,002 100 28,907,108 84 5,566,894 16 1,581,796 5 3,985,098 11 139,193 1 (314,415 ) (1 ) (572,520 ) (2 ) (85,146) - (832,888) (2) 3,152,210 9 351,690 1 2,800,520 8 (8,005 ) - (60,447 ) - 12,386 - (56,066) -		Amount % $ 26,611,698 100 25,408,645 95 1,203,053 5 1,560,622 6 (357,569) (1) 182,503 1 89,695 - (750,676 ) (3 ) (57,013) - (535,491) (2) (893,060 ) (3 ) (75,767) - (817,293) (3) (213,217 ) (1 ) (11,473 ) - 44,939 - (179,751) (1)		Amount % $ 91,674,640 100 81,606,537 89 10,068,103 11 5,345,976 6 4,722,127 5 389,739 - (1,608,211 ) (2 ) (1,850,981 ) (2 ) (382,599) - (3,452,052) (4) 1,270,075 1 171,768 - 1,098,307 1 (55,461 ) - (72,433 ) - 25,075 - (102,819) -		Amount % $ 85,484,350 100 79,395,609 93 6,088,741 7 6,669,400 8 (580,659) (1) 545,707 1 19,407 - (2,367,841 ) (3 ) (176,235) - (1,978,962) (2) (2,559,621 ) (3 ) (184,376) - (2,375,245) (3) (224,034 ) - (85,280 ) - 60,960 - (248,354) - (Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share) (Reviewed, Not Audited)

For the Three Months EndedSeptember 30	For the Three Months EndedSeptember 30	For the Nine Months	EndedSeptember 30
2021	2020	2021	2020
Amount % $ (1,610 ) - (189,870 ) - 38,185 - (153,295) - (209,361) - $ 2,591,159 8 $ 2,917,304 8 (116,784) - $ 2,800,520 8 $ 2,708,171 8 (117,012) - $ 2,591,159 8 $ 0.51 $ 0.48	Amount % $ (13,055 ) - 838,066 3 (164,068) - 660,943 3 481,192 2 $ (336,101) (1) $ (707,937 ) (3 ) (109,356) - $ (817,293) (3) $ (229,105 ) (1 ) (106,996) - $ (336,101) (1) $ (0.13) $ (0.13)	Amount % $ (34,560 ) - 250,906 - (43,812) - 172,534 - 69,715 - $ 1,168,022 1 $ 1,555,376 2 (457,069) (1) $ 1,098,307 1 $ 1,626,126 2 (458,104) (1) $ 1,168,022 1 $ 0.28 $ 0.26	Amount % $ (70,055 ) - 1,231,041 1 (232,713) - 928,273 1 679,919 1 $ (1,695,326) (2) $ (2,021,822 ) (2 ) (353,423) (1) $ (2,375,245) (3) $ (1,341,250 ) (2 ) (354,076) - $ (1,695,326) (2) $ (0.37) $ (0.37)


$	$	$
$	$	$
$	$	$
$	$	$
$	$	$

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

(With Deloitte & Touche auditors’ review report dated November 4, 2021)

(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

BALANCE AT JANUARY 1, 2020 Issuance of employee share options by subsidiaries Appropriation of 2019 earnings Legal reserve Special reserve Capital surplus used to cover accumulated deficit Net loss for the nine months ended September 30, 2020 Other comprehensive income (loss) for the nine months ended September 30, 2020, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2020 Disposal of treasury shares Cash dividends from subsidiaries paid to non-controlling interests BALANCE AT SEPTEMBER 30, 2020 BALANCE AT JANUARY 1, 2021 Basis adjustment to gain (loss) on hedging instruments Appropriation of 2020 earnings Capital surplus used to cover accumulated deficit Issuance of employee share options by the subsidiaries Change in percentage of ownership interests in subsidiaries Net profit (loss) for the nine months ended September 30, 2021 Other comprehensive income (loss) for the nine months ended September 30, 2021, net of income tax Total comprehensive income (loss) for the nine months ended September 30, 2021 Equity component of convertible bonds issued by the Company Convertible bonds converted to ordinary shares Cash dividends from subsidiaries paid to non-controlling interests BALANCE AT SEPTEMBER 30, 2021				Equity Attributable toOwners of theCompany	Equity Attributable toOwners of theCompany	Total Non-controlling Interests $ 56,553,772 $ 3,578,345 172 52 - - - - - - (2,021,822 ) (353,423 ) 680,572 (653) (1,341,250) (354,076) 6,854 - - (375,036) $ 55,219,548 $ 2,849,285 $ 57,559,483 $ 3,152,090 79,606 - - - 540 126 (104,639 ) 575,753 1,555,376 (457,069 ) 70,750 (1,035) 1,626,126 (458,104) 188,862 - 3,941,035 - - (124,727) $ 63,291,013 $ 3,145,138	Total Equity $ 60,132,117 224 - - - (2,375,245 ) 679,919 (1,695,326) 6,854 (375,036) $ 58,068,833 $ 60,711,573 79,606 - 666 471,114 1,098,307 69,715 1,168,022 188,862 3,941,035 (124,727) $ 66,436,151
		Share Capital Capital Surplus $ 54,209,846 $ 2,488,907 - 172 - - - - - (1,297,843 ) - - - - - - - (3,909 ) - - $ 54,209,846 $ 1,187,327 $ 54,209,846 $ 1,187,327 - - - (350,581 ) - 540 - - - - - - - - - 188,862 3,194,998 746,037 - - $ 57,404,844 $ 1,772,185		Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings (Accumulated Deficits) $ 466,416 $ 12,967 $ (1,777,225 ) - - - (466,416 ) - 466,416 - (12,967 ) 12,967 - - 1,297,843 - - (2,021,822 ) - - - - - (2,021,822) - - (1,734 ) - - - $ - $ - $ (2,023,555) $ - $ - $ (350,581 ) - - - - - 350,581 - - - - - (104,639 ) - - 1,555,376 - - - - - 1,555,376 - - - - - - - - - $ - $ - $ 1,450,737	Other Equity Exchange Differences on Translation of the Unrealized Valuation Gain (Loss) on Financial Assets Financial Statements of Foreign Operations at Fair Value Through Other Comprehensive Income Gain (Loss) on Hedging Instruments Treasury Shares Held by Subsidiaries $ (54,707 ) $ 107,262 $ 1,143,678 $ (43,372 ) - - - - - - - - - - - - - - - - - - - - (55,231) (69,127) 804,930 - (55,231) (69,127) 804,930 - - - - 12,497 - - - - $ (109,938) $ 38,135 $ 1,948,608 $ (30,875) $ (134,252 ) $ 71,359 $ 2,606,659 $ (30,875 ) - - 79,606 - - - - - - - - - - - - - - - - - (26,788) (58,451) 155,989 - (26,788) (58,451) 155,989 - - - - - - - - - - - - - $ (161,040) $ 12,908 $ 2,842,254 $ (30,875)

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

(With Deloitte & Touche auditors’ review report dated November 4, 2021)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss recognized on trade receivables Net gain on fair value changes of financial assets and liabilities at fair value through profit or loss Interest income Dividend income Share of loss (profit) of associates and joint ventures Loss (gain) on disposal of property, plant and equipment Loss on disposal of investments Loss on inventory and property, plant and equipment Compensation costs of employee share options Finance costs Net gain on foreign currency exchange Loss on sale and leaseback transactions Recognition of provisions Others Changes in operating assets and liabilities Financial assets mandatorily classified as at fair value through profit or loss Financial liabilities at fair value through profit or loss Notes and accounts receivable Accounts receivable - related parties Other receivables Inventories Other current assets Notes and accounts payable Accounts payable - related parties Other payables Contract liabilities Provisions Other current liabilities Accrued pension liabilities Other liabilities Cash generated from operations Interest received Dividends received		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 1,270,075 22,528,432 165,970 28,606 (13) (97,677) (11,607) 382,599 1,023,694 540 850,684 666 1,850,981 (829,452) 342,080 4,575,939 (3,538) 105,643 - (2,301,224) (68,763) 305,753 43,362 (129,676) (111,976) 31,311 1,617,657 (1,142,865) (1,142,874) 670,404 (2,080) 5,556 29,958,207 90,811 11,607	2020 $ (2,559,621) 23,898,705 152,758 5,791 (2,234) (242,761) (22,516) 176,235 (13,466) - 388,460 224 2,367,841 (621,249) - 4,730,275 3,533 23,905 (11,749) (140,637) 867,396 110,725 663,251 1,528,637 61,595 (1,073,199) (4,520,964) (16,904,416) (962,948) (2,628,167) (126,909) (33,033) 5,115,462 232,156 63,817 (Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at amortized cost Disposal of financial assets at amortized cost Purchase of financial assets for hedging Proceeds from sale of financial assets for hedging 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 other intangible assets Increase in restricted assets Net cash inflow on disposal of subsidiary Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term debts (Decrease) increase in short-term bill payable Proceeds from issuance of bonds payable Repayments of bonds payable Proceeds from long-term debts Repayments of long-term debts Repayments of the principal portion of lease liabilities Proceeds of guarantee deposits received Refunds of guarantee deposits received Proceeds from sale and leaseback transactions Proceeds from issuance of ordinary shares of subsidiaries Cash dividends paid to non-controlling interests Proceeds from disposal of treasury shares Net cash (used in) generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ (1,707,710) (257,444) 28,095,471 (2,505,043) 7,646,697 (3,566,844) 8,888,275 (1,635,174) 394,747 (84,030) 92,839 (11,860,667) (125,483) (282,691) 942 (3,036,432) 20,000 (8,088,882) 4,500,000 (5,000,000) 8,023,590 (10,268,775) (7,754,584) 266,221 (201,638) 2,810,098 471,114 (124,727) - (15,347,583) 56,753	2020 $ (2,477,852) (191,653) 2,741,930 (5,398,640) 1,694,234 (9,667,026) - (858,411) 39,076 (63,471) 100,018 (3,983,167) (57,715) (52,410) - (18,247,512) 1,552,000 8,068,279 - (8,950,000) 65,830,527 (43,944,169) (8,153,315) 92,983 (137,738) - - (375,036) 6,854 13,990,385 (305,481) (Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 9,768,209 27,125,937 $ 36,894,146	2020 $ (1,820,678) 28,459,528 $ 26,638,850

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche auditors’ review report dated November 4, 2021) (Concluded)

10 -

CHINA AIRLINES, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

China Airlines, Ltd. (the “Company”) was founded in 1959 and its shares have been listed on the Taiwan Stock Exchange since February 26, 1993. The Company is primarily involved in (a) air transport services for passengers, cargo and mail; (b) ground services and routine aircraft maintenance; (c) major maintenance of flight equipment; (d) communications and data processing services to other airlines; (e) the sale of aircraft parts and aviation equipment; and (f) leasing of aircraft.

The major shareholders of the Company are China Aviation Development Foundation (“CADF”) and National Development Fund (“NDF”), Executive Yuan. As of September 30, 2021, December 31, 2020 and September 30, 2020, CADF and NDF held a combined 41.58%, 44.03% and 44.03%, respectively of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements of the Company and its subsidiaries (collectively, the “Group”) were approved by the board of directors and authorized for issue on November 4, 2021.

APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

The application of the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Group’s accounting policies.

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

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 IFRS 17 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 1 “Disclosure of Accounting Policies” Amendments to IAS 8 “Definition of Accounting Estimates” Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”	Effective Date Announced by IASB (Note 1)
	To be determined by IASB January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 (Note 2) January 1, 2023 (Note 3) January 1, 2023 (Note 4)

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 IFRS 17

Amendments to IAS 1 “Classification of Liabilities as Current or
Non-current”

Amendments to IAS 1 “Disclosure of Accounting Policies”

Amendments to IAS 8 “Definition of Accounting Estimates”

Amendments to IAS 12 “Deferred Tax related to Assets and
Liabilities arising from a Single Transaction”

Effective Date Announced by
IASB (Note 1)

To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 2)
January 1, 2023 (Note 3)
January 1, 2023 (Note 4)

11 -
Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.
Note 2: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.
Note 3: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.
Note 4: Except that deferred taxes will be recognized on January 1, 2022 for temporary differences associated with leases and decommissioning obligations, the amendments will be applied prospectively to transactions that occur on or after January 1, 2022.

The application of new IFRSs in issue but not yet endorsed and issued into effect by the FSC would not have 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 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.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the policies listed below, the accounting policies adopted for these consolidated financial statements are the same as those of for the consolidated financial statements for the year ended December 31, 2020.

Statement of Compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosures required in a full set of annual consolidated financial statements.

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 fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c. Level 3 inputs are unobservable inputs for an asset or liability.

Basis of Consolidation

The consolidated financial statements reporting principles are the same as those in the consolidated financial statements for the year ended December 31, 2020.

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Employee Benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

Income Tax

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings.

Lease

The Group negotiates with the lessor for rent concessions as a direct consequence of the Covid-19 to change the lease payments originally due by June 30, 2022, that results in the revised consideration for the lease substantially the same as, or less than, the consideration for the lease immediately preceding the change. There is no substantive change to other terms and conditions. The Group elects to apply the practical expedient to rent concessions for the abovementioned lease contracts, and therefore, does not assess whether the rent concessions are lease modifications. Instead, the Group recognizes the reduction in lease payment in profit or loss in the period in which the events or conditions that trigger the concession occurs, and makes a corresponding adjustment to the lease liability.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The critical accounting judgments and key sources of estimation uncertainty for these interim consolidated financial statements are the same as those applied for the consolidated financial statements for the year ended December 31, 2020.

6. CASH AND CASH EQUIVALENTS

September 30, 2021 Cash on hand and revolving fund $ 384,002 Checking accounts and demand deposits 18,447,813 Cash equivalents Time deposits with original maturities of less than three months 14,887,299 Repurchase agreements collateralized by bonds 3,175,032 $ 36,894,146	December 31, 2020 September 30, 2020 $ 333,677 $ 102,243 17,690,186 12,480,737 6,980,493 7,147,612 2,121,581 6,908,258 $ 27,125,937 $ 26,638,850

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

	September 30,	December 31,	September 30,
	2021	2020	2020
Bank balance	0%-1.9%	0%-1.9%	0%-1.90%
Time deposits with original maturities of less than
three months	0.07%-0.53%	0.24%-2.20%	0.28%-2.20%
Repurchase agreements collateralized by bonds	0.2%-0.41%	0.22%-0.55%	0.28%-0.65%

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

					Carrying
			Maturity Date	Subject	Value
September	30,	2021	2021.10.6-2021.11.4	Financial assets for hedging - current	$ 2,228,412
December	31,	2020	2021.1.4-2021.11.1	Financial assets for hedging - current	7,613,636
September	30,	2020	2020.10.8-2020.12.16	Financial assets for hedging - current	9,505,814

Impact on other comprehensive income (loss)

	Recognized in
	Other
	Comprehensive
	Income (Loss)
For the nine months ended September 30, 2021	$ (55,461)
For the three months ended September 30, 2021	(8,005)

For the nine months ended September 30, 2021, the amount of hedge settlements recognized as prepayments for equipment was $79,606 thousand.

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

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2021		2020		2020
Financial assets-current
Financial assets mandatorily classified as at
FVTPL
Non-derivative financial assets
Beneficial certificates	$ 169,479		$ 274,761		$ 491,271

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8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in Equity Instruments

	September 30,	September 30,	December 31,	September 30,
		2021	2020	2020
Non-current
Foreign investments
Unlisted shares	$	63,999	$ 134,042	$ 100,161
Domestic investments
Unlisted shares		27,181	29,704	22,351
	$	91,180	$ 163,746	$ 122,512

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes and are expected to profit through long-term investments. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair values in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes.

9. FINANCIAL ASSETS AT AMORTIZED COST

	September 30,	September 30,	December	December	31,	September	September	30,
		2021		2020			2020
Current
Time deposits with original maturities of more
than 3 months	$	1,389,023	$	6,551,693		$	5,458,047
Government bonds		1,550			-			-
	$	1,390,573	$	6,551,693		$	5,458,047
Non-current
Time deposits with original maturities of more
than 1 year	$	515,504	$	311,596		$	388,270

The range of interest rates for time deposits with original maturities of more than 3 months were approximately 0.21%-1.10%, 0.21%-1.90% and 0.40%-2.75% per annum as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively.

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10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE, NET

September 30, 2021 Notes receivable $ 3,031 Accounts receivable At amortized cost Gross carrying amount 12,140,066 Less: Allowance for impairment loss (225,753) 11,914,313 $ 11,917,344	December 31, 2020 September 30, 2020 $ 655 $ 14,711 9,903,008 8,615,272 (206,152) (211,714) 9,696,856 8,403,558 $ 9,697,511 $ 8,418,269

The average credit period was 7 to 55 days. In determining the recoverability of a accounts receivable, the Group considered any change in the credit quality of the receivables since the date credit was initially granted to the end of the reporting period, and any allowance for impairment loss was based on the estimated irrecoverable amounts determined by reference to the Group’s past default experience with the counterparty 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 and the 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 accounts receivable. The expected credit losses on accounts receivable are estimated using a provision matrix prepared 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 the forecasted 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 the Group’s customer base.

The Group writes off accounts 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 have been written off, the Group continues to engage in enforcement activity to attempt to recover the past due receivables. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of accounts receivable based on the Group’s provision matrix:

September 30, 2021

Expected credit loss rate Gross carrying amount Loss allowance (lifetime ECLs) Amortized cost	Not Past Due 0.67% $ 11,915,147 (79,853) $ 11,835,294	Up to 30 Days 2.98% $ 56,648 (1,689) $ 54,959	31 to 60 Days 0.95% $ 6,501 (62) $ 6,439	61 to 90 Days 0.00% $ 941 - $ 941	Over 90 Days 89.63% $ 160,829 (144,149) $ 16,680	Total $ 12,140,066 (225,753) $ 11,914,313

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December 31, 2020

Expected credit loss rate Gross carrying amount Loss allowance (lifetime ECLs) Amortized cost September 30, 2020 Expected credit loss rate Gross carrying amount Loss allowance (lifetime ECLs) Amortized cost	Not Past Due 0.14% $ 9,304,785 (13,391) $ 9,291,394 Not Past Due 0.04% $ 7,946,934 (3,401) $ 7,943,533	Up to 30 Days 0.18% $ 256,178 (470) $ 255,708 Up to 30 Days 0.38% $ 314,390 (1,195) $ 313,195	31 to 60 Days 1.20% $ 134,111 (1,608) $ 132,503 31 to 60 Days 8.26% $ 137,376 (11,342) $ 126,034	61 to 90 Days 53.78% $ 5,513 (2,965) $ 2,548 61 to 90 Days 67.05% $ 38,874 (26,063) $ 12,811	Over 90 Days 92.74% $ 202,421 (187,718) $ 14,703 Over 90 Days 95.51% $ 177,698 (169,713) $ 7,985	Total $ 9,903,008 (206,152) $ 9,696,856 Total $ 8,615,272 (211,714) $ 8,403,558

The movements of the loss allowance of accounts receivable were as follows:

Balance at January 1 Add: Net remeasurement of loss allowance Add: Amounts recovered Less: Amounts written off Foreign exchange gains and losses Balance at September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 206,152 28,606 234 (9,237) (2) $ 225,753	2020 $ 218,665 5,791 - (12,735) (7) $ 211,714

11. INVENTORIES, NET

	September 30,	December 31,	September 30,
	2021	2020	2020
Aircraft spare parts	$ 7,771,779	$ 7,898,482	$ 7,263,449
Items for in-flight sale	618,107	627,437	624,082
Work in process - maintenance services	370,645	214,362	133,597
Others	55,421	47,824	26,983
	$ 8,815,952	$ 8,788,105	$ 8,048,111

The operating costs for the nine months ended September 30, 2021 and 2020 included losses from inventory write-downs of $279,354 thousand and $196,286 thousand, respectively. And the operating costs for the three months ended September 30, 2021 and 2020 included (reversal of loss) losses from inventory write-downs of $2,379 thousand and $(933) thousand, respectively.

17 -

12. NON-CURRENT ASSETS HELD FOR SALE

	September 30,	December 31,	September 30,
	2021	2020	2020
Aircraft held for sale	$ 89,956	$ 89,296	$ 79,143

To enhance its competitiveness, the Company plans to introduce new aircraft and retire old aircraft according to a planned schedule. Such aircraft, classified as non-current assets held for sale, had an original carrying amount which was higher than the expected sale price and which was recognized as an impairment loss, and would be continuously assessed whether there are further impairments in subsequent periods. However, the actual loss shall be identified by the actual sale price.

The fair value measurement is classified as Level 3, and the fair value was determined according to similar transactions of the related markets and the proposed sale prices were based on the current status of the aircraft.

13. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements are as follows:

Investor Company Investee Company Main Businesses and Products China Airlines, Ltd. Cal-Dynasty International A holding company, real estate and hotel services Cal-Asia Investment General investment Dynasty Aerotech International Corp. Cleaning of aircraft and maintenance of machine and equipment Yestrip Travel business Cal Park Real estate lease and international trade Cal Hotel Co., Ltd. Hotel business Sabre Travel Network (Taiwan) Sale and maintenance of hardware and software Mandarin Airlines Air transportation and maintenance of aircraft Taiwan Air Cargo Terminal (Note) Air cargo and storage Taoyuan International Airport Services Airport services Taiwan Airport Services (Note) Airport services Global Sky Express Forwarding and storage of air cargo Tigerair Taiwan Co., Ltd. (Note) Air transportation Taiwan Aircraft Maintenance And Engineering Co., Ltd. Aircraft maintenance Kaohsiung Catering Services, Ltd. In-flight catering Cal-Dynasty International Dynasty Properties Co., Ltd. Real estate management Dynasty Hotel of Hawaii, Inc. Hotel business Taiwan Airport Services Taiwan Airport Service (Samoa) Airport supporting service and investment	Proportion of Ownership (%)
	September 30, 2021 December 31, 2020 September 30, 2020 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 94 94 94 97 94 94 59 59 59 49 49 49 48 48 48 25 25 25 82 81 77 100 100 100 54 54 54 100 100 100 100 100 100 100 100 100

Investor Company
Investee Company
Main Businesses and Products
China Airlines, Ltd.
Cal-Dynasty International
A holding company, real estate and
hotel services
Cal-Asia Investment
General investment
Dynasty Aerotech International Corp. Cleaning of aircraft and maintenance of
machine and equipment
Yestrip
Travel business
Cal Park
Real estate lease and international trade
Cal Hotel Co., Ltd.
Hotel business
Sabre Travel Network (Taiwan)
Sale and maintenance of hardware and
software
Mandarin Airlines
Air transportation and maintenance of
aircraft
Taiwan Air Cargo Terminal (Note)
Air cargo and storage
Taoyuan International Airport Services Airport services
Taiwan Airport Services (Note)
Airport services
Global Sky Express
Forwarding and storage of air cargo
Tigerair Taiwan Co., Ltd. (Note)
Air transportation
Taiwan Aircraft Maintenance And
Engineering Co., Ltd.
Aircraft maintenance
Kaohsiung Catering Services, Ltd.
In-flight catering
Cal-Dynasty International Dynasty Properties Co., Ltd.
Real estate management
Dynasty Hotel of Hawaii, Inc.
Hotel business
Taiwan Airport Services
Taiwan Airport Service (Samoa)
Airport supporting service and
investment

Proportion of Ownership (%)

September 30,
2021
December 31,
2020
September 30,
2020
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
94
94
94
97
94
94
59
59
59
49
49
49
48
48
48
25
25
25
82
81
77
100
100
100
54
54
54
100
100
100
100
100
100
100
100
100

Note: Based on the Group’s proportion of ownership.

The Company has control over Taoyuan International Airport Service, Taiwan Airport Service and Global Sky Express despite its ownership of less than 50% and for the other subsidiaries, the Company had control and more than 50% of their voting shares. The above financial information of the subsidiaries for the nine months ended September 30, 2021 and 2020 was reported according to financial statements that were not reviewed by independent auditors, except for Mandarin Airlines and Tigerair Taiwan Co., Ltd.

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

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Tigerair Taiwan Co., Ltd. planned to issue ordinary shares for cash to meet the needs for funds. The board of directors of the Company approved the plan to issue ordinary shares for cash at $25 per share on August 5, 2021. The Company subscribed for 101,212 thousand shares in September 2021. The proportion of ownership of the Group increased to 82%. Because the shares were subscribed at a percentage different from its existing ownership percentage, the Company’s retained earnings decreased by $54,449 thousand.

To strengthen the capital structure of Mandarin Airlines, the board of directors of the Company approved the plan to issue ordinary shares for cash at $10 per share on August 26, 2021. The Company subscribed for 199,677 thousand shares in September 2021. The proportion of ownership of the Group increased to 97%. Because the shares were subscribed at a percentage different from its existing ownership percentage, the Company’s retained earnings decreased by $50,190 thousand.

The liquidation of Yestrip Co., Ltd. was completed on April 22, 2021, and the Company recognized a liquidation loss of $540 thousand.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

	September 30,	September 30,	December 31,	September 30,
		2021	2020	2020
Investments in associates	$	880,464	$ 1,079,852	$ 1,137,076
Investments in jointly controlled entities		696,092	890,950	872,242
	$	1,576,556	$ 1,970,802	$ 2,009,318

a. Investments in associates

The investments in associates were as follows:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2021		2020		2020
Unlisted companies
China Aircraft Services	$	28,174	$	277,234	$	365,387
Dynasty Holidays		3,493		5,237		7,725
Airport Air Cargo Terminal (Xiamen)		501,171		476,219		461,308
Airport Air Cargo Service (Xiamen)		288,006		270,046		259,765
Eastern United International Logistics
(Holdings) Ltd. (Hong Kong)		59,620		51,116		42,891
	$	880,464	$	1,079,852	$	1,137,076

At the end of the reporting period, the proportion of ownership and voting rights of associates held by the Group were as follows:

Name of Associate China Aircraft Services Dynasty Holidays Airport Air Cargo Terminal (Xiamen) Airport Air Cargo Service (Xiamen) Eastern United International Logistics (Holdings) Ltd. (Hong Kong)	Proportion of Ownership and Voting Rights
	September 30, 2021 December 31, 2020 September 30, 2020 20% 20% 20% 20% 20% 20% 28% 28% 28% 28% 28% 28% 35% 35% 35%

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The investment (loss) gain recognized for associates accounted for using the equity method was as follows:

China Aircraft Services Dynasty Holidays Airport Air Cargo Terminal (Xiamen) Airport Air Cargo Service (Xiamen) Eastern United International Logistics (Holdings) Ltd. (Hong Kong)	For the Three Months Ended September 30 2021 2020 $ (27,075) $ (12,550) (422) (682) 5,391 5,347 7,019 4,637 3,051 1,838 $ (12,036) $ (1,410)	For the Three Months Ended September 30 2021 2020 $ (27,075) $ (12,550) (422) (682) 5,391 5,347 7,019 4,637 3,051 1,838 $ (12,036) $ (1,410)	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ (27,075) (422) 5,391 7,019 3,051 $ (12,036)		2021 $ (244,985) (1,302) 29,200 20,366 8,980 $ (187,741)	2020 $ (73,782) (2,326) 19,247 13,751 3,288 $ (39,822)

The investments accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were based on the associates’ financial statements which have not been reviewed. However, the management determined that there would have been be no significant adjustments had these investee’s financial statements been independently reviewed.

b. Investments in jointly controlled entities

The investments in jointly controlled entities were as follows:

	September 30,	December 31,	September 30,
	2021	2020	2020
China Pacific Catering Services	$ 533,279	$ 695,959	$ 680,527
China Pacific Laundry Services	121,458	149,353	146,027
NORDAM Asia Ltd.	33,484	37,767	37,820
Delica International Co., Ltd.	7,871	7,871	7,868
	$ 696,092	$ 890,950	$ 872,242

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled entities held by the Group was as follows:

China Pacific Catering Services China Pacific Laundry Services NORDAM Asia Ltd. Delica International Co., Ltd.	Proportion of Ownership and Voting Rights
	September 30, 2021 December 31, 2020 September 30, 2020 51% 51% 51% 55% 55% 55% 49% 49% 49% 51% 51% 51%

The Group entered into a joint venture agreement with Taikoo Group to invest in China Pacific Catering Services and China Pacific Laundry Services. According to the agreement, both sides have the right to make major motion vetoes on the board of directors, and therefore, the Group does not have control.

20 -

To expand the Group’s catering business, Kaohsiung Catering entered into a joint venture agreement with a Japanese brand company to invest in Delica International Co, Ltd., with the Japanese brand company having the right to make decisions on operations, and therefore, the Group does not have control.

The investment (loss) gain recognized for jointly controlled entities accounted for using the equity method was as follows:

China Pacific Catering Services China Pacific Laundry Services NORDAM Asia Ltd. Delica International Co., Ltd.	For the Three Months Ended September 30 2021 2020 $ (60,084) $ (48,653) (11,299) (6,949) (1,727) (1) - - $ (73,110) $ (55,603)	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
			2021 $ (162,680) (27,895) (4,283) - $ (194,858)	2020 $ (120,543) (15,877) 7 - $ (136,413)

The investments accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were based on the jointly controlled entities’ financial statements which have not been reviewed. However, the management determined that there would have been no significant adjustments had this investee’s financial statements been independently reviewed.

For information on the major businesses and products and the locations of registration for the major business offices of the above entities, refer to Tables 6 and 7 (names, locations, and related information of investees on which the Company exercises significant influence and investment in mainland China) following the notes to the consolidated financial statements.

15. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2020 Additions Disposals Reclassification Net exchange differences Balance at September 30, 2020 Accumulated depreciation and impairment Balance at January 1, 2020 Depreciation expenses Disposals Reclassification Net exchange differences Balance at September 30, 2020 Balance at September 30, 2020, net value	Freehold Land $ 1,002,499 - (15,205 ) - (16,972) $ 970,322 $ - - - - - $ - $ 970,322	Buildings $ 16,084,063 31,375 (372,712 ) 303 (30,991) $ 15,712,038 $ (7,028,540 ) (368,318 ) 370,829 - 16,330 $ (7,009,699) $ 8,702,339	Flight Equipment $ 272,077,692 448,356 (2,873,953 ) 1,485,746 - $ 271,137,841 $ (141,886,170 ) (13,546,525 ) 2,691,178 1,489,158 - $ (151,252,359) $ 119,885,482	Others $ 16,846,835 378,680 (195,126 ) 22,295 (3,326) $ 17,049,358 $ (11,209,408 ) (693,661 ) 188,919 5,564 (1,559) $ (11,710,145) $ 5,339,213	Total $ 306,011,089 858,411 (3,456,996 ) 1,508,344 (51,289) $ 304,869,559 $ (160,124,118 ) (14,608,504 ) 3,250,926 1,494,722 14,771 $ (169,972,203) $ 134,897,356 (Continued)

21 -

Cost Balance at January 1, 2021 Additions Disposals Reclassification Net exchange differences Balance at September 30, 2021 Accumulated depreciation and impairment Balance at January 1, 2021 Depreciation expenses Disposals Reclassification Net exchange differences Balance at September 30, 2021 Balance at September 30, 2021, net value	Freehold Land $ 955,823 - - - (9,790) $ 946,033 $ - - - - - $ - $ 946,033	Buildings $ 15,705,635 220,425 (17,311 ) - (18,061) $ 15,890,688 $ (7,121,637 ) (367,719 ) 17,311 - 9,586 $ (7,462,459) $ 8,428,229	Flight Equipment $ 282,007,135 866,095 (44,511,895 ) 9,198,342 - $ 247,559,677 $ (155,376,265 ) (12,648,680 ) 37,878,024 987 - $ (130,145,934) $ 117,413,743	Others Total $ 17,058,648 $ 315,727,241 548,654 1,635,174 (136,391 ) (44,665,597 ) 15,754 9,214,096 (1,907) (29,758) $ 17,484,758 $ 281,881,156 $ (11,747,645 ) $ (174,245,547 ) (660,556 ) (13,676,955 ) 133,414 38,028,749 2,708 3,695 1,575 11,161 $ (12,270,504) $ (149,878,897) $ 5,214,254 $ 132,002,259 (Concluded)

Reclassification was mainly aircraft prepayment.

Property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of the assets as follows:

Buildings Main buildings 45-55 years Others 10-25 years Machinery equipment Electro-mechanical equipment 25 years Others 3-13 years Office equipment 3-15 years Leasehold improvements Building improvements 5 years Others 3-5 years Assets leased to others 3-5 years Flight equipment and equipment under finance leases Airframes 15-25 years Aircraft cabins 7-20 years Engines 10-20 years Heavy maintenance on aircraft 6-8 years Engine overhauls 3-10 years Landing gear overhauls 7-12 years Repairable spare parts 3-15 years Leased aircraft improvements 5-12 years

Refer to Note 33 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, real estate, and movable property are adequately insured to diversify the potential risk related to operations.

The Group disposed of a portion of flight equipment and recognized a loss of $950,980 thousand for the three months ended June 30, 2021.

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16. INVESTMENT PROPERTIES

	September 30,	December 31,	September 30,
	2021	2020	2020
Carrying amount
Investment properties	$ 2,074,597	$ 2,074,798	$ 2,074,864

The investment properties held by the Group were land located in Nankan and buildings in Taipei, which were all leased to other parties. The buildings are depreciated on a straight-line basis over 55 years.

The fair values of the investment properties held by the Group were all $2,488,931 thousand as of December 31, 2020 and September 30, 2020, respectively. In addition, management assessed that there was no significant difference between the fair values on September 30, 2021 and December 31, 2020. The fair value valuations were performed by independent qualified professional valuers and management’s assessment based on similar market transactions.

All of the Group’s investment properties were held under freehold interests.

17. OTHER INTANGIBLE ASSETS

Computer Software Cost Balance at January 1, 2020 $ 2,406,163 Additions 57,717 Reclassification 549 Amortization expenses - Effects of exchange rate changes - Balance at September 30, 2020 $ 2,464,429 Balance at January 1, 2021 $ 1,763,644 Additions 52,508 Reclassification 24,710 Amortization expenses - Effects of exchange rate changes - Balance at September 30, 2021 $ 1,840,862	Others Accumulated Amortization $ 186,197 $ (1,409,668) - - - - - (152,758) - (6) $ 186,197 $ (1,562,432) $ 186,197 $ (873,490) 168,280 - - - - (165,970) - (3) $ 354,477 $ (1,039,463)	Net Value $ 1,182,692 57,717 549 (152,758) (6) $ 1,088,194 $ 1,076,351 220,788 24,710 (165,970) (3) $ 1,155,876

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

In addition, the contract for the purchase of the trademark has a final payment of $83,000 thousand still unpaid.

23 -

18. OTHER ASSETS

September 30, 2021 Current Temporary payments $ 213,088 Prepayments 432,040 Restricted assets 10,009 Others 398,633 $ 1,053,770 Non-current Prepayments for aircraft $ 8,616,451 Prepayments - long-term 1,524,002 Refundable deposits 1,070,646 Restricted assets 562,623 Other financial assets 18,141 Others 13,575 $ 11,805,438	December 31, 2020 September 30, 2020 $ 136,681 $ 278,196 348,554 1,246,722 11,065 11,710 364,879 327,462 $ 861,179 $ 1,864,090 $ 5,725,340 $ 9,845,883 2,216,049 2,501,818 1,087,668 1,166,081 291,742 130,540 18,078 18,292 14,015 24,331 $ 9,352,892 $ 13,686,945

The prepayments for aircraft are comprised of prepaid deposits and capitalized interest from the purchase of A321neo, A320neo and B777F aircraft. For details of the contract for the purchase of the aircraft, refer to Note 34.

19. BORROWINGS

a. Short-term loans

		September	September	30,	December 31,	September 30,
			2021		2020	2020
	Bank loans - unsecured	$	1,952,000		$ 1,932,000	$ 1,932,000
	Interest rates	0.90%-1.27%			0.92%-1.28%	0.92%-1.28%
b.	Short-term bills payable
		September		30,	December 31,	September 30,
			2021		2020	2020
	Commercial paper	$		-	$ 8,100,000	$ 8,500,000
	Less: Unamortized discount on bills payable			-	11,118	31,722
		$		-	$ 8,088,882	$ 8,468,278
	Annual discount rate		-		0.99%-1.00%	0.99%-1.23%

24 -

c. Long-term borrowings

September 30, 2021 Unsecured bank loans $ 22,399,892 Secured bank loans 37,592,547 Commercial papers Proceeds from issuance 30,460,000 Less: Unamortized discounts 29,223 90,423,216 Less: Current portion 13,808,717 $ 76,614,499 Interest rates 0.83%-1.60%	December 31, 2020 September 30, 2020 $ 23,470,696 $ 14,114,500 39,584,540 40,862,328 29,490,000 34,200,000 22,532 26,634 92,522,704 89,150,194 15,234,374 16,468,455 $ 77,288,330 $ 72,681,739 0.81%-1.63% 0.81%-1.63%

Secured bank loans are secured by flight equipment, buildings, and other equipment, refer to Note 33.

Bank loans (denominated in New Taiwan dollars) are repayable quarterly, semiannually or in lump sum upon maturity. The related information is summarized as follows:

	September 30,	December 31,	September 30,
	2021	2020	2020
Periods	2009.2.4-	2009.2.4-	2009.2.4-
	2032.6.30	2032.6.30	2032.6.30

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The NIFs, with various maturities until September 2026, were used by the Group to guarantee the commercial papers issued. As of September 30, 2021, December 31, 2020 and September 30, 2020, such commercial papers were issued at discount rates of 0.9787%-1.0907%, 1.0263%-1.1629% and 1.0310%-1.1310%, respectively.

In accordance with the “Regulations on Relief and Revitalization Measures for Industries and Enterprises Affected by Severe Pneumonia with Novel Pathogens” endorsed by the Ministry of Transportation and Communications and the “Operational Guides on Relief Loan Guarantees for Ailing Aviation Industry Affected by Severe Pneumonia with Novel Pathogens”, the Group applied for a special loan project to maintain its operation, and the fund along with credit guarantee were provided by the government. The total amount of the loans is $35,290 million, which shall be repaid within 2 years from the date of initial drawdown. The Group can apply to the lending institution for a two-year extension. As of September 30, 2021, the Group had made a drawdown in the amount of $23,710 million.

25 -

20. BONDS PAYABLE

Unsecured corporate bonds first-time issued in 2016
Unsecured corporate bonds second-time issued in 2016
Unsecured corporate bonds first-time issued in 2017
Unsecured corporate bonds second-time issued in 2017
Unsecured corporate bonds first-time issued in 2018
Unsecured corporate bonds first-time issued in 2019
Convertible bonds sixth-time issues Convertible bonds seventh-time issues
Less: Current portion and put option of convertible bonds

September 30, 2021 $ - - 1,000,000 2,600,000 4,500,000 3,500,000 1,939,234 4,327,029 17,866,263 1,300,000 $ 16,566,263	December 31, 2020 September 30, 2020 $ 2,350,000 $ 2,350,000 2,500,000 2,500,000 1,000,000 1,000,000 2,600,000 3,500,000 4,500,000 4,500,000 3,500,000 3,500,000 5,832,859 5,812,586 - - 22,282,859 23,162,586 11,982,859 11,562,586 $ 10,300,000 $ 11,600,000

Related issuance conditions were as follows:

Category	Period	Conditions	Rate (%)
Five-year unsecured bonds - issued at par in May 2016;	2016.5.26-2021.5.26	Principal repayable in May 2020 and	1.19
repayable in May 2020 and 2021; 1.19% interest p.a.,		2021; interest p.a. payable annually
payable annually
Five-year unsecured bonds - issued at par in September	2016.9.27-2021.9.27	Principal repayable in September 2020	1.08
2016; repayable in September 2020 and 2021; 1.08%		and 2021; interest p.a. payable
interest p.a., payable annually		annually
Three-year private unsecured bonds - issued at par in May	2017.5.19-2020.5.19	Principal repayable on due date;	1.20
2017; repayable on due date; interest of 1.2% p.a.,		indicator rate; payable annually
payable annually
Seven-year private unsecured bonds - issued at par in May	2017.5.19-2024.5.19	Principal repayable on due date;	1.75
2017; repayable on due date; interest of 1.75% p.a.,		indicator rate; payable annually
payable annually
Three-year private unsecured bonds - issued at par in	2017.10.12-2020.10.12	Principal repayable on due date;	1.14
October 2017; repayable on due date; interest of 1.14%		indicator rate; payable annually
p.a., payable annually
Five-year private unsecured bonds - issued at par in October	2017.10.12-2022.10.12	Principal repayable in October 2021	1.45
2017; repayable in October 2021 and 2022; 1.45%		and 2022; indicator rate; payable
interest p.a., payable annually		annually
Five-year private unsecured bonds - issued at par in	2018.11.30-2023.11.30	Principal repayable in November 2022	1.32
November 2018; repayable in November 2022 and 2023;		and 2023; indicator rate; payable
1.32% interest p.a., payable annually		annually
Seven-year private unsecured bonds - issued at par in	2018.11.30-2025.11.30	Principal repayable in November 2024	1.45
November 2018; repayable in November 2024 and 2025;		and 2025; indicator rate; payable
1.45% interest p.a., payable annually		annually
Five-year private unsecured bonds - issued at par in June	2019.06.21-2024.06.21	Principal repayable in June 2023 and	1.10
2019; repayable in June 2023 and 2024; 1.10% interest		2024; indicator rate; payable
p.a., payable annually		annually
Seven-year private unsecured bonds - issued at par in June	2019.06.21-2026.06.21	Principal repayable in June 2025 and	1.32
2019; repayable in June 2025 and 2026; 1.32% interest		2026; indicator rate; payable
p.a., payable annually		annually
Five-year convertible bonds - issued at discount in January	2018.01.30-2023.01.30	Unless bonds are converted to share	-
2018; repayable in lump sum upon maturity; 1.3821%		capital or redeemed, principal
discount rate p.a.		repayable one time in January 2023;
		1.3821 discount rate p.a.
Five-year convertible bonds-issued at discount in April	2021.04.28-2026.04.28	Unless bonds are converted to share	-
2021; repayable in lump sum upon maturity; 0.8612%		capital or redeemed, principal
discount rate p.a.		repayable the time in April 2026;
		0.8612 discount rate p.a.

26 -

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 anniversary of 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 April 30, 2018 and January 30, 2023 (except for the period between the former dividend date and the date of the dividend declaration on record), holders may convert the bonds to the Company’s ordinary shares. The initial conversion price was set at NT$13.2, which is subject to adjustment 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. Also a total face value of NT$4,025,700 thousand of convertible bonds was converted into 319,500,000 ordinary shares of the Company.

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 Liability component at the date of issuance	$ 6,012,000 (409,978) $ 5,602,022

The Company issued the seventh 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 anniversary of the offering date. The holders can exercise the right to sell on April 28, 2024.
c. The Company may redeem the bonds at face value between July 28, 2021 and March 18, 2026 under certain conditions.
d. Between July 28, 2021 and April 28, 2026 (except for the period between the former dividend date and the date of the dividend declaration on record), holders may convert the bonds to the Company’s ordinary shares. The initial conversion price was set at NT$19 per share, which is subject to adjustment if there is a capital injection by cash or share dividend distribution.

Proceeds from issuance Equity component Liability component at the date of issuance	$ 4,500,000 (188,862) $ 4,311,138

27 -

21. LEASE AGREEMENTS

a. Right-of-use assets

September 30, 2021 Carrying amounts Land $ 7,382,514 Buildings 1,146,996 Flight equipment 48,224,332 Other equipment 7,403 $ 56,761,245 Additions to right-of-use assets Depreciation for right-of-use assets Land Buildings Flight equipment Other equipment Lease liabilities September 30, 2021 Carrying amounts Current $ 2,640,078 Non-current $ 13,267,766		December 31, 2020 September 30, 2020 $ 7,813,335 $ 7,950,003 1,394,386 1,271,880 50,644,652 53,643,107 9,164 1,991 $ 59,861,537 $ 62,866,981 For the Nine Months Ended September 30
		2021 2020 $ 2,661,426 $ 2,113,026 $ 147,161 $ 363,649 298,035 589,586 8,396,088 8,335,550 9,993 1,213 $ 8,851,277 $ 9,289,998 December 31, 2020 September 30, 2020 $ 2,525,957 $ 2,499,005 $ 13,279,792 $ 13,530,522

b. Lease liabilities

Ranges of discount rates for lease liabilities (including leases denominated in USD designated as hedging instruments):

	September 30,	December 31,	September 30,
	2021	2020	2020
Land	0%-1.80%	1.09%-1.80%	0%-1.8%
Buildings	0%-2.98%	0%-3.56%	0%-2.98%
Flight equipment	0.68%-3.34%	0.68%-3.34%	0.68%-3.34%
Other equipment	0%-1.50%	1.06%-1.50%	1.058%

28 -
c. Financial liabilities under hedge accounting

The Group specifies a part of aircraft leases denominated in USD as hedging instruments to avoid exchange rate fluctuations in passenger revenue and applies the accounting treatment of cash flow hedge. The lease information is as follows:

			Maturity Date	Subject	Carrying Value	Carrying Value
September	30,	2021	2022.2.9-2028.5.15	Financial liabilities for hedging -	$	8,403,826
				current
				Financial liabilities for hedging -		27,728,396
				non-current
December	31,	2020	2022.2.9-2028.5.15	Financial liabilities for hedging -		8,120,445
				current
				Financial liabilities for hedging -		32,455,333
				non-current
September	30,	2020	2021.4.15-2028.5.15	Financial liabilities for hedging -		8,390,296
				current
				Financial liabilities for hedging -		35,774,370
				non-current

Influence of comprehensive income

	Recognized in	Recognized in
		Other
	Comprehensive		Reclassified to
		Income		Income
For the nine months ended September 30, 2021	$	231,217	$	501,418
For the three months ended September 30, 2021		(190,986)		188,207
For the nine months ended September 30, 2020		1,262,985		219,942
For the three months ended September 30, 2020		832,399		93,174

d. China Airlines, Mandarin Airlines and Tigerair Taiwan leased ten 777-300ER planes, twenty A330-300 planes, fifteen 737-800 planes, ten A320-200 planes, two A320neo planes, four ERJ190 planes, and three ART72-600 planes for operation, lease period are 4 to 16 years from February 2006 to July 2023. 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, the lease agreements have no purchase rights.

The information of refundable deposits and opening of credit letter due to rental of planes:

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2021		2020		2020
Refundable deposits	$	748,518	$	725,135	$	741,998
Credit guarantees		1,842,845		1,756,656		1,797,508

CAL Park, and Taoyuan International Airport Service signed a BOT contract with a land lease agreement, refer to Note 34. 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 was included in the lease liability, the lease liability would have increased by $894,584 thousand, $885,657 thousand and $882,702 thousand on September 30, 2021, December 31, 2020 and September 30, 2020, respectively.

29 -

Taiwan Air Cargo Terminal Co. and CAA signed a BOT contract with a land lease agreement. For details, please refer to Note 34.

e. In September 2019, the Company signed a rental contract for six A321neo with Air Lease Corporation, which is expected to be introduced between 2021 and 2023.

In October 2019, the Company signed a rental contract for eight A321neo with CALC Lease Corporation, which is expected to be delivered between 2022 and 2023.

In February 2020, Tigerair Taiwan Co., Ltd. signed a rental contract for eight A320neo with ICBC Lease Corporation, which is expected to be delivered between 2021 and 2024. As of September 30, 2021, two A320neo have been delivered.

f. In order to revitalize assets and strengthen financial structure, the Company signed a sale and leaseback agreement for five A330-300 with CALC Lease Corporation in June 2021 and September 2021. Those aircraft were sold for $2,810,098 thousand and the Company recognized a loss of $342,080 thousand. The lease term is 4 years without renewal option or right of first refusal and the annual lease payments for each aircraft are US$4,200 thousand to US$4,823 thousand.
g. In order to revitalize assets, the Company signed a lease agreement for two 747-400F with US Cargo Company in August 2021 and September 2021, which is expected to be delivered between October 2021 and December 2021.
h. Other lease information

The Group uses operating lease agreement for investment properties, refer to Note 16.

Short-term leases and low-value asset leases Total cash outflow for leases		For the Three Months Ended September 30 2021 2020 $ 9,203 $ 6,994 $ (2,961,296) $ (3,183,943)		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 9,203 $ (2,961,296)		2021 $ 22,846 $ (8,889,159)	2020 $ 19,117 $ (9,581,731)

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

22. OTHER PAYABLES

	September 30,	December 31,	September 30,
	2021	2020	2020
Short-term employee benefits	$ 2,687,129	$ 1,948,982	$ 2,197,375
Fuel costs	2,393,587	1,853,717	1,341,930
Repair expenses	1,023,532	366,589	491,382
Ground service expenses	872,152	956,956	857,837
Terminal surcharges	726,684	420,194	451,174
Interest expenses	159,529	120,550	173,278
Commission expenses	114,160	184,363	317,156
Others	2,004,784	2,454,906	2,650,850
	$ 9,981,557	$ 8,306,257	$ 8,480,982

30 -

23. CONTRACT LIABILITIES

September 30,
2021

Frequent flyer program
$ 2,691,031

Advance ticket sales
1,496,695
Others

-

$ 4,187,726

Current
$ 3,271,347

Non-current

916,379

$ 4,187,726

PROVISIONS
September 30,
2021

Operating leases - aircraft
$ 17,738,772

Current
$ 2,775,946
Non-current

14,962,826

$ 17,738,772

Balance at January 1, 2020
Additional provisions recognized
Usage
Effects of exchange rate changes
Balance at September 30, 2020
Balance at January 1, 2021
Additional provisions recognized
Usage
Effects of exchange rate changes
Balance at September 30, 2021

December 31,
2020
September 30,
2020
$ 2,671,203
$ 2,789,328
2,659,093
3,603,340
168

-
$ 5,330,464
$ 6,392,668
$ 3,569,360
$ 4,394,318
1,761,104

1,998,350
$ 5,330,464
$ 6,392,668
December 31,
2020
September 30,
2020
$ 14,534,286
$ 13,787,291
$ 164,800 $ 221,320

14,369,486

13,565,971
$ 14,534,286
$ 13,787,291
Aircraft Lease
Contracts
$ 10,371,857
4,730,275
(962,948)

(351,893)
$ 13,787,291
$ 14,534,286
4,575,939
(1,142,874)

(228,579)
$ 17,738,772

24. PROVISIONS

The Company and Mandarin Airlines 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 revolution. The Company and Mandarin Airlines had existing obligations to recognize provisions when signing a lease or during the lease term. Tigerair Taiwan Co., Ltd. also leased flight equipment under operating lease agreements. In accordance with the contract, Tigerair had to pay the maintenance reserve accounted for by using the actual number of flying hours.

31 -

25. RETIREMENT BENEFIT PLANS

Employee benefits expense in respect of the Group’s defined benefit retirement plan was calculated using the actuarially determined pension cost discount rate as of December 31, 2020 and 2019.

Operating costs Operating expenses		For the Three Months Ended September 30	For the Three Months Ended September 30		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 242,394 99,462 $ 341,856	2020 $ 222,901 91,616 $ 314,517		2021 $ 739,235 279,185 $ 1,018,420	2020 $ 709,999 304,134 $ 1,014,133

26. EQUITY

a. Share capital

Ordinary shares

September 30, 2021 Number of shares authorized (in thousands) 7,000,000 Amount of shares authorized $ 70,000,000 Amount of shares issued $ 57,404,844	December 31, 2020 September 30, 2020 7,000,000 7,000,000 $ 70,000,000 $ 70,000,000 $ 54,209,846 $ 54,209,846

The Company issued the 6th domestic unsecured convertible bonds, and the holders of the convertible bonds applied for conversion in the amount of $4,025,700 thousand for the six months ended September 30, 2021. The number of ordinary shares exchanged was 319,500,000 and entitled to have their registration changed after the issuance of new shares.

b. Capital surplus

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
		2021		2020		2020
Issuance of shares in excess of par value and
conversion premium	$	746,037	$	146,351	$	146,351
Retirement of treasury shares		-		33,513		33,513
Employee share options expired		-		11,747		11,747
Long-term investments		540		119,134		119,134
Bonds payable - equity component		323,766		409,978		409,978
Others		701,842		466,604		466,604
	$	1,772,185	$	1,187,327	$	1,187,327

The capital surplus from share issued in excess of par (including additional paid-in capital from the converted convertible bonds) may be used to offset deficits; in addition, when the Group has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (but limited to a certain percentage of the Group’s paid-in capital on a yearly basis).

32 -

The capital surplus arising from long-term investments, employee share options and the distribution of cash dividends to treasury share held by subsidiaries may not be used for other purposes but to offset deficits. The capital surplus arising from share options for employees and convertible bonds cannot be used.

c. Appropriation of earnings and dividend policy

Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”), where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which is to distribute dividends and bonus no less than 50% of the remaining profit and undistributed retained earnings. The dividends and bonus mentioned above can be distributed in the form of new shares or cash, and the cash dividends should be no less than 30% of the total dividends.

Under the Company Act, if surplus earnings are distributed in the form of new shares, the distribution of shares shall be approved in the meeting of the board of directors; if such earnings are distributed in the form of cash, the cash distribution shall be authorized after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors; and in addition, a report of such distribution shall be submitted to the shareholders’ meeting. If the Group has no loss, according to laws and regulations, the Group can distribute its capital reserve, in whole or in part, by issuing new shares or cash based on financial, business and management considerations. If such surplus earnings is distributed in the form of new shares, it shall be approved by a meeting of the board of directors; if such surplus earning is distributed in the form of cash, it shall be authorized after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

Under the dividend policy as set forth in the Company’s Articles of Incorporation (the “Articles”) based on the amended Company Act, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan with due consideration of any future aircraft acquisition plans and fund demands, which should be resolved in the shareholders’ 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 for earnings distribution, retained earnings can be used as a supplement for the deficiency.

The distribution of dividends should be resolved and recognized in the shareholders’ meeting in the following year.

1) Offsetting deficit in 2019

On June 23, 2020, the offsetting of deficit in 2019 was resolved and recognized in the shareholders’ meeting. The deficit included a net loss of $1,199,798 thousand and negative adjustment of other retained earnings of $577,427 thousand; thus, the remaining amount of accumulated deficit was $1,777,225 thousand. The deficit was offset by the legal reserve of $466,416 thousand, the special reserve of $12,967 thousand and the capital reserve of $1,297,843 thousand.

33 -

2) Offsetting deficit in 2020

On August 12, 2021, the offsetting of deficit in 2020 was resolved and recognized in the shareholders’ meeting. The deficit included a net income of $140,000 thousand and negative adjustment of other retained earnings of $490,581 thousand; thus, the remaining amount of accumulated deficit was $350,581 thousand. The deficit was offset by the capital reserve of $350,581 thousand.

d. Other equity items

The movements of other equity items were as follows:

Exchange
Differences on
Translation of
the Financial
Statements of
Foreign
Operations
Unrealized
Gain (Loss) on
Financial
Assets at Fair
Value Through
Other
Comprehensive
Income
Gain (Loss) on
Hedging
Instruments
Balance on January 1, 2020
$ (54,707 ) $ 107,262 $ 1,143,678
Exchange differences on translation of the financial statements of
foreign operations
(68,728 )
-
-
Gain on hedging instruments
-
-
1,185,753
Cumulative loss on changes in fair value of hedging instruments
reclassified to profit or loss
-
-
(179,589 )
Unrealized loss on financial assets at fair value through other
comprehensive income
-
(85,280 )
-
Effects of income tax

13,497

16,153

(201,234)

Other comprehensive income recognized in the period

(55,231)

(69,127)

804,930

Balance on September 30, 2020
$ (109,938)
$ 38,135
$ 1,948,608

Balance on January 1, 2021
$ (134,252 ) $ 71,359 $ 2,606,659
Exchange differences on translation of the financial statements of
foreign operations
(33,157 )
-
-
Gain on hedging instruments
-
-
687,829
Cumulative loss on changes in fair value of hedging instruments
reclassified to profit or loss
-
-
(492,844 )
Unrealized loss on financial assets at fair value through other
comprehensive income
-
(72,433 )
-
Effects of income tax

6,369

13,982

(38,996)

Other comprehensive income recognized in the period

(26,788)

(58,451)

155,989

Transferred to hedged items

-

-

79,606

Balance on September 30, 2021
$ (161,040)
$ 12,908
$ 2,842,254

Total
$ 1,196,233

(68,728 )

1,185,753

(179,589 )

(85,280 )

(171,584)

680,572
$ 1,876,805
$ 2,543,766

(33,157 )

687,829

(492,844 )

(72,433 )

(18,645)

70,750

79,606
$ 2,694,122

e. Non-controlling interests

Beginning balance Share in loss for the year Exchange differences on translating the financial statements of foreign operations Loss on hedging instruments Cumulative gain on changes in fair value of hedging instruments reclassified to profit or loss Effects of income tax		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 3,152,090 (457,069) (1,403) (325) 785 (92) (1,035)	2020 $ 3,578,345 (353,423) (1,327) (855) 1,698 (169) (653) (Continued)

34 -

Change in subsidiaries’ equity Share options held by the employees of subsidiaries Dividends paid by subsidiaries Ending balance		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 575,753 126 (124,727) $ 3,145,138	2020 $ - 52 (375,036) $ 2,849,285 (Concluded)

f. Treasury shares

Treasury shares are the Company’s shares held by its subsidiaries as of September 30, 2021 and 2020 and are as follows:

			(In Thousands of Shares)	(In Thousands of Shares)	(In Thousands of Shares)	(In Thousands of Shares)
	Number of					Number of
		Shares,	Reduction			Shares,
	Beginning		During			End
Period of Treasury Shares		of Year	the	Year		of Year
For the nine months ended September 30, 2021		2,075		-		2,075
For the nine months ended September 30, 2020		2,889		(814)		2,075
	Shares	Carrying
Subsidiary	(In Thousands)	Amount			Market Value
September 30, 2021
Mandarin Airlines	2,075	$ 35,684			$	35,684
December 31, 2020
Mandarin Airlines	2,075	$ 24,999			$	24,999
September 30, 2020
Mandarin Airlines	2,075	$ 17,178			$	17,178

The above acquisitions by subsidiaries of the Company’s shares in previous years was due to investment 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 the Company’s new shares and voting rights.

Dynasty Aerotech International Corp. sold a total of 814 thousand shares of the Company between January 1, 2020 and September 30, 2020. The disposal price was $6,854 thousand.

35 -

27. NET INCOME

a. Revenue

Passenger Cargo Others		For the Three Months Ended September 30 2021 2020 $ 1,189,331 $ 3,241,277 31,247,067 21,508,899 2,037,604 1,861,522 $ 34,474,002 $ 26,611,698		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 1,189,331 31,247,067 2,037,604 $ 34,474,002		2021 $ 4,569,176 81,309,658 5,795,806 $ 91,674,640	2020 $ 23,482,646 56,046,312 5,955,392 $ 85,484,350

b. Other income

Interest income Dividend income Others Other gains and losses Gain (loss) on disposal of property, plant and equipment Loss arising from sale and leaseback transactions Gain (loss) on financial assets mandatorily classified as at FVTPL Loss on disposal of investments Net foreign exchange (losses) gains Others		For the Three Months Ended September 30 2021 2020 $ 22,988 $ 62,650 11,607 15,099 104,598 104,754 $ 139,193 $ 182,503 For the Three Months Ended September 30 2021 2020 $ (33,839) $ 6,586 (202,383) - 238 304 - - (17,152) 161,378 (61,279) (78,573) $ (314,415) $ 89,695		For the Nine Months Ended September 30	For the Nine Months Ended September 30
				2021 2020 $ 97,677 $ 242,761 11,607 22,516 280,455 280,430 $ 389,739 $ 545,707 For the Nine Months Ended September 30
		2021 $ (33,839) (202,383) 238 - (17,152) (61,279) $ (314,415)		2021 $ (1,023,694) (342,080) 13 (540) (19,211) (222,699) $ (1,608,211)	2020 $ 13,466 - 2,234 - 212,336 (208,629) $ 19,407

c. Other gains and losses

36 -

d. Finance costs

Interest expense Bonds payable Bank loans Interest on lease liabilities Capitalization rate Capitalization interest		For the Three Months Ended September 30 2021 2020 $ 37,978 $ 99,399 162,900 193,212 371,642 458,065 $ 572,520 $ 750,676 0.55%-1.11% 0.78%-1.55% $ 11,619 $ 18,559		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 37,978 162,900 371,642 $ 572,520 0.55%-1.11% $ 11,619		2021 $ 187,102 552,150 1,111,729 $ 1,850,981 0.55%-1.11% $ 30,735	2020 $ 242,546 715,996 1,409,299 $ 2,367,841 0.71%-1.92% $ 64,708

e. Depreciation and amortization expenses

Property, plant, equipment Right-of-use assets Investment properties Intangible assets Depreciation and amortization expenses An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses		For the Three Months Ended September 30 2021 2020 $ 4,107,786 $ 4,835,632 2,977,451 3,041,624 66 67 56,769 47,201 $ 7,142,072 $ 7,924,524 $ 6,899,689 $ 7,649,024 185,614 228,299 $ 7,085,303 $ 7,877,323 $ 3,010 $ 3,561 53,759 43,640 $ 56,769 $ 47,201		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 4,107,786 2,977,451 66 56,769 $ 7,142,072 $ 6,899,689 185,614 $ 7,085,303 $ 3,010 53,759 $ 56,769		2021 $ 13,676,955 8,851,277 200 165,970 $ 22,694,402 $ 21,700,767 827,665 $ 22,528,432 $ 9,032 156,938 $ 165,970	2020 $ 14,608,504 9,289,998 203 152,758 $ 24,051,463 $ 22,858,093 1,040,612 $ 23,898,705 $ 10,647 142,111 $ 152,758

37 -

f. Employment benefits expense

Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits Salary expenses Personnel service expenses An analysis of employee benefits expense by function Operating costs Operating expenses		For the Three Months Ended September 30 2021 2020 $ 126,607 $ 153,738 341,856 314,517 $ 468,463 $ 468,255 $ 4,847,369 $ 4,534,209 1,158,472 852,518 $ 6,005,841 $ 5,386,727 $ 5,346,128 $ 4,823,825 1,128,176 1,031,157 $ 6,474,304 $ 5,854,982		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 126,607 341,856 $ 468,463 $ 4,847,369 1,158,472 $ 6,005,841 $ 5,346,128 1,128,176 $ 6,474,304		2021 $ 387,783 1,018,420 $ 1,406,203 $ 13,538,648 3,743,412 $ 17,282,060 $ 15,336,479 3,351,784 $ 18,688,263	2020 $ 437,620 1,014,133 $ 1,451,753 $ 13,599,526 3,267,290 $ 16,866,816 $ 14,827,517 3,491,052 $ 18,318,569

According to the Company’s articles, the Company accrues compensation of employees at rates of no less than 3% of the net profit before income tax and compensation of employees. For the three months ended September 30, 2021 and for the nine months ended September 30, 2021, the estimated compensation of employees was both $53,321 thousand. For the three months ended September 30, 2020 and for the nine months September 30, 2020, the Company has experienced a deficit and, therefore, no compensation of employees was estimated.

Material differences between such estimated amounts and the amounts proposed by the board of directors on or before the date that the annual consolidated financial statements are authorized for issue are adjusted in the year that the compensation and remuneration are recognized. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

Information on the compensation of employees and remuneration of directors and supervisors resolved by the Company’s board of directors is available at the Market Observation Post System website of the Taiwan Stock Exchange.

38 -

28. INCOME TAX

a. Income tax expense recognized in profit or loss

The major components of tax expense (benefit) were as follows:

For the Three Months Ended September 30 2021 2020 Current tax Current year $ 766,443 $ 120,086 Adjustments for prior periods - 199 Deferred tax Current year (414,753) (196,052) Income tax expense (benefit) recognized in profit or loss $ 351,690 $ (75,767) Income tax recognized in other comprehensive income For the Three Months Ended September 30 2021 2020 Deferred tax Recognized in other comprehensive income Translation of foreign operations $ 211 $ 3,548 Fair value changes of financial assets at FVTOCI 10,783 2,295 Fair value revaluation of hedging instruments for cash flow hedging 39,577 (124,972) Total income tax recognized in other comprehensive income$ 50,571 $ (119,129)	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
	2021 2020 $ 847,840 $ 445,896 7,785 (22,123) (683,857) (608,149) $ 171,768 $ (184,376) For the Nine Months Ended September 30
		2021 $ 6,369 13,982 (39,088) $ (18,737)	2020 $ 13,497 16,153 (201,403) $ (171,753)

b. Income tax recognized in other comprehensive income
c. Income tax assessment

Income tax returns of the Company through 2018 have been examined by the tax authorities. And the income tax returns of the rest of the Company’s subsidiaries through 2019 have been examined by the tax authorities.

29. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share Diluted earnings (loss) per share	For the Three Months Ended September 30 2021 2020 $ 0.51 $ (0.13) $ 0.48 $ (0.13)	For the Three Months Ended September 30 2021 2020 $ 0.51 $ (0.13) $ 0.48 $ (0.13)	For the Nine Months Ended September 30	For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 0.51 $ 0.48		2021 $ 0.28 $ 0.26	2020 $ (0.37) $ (0.37)

39 -

Earnings (loss) used in the computation of basic earnings (loss) per share Effect of potentially dilutive ordinary shares: Interest on convertible bonds (after tax) Earnings (loss) used in the computation of diluted earnings (loss) per share In thousands of shares Weighted average number of ordinary shares in computation of basic earnings (loss) per share Effect of potentially dilutive ordinary shares: Compensation of employees Convertible bonds Weighted average number of ordinary shares used in the computation of diluted earnings (loss) per share		For the Three Months Ended September 30 2021 2020 $ 2,917,304 $ (707,937) 16,615 - $ 2,933,919 $ (707,937) 5,724,826 5,418,910 3,100 - 407,116 - 6,135,042 5,418,910		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 2,917,304 16,615 $ 2,933,919 5,724,826 3,100 407,116 6,135,042		2021 $ 1,555,376 60,635 $ 1,616,011 5,540,441 3,100 591,501 6,135,042	2020 $ (2,021,822) - $ (2,021,822) 5,418,640 - - 5,418,640

If the Group offered to settle compensation or bonuses paid to employees in cash or shares, the Group assumed 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 the computation of diluted earnings (loss) per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings (loss) per share until the number of shares to be distributed to employees is resolved in the following year.

30. CAPITAL MANAGEMENT

The goal, policies and procedures as well as the composition of the Group’s capital management are the same as those stated in Note 31 to the Group’s consolidated financial statements for the year ended December 31, 2020.

40 -

31. FINANCIAL INSTRUMENTS

a. Fair values of financial instruments not measured at fair value

Except as detailed in the following table, the management considers the carrying amounts of financial assets and financial liabilities recognized in these consolidated financial statements as approximating their fair values.

Financial liabilities Bonds payable	September 30, 2021 Carrying Amount Fair Value $ 17,866,263 $ 19,076,962	December 31, 2020 Carrying Amount Fair Value $ 22,282,859 $ 22,459,685	September 30, 2020
			Carrying Amount Fair Value $ 23,162,586 $ 23,145,514

Lease liabilities and long-term debts are floating-rate financial liabilities, so their carrying amounts are their fair values. Fair values of bond payable trading in OTC and based on quoted market prices (Level 1)

b. Fair value of financial instruments measured at fair value on a recurring basis

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

September 30, 2021

Financial assets at FVTPL Domestic money market funds Financial assets at FVTOCI Investments in equity instruments Unlisted shares - domestic Unlisted shares - foreign Financial assets for hedging Financial liabilities for hedging	Level 1 $ 169,479 $ - - $ - $ 2,228,412 $ 36,132,222	Level 2 $ - $ - - $ - $ - $ 1,080	Level 3 $ - $ 27,181 63,999 $ 91,180 $ 20,219 $ 424	Total $ 169,479
				$ 27,181 63,999
				$ 91,180
				$ 2,248,631
				$ 36,133,726

41 -

December 31, 2020

Financial assets at FVTPL Domestic money market funds Financial assets at FVTOCI Investments in equity instruments Unlisted shares - domestic Unlisted shares - foreign Financial assets for hedging Financial liabilities for hedging September 30, 2020 Financial assets at FVTPL Domestic money market funds Financial assets at FVTOCI Investments in equity instruments Unlisted shares - domestic Unlisted shares - foreign Financial assets for hedging Financial liabilities for hedging	Level 1 $ 274,761 $ - - $ - $ 7,613,636 $ 40,575,778 Level 1 $ 491,271 $ - - $ - $ 9,505,814 $ 44,164,666	Level 2 $ - $ - - $ - $ - $ 9,307 Level 2 $ - $ - - $ - $ 44 $ 92,968	Level 3 $ - $ 29,704 134,042 $ 163,746 $ - $ - Level 3 $ - $ 22,351 100,161 $ 122,512 $ 2 $ 33,243	Total $ 274,761
				$ 29,704 134,042
				$ 163,746
				$ 7,613,636
				$ 40,585,085
				Total $ 491,271
				$ 22,351 100,161
				$ 122,512
				$ 9,505,860
				$ 44,290,877

There were no transfers between Levels 1 and 2 in the current period.

4) Valuation techniques and inputs applied for Level 2 fair value measurement

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

5) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of fuel options are determined using option pricing models where the significant unobservable inputs are the implied fluctuation. Changes in the implied fluctuations used in isolation would result in an increase or decrease in the fair value of the fuel options.

42 -

The domestic unlisted equity investment is based on the comparative company valuation to estimate the fair value. The main assumptions are based on the multiplier of the market price of the 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 value of the relevant financial instruments.

The multiplier and liquidity discount of Level 3 financial instruments were as follows:

				Liquidity
			Multiplier	Discount
September	30,	2021	0.79-16.32	80%
December	31,	2020	0.79-16.32	80%
September	30,	2020	0.80-21.22	80%

The movements of Level 3 financial instruments were as follows:

	Derivative	Derivative		Equity
	Instruments		Instruments
Balance at January 1, 2021	$	-	$	163,746
Recognized in other comprehensive income		11,463		(72,566)
Balance at September 30, 2021	$	11,463	$	91,180
Balance at January 1, 2020	$	5,524	$	209,221
Recognized in other comprehensive income		(38,765)		(86,709)
Balance at September 30, 2020	$	(33,241)	$	122,512

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

c. Categories of financial instruments

		September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
			2021		2020		2020
Financial	assets
Financial	assets at FVTPL	$	169,479	$	274,761	$	491,971
Financial	assets for hedging		2,248,631		7,613,636		9,505,860
Financial	assets at amortized cost (Note 1)		52,998,119		45,898,091		42,853,509
Financial	assets at FVTOCI		91,180		163,746		122,512
Financial	liabilities
Financial	liabilities at FVTPL		-		-		-
Financial	liabilities for hedging		36,133,726		40,585,085		44,290,877
Financial	liabilities at amortized cost (Note 2)		155,822,412		165,458,441		153,646,499

Note 1: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, time deposits with original maturities of more than 3 months, notes and accounts receivable, accounts receivable - related parties, other receivables, refundable deposits and other restricted financial assets.

43 -
Note 2: The balances include financial liabilities measured at amortized cost, which comprise short-term loans, short-term notes payable, notes and accounts payable, accounts payable - related parties, other payables, bonds payable and long-term loans, lease liabilities, provisions, parts of other current liabilities, parts of other noncurrent liabilities and guarantee deposits.

d. Financial risk management objectives and policies

The Group has risk management and hedging strategies to respond to changes in the economic and financial environment and in the fuel market. To reduce the financial risks from changes in interest, exchange rates and in fuel prices, the Group has its operating costs stay within a specified range by using appropriate financial hedging instruments and hedging percentages in accordance with the “Processing Program of Derivative Financial Instrument Transactions” approved by the Group’s shareholders to reduce the impact of market price changes on earnings. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

In addition, the Group has a risk committee, which meets periodically to evaluate the performance of derivative instruments and determine the appropriate hedging percentage. This committee informs 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 and response to avoid financial risk with the assistance of financial risk experts to effect risk management.

1) Market risk

The Group is primarily exposed to the financial risks of changes in foreign currency exchange rates and interest rates. The Group entered into derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk.

The Group enters into forward contracts, foreign currency option contracts, and interest swap contracts with fair values that are highly negatively correlated to the fair values of hedged items 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 in foreign-currency assets, liabilities and commitments in the related exchange rates.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar. The following details the Group’s sensitivity to increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. U.S. dollars increase/decrease one dollar against New Taiwan dollars used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for U.S. dollars increase/decrease one dollar against New Taiwan dollars change in foreign currency rates.

When New Taiwan dollars increased by one dollar against U.S. dollars and all other variables were held constant, there would be an increase in pre-tax profit and an increase in pre-tax other comprehensive income for the nine months ended September 30, 2021 of $165,618 thousand and $1,212,126 thousand, respectively, and an decrease in pre-tax loss and increase in pre-tax other comprehensive income for the nine months ended September 30, 2020 of $330,226 thousand and $1,069,139 thousand, respectively.

44 -

The Group’s hedging strategy is to enter into foreign exchange forward contracts to avoid exchange rate exposure of its foreign currency denominated receipts and payments and to manage exchange rate exposure of its aircraft prepayments in the next year. Those transactions are designated as cash flow hedges. When forecasted purchases actually take place, basis adjustments are made to the initial carrying amounts of hedged items.

For the hedges of highly probable aircraft prepayments, as the critical terms (i.e. the notional amount, useful life and underlying asset) of the foreign exchange forward contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of the effectiveness, and it is expected that the value of the foreign exchange forward contracts and the value of the corresponding hedged items will systematically change in the opposite direction in response to movements in the underlying exchange rates.

The following table summarizes the information relating to the hedges of foreign currency risk.

Please refer to Note 21 for rental contract for hedging.

September 30, 2021

Notional Line Item in Hedging Instruments Currency Amount Maturity Forward Rate Balance Sheet Cash flow hedge Aircraft rentals - forward exchange contracts NTD/USD NT$42,503/ US$1,486 2021.10.6- 2021.11.9 28.5-28.9 Financial assets for hedging - current/ liabilities for hedging - current	Carrying Amount
	Asset Liability $ - $ 1,080

The abovementioned hedging instruments applied hedge accounting. The book value of other equity which belongs to each hedging items (aircraft rentals in U.S. dollars) was $(1,080) thousand.

December 31, 2020

Notional
Line Item in
Hedging Instruments
Currency
Amount
Maturity
Forward Rate
Balance Sheet
Cash flow hedge
Aircraft rentals -
forward exchange
contracts
NTD/USD
NT$127,906/
US$4,371
2021.1.8-
2021.11.9
28.5-29.7
Financial assets for
hedging - current/
liabilities for hedging -
current

Aviation fuel - forward
exchange contracts
NTD/USD
NT$142,045/
US$5,000
2021.1.29-
2021.5.28
29.9-29.8
Financial assets for
hedging - current/
liabilities for hedging -
current

Carrying Amount

Asset
Liability
$ -
$ 3,513
-
5,794

The abovementioned hedging instruments applied hedge accounting. The book value of other equity for each hedging item (aircraft rentals and aviation fuel in U.S. dollars) was $(3,513) thousand and $(5,794) thousand, respectively.

September 30, 2020

Notional
Line Item in
Hedging Instruments
Currency
Amount
Maturity
Forward Rate
Balance Sheet
Cash flow hedge
Aircraft rentals -
forward exchange
contracts
NTD/USD
NT$212,144/
US$7,126
2020.10.7-
2021.10.6
28.88-30.28
Financial assets for
hedging - current/
liabilities for hedging -
current

Aviation fuel - forward
exchange contracts
NTD/USD
NT$319,767/
US$11,000
2020.10.30-
2021.5.28
29.38-30.02
Financial assets for
hedging - current/
liabilities for hedging -
current
Aircraft prepayments -
forward exchange
contracts
NTD/USD
NT$3,052,326/
US$105,000
2020.11.4-
2020.12.4
29.48-30.5
Financial assets for
hedging - current/
liabilities for hedging -
current

Carrying Amount

Asset
Liability
$ 44
$ 4,879
-
6,958
-
81,131

45 -

The abovementioned hedging instruments applied hedge accounting. The book value of other equity which belongs to each hedging items (aircraft rentals, aviation fuel and aircraft prepayments in U.S. dollar) was $(4,835) thousand, $(6,958) thousand and $(81,131) thousand, respectively.

For the nine months ended September 30, 2021

	Hedging Gain	Amount
	(Loss)	Reclassified to
	Recognized in	Profit and Loss
	Other	and the
	Comprehensive	Adjusted Line
Comprehensive Income	Income	Item
Cash flow hedge
Aircraft rentals	$ 2,432	$ (4,144)	(Note)
Aviation fuel	5,794	(6,844)
	$ 8,226	$ (10,988)

Note: Increase in operating costs or foreign exchange loss.

For the three months ended September 30, 2021

	Hedging Gain	Amount
	(Loss)	Reclassified to
	Recognized in	Profit and Loss
	Other	and the
	Comprehensive	Adjusted Line
Comprehensive Income	Income	Item
Cash flow hedge
Aircraft rentals	$ 405	$ (356)	(Note)
Aviation fuel	-	-
	$ 405	$ (356)

Note: Increase in operating costs or foreign exchange loss.

For the nine months ended September 30, 2020

	Hedging Gain	Hedging Gain	Amount
		(Loss)	Reclassified to
	Recognized in		Profit and Loss
		Other	and the
	Comprehensive		Adjusted Line
Comprehensive Income	Income		Item
Cash flow hedge
Aircraft rentals	$	3,618	$ (7,286)	(Note)
Aviation fuel		3,203	(8,050)
Aircraft prepayments		(62,823)	-
Maintenance cost		-	5
	$	(56,002)	$ (15,331)

46 -

Note: Increase in operating costs or foreign exchange loss.

For the three months ended September 30, 2020

	Hedging Gain	Hedging Gain	Amount
		(Loss)	Reclassified to
	Recognized in		Profit and Loss
		Other	and the
	Comprehensive		Adjusted Line
Comprehensive Income	Income		Item
Cash flow hedge
Aircraft rentals	$	(318)	$ (3,333)	(Note)
Aviation fuel		59	(5,950)
Aircraft prepayments		(52,006)	-
Long-term prepayments		(150)	-
Maintenance cost		-	5
	$	(52,415)	$ (9,278)

Note: Increase in operating costs or foreign exchange loss.

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating 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 amounts of the Group’s financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

	September 30,	December 31,	September 30,
	2021	2020	2020
Fair value interest rate risk
Financial liabilities	$ 60,769,474	$ 68,883,667	$ 73,848,215
Cash flow interest rate risk
Financial liabilities	101,512,073	112,324,305	109,059,037

Sensitivity analysis

The sensitivity analysis below was determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A one yard (25 basis points) increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

Had interest rates increased by one yard (25 basis points) and all other variables been held constant, the Group’s pretax profit for the nine months ended September 30, 2021 would have decreased by $190,335 thousand.

47 -

Had interest rates increased by one yard (25 basis points) and all other variables been held constant, the Group’s pretax loss for the nine months ended September 30, 2020 would have increased by $204,486 thousand.

c) Other price risk

The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters into fuel options contract to hedge against adverse risks on fuel price changes.

September 30, 2021

Notional Forward Line Item in Hedging Instrument Currency Amount Maturity Rate Balance Sheet Cash flow hedges - fuel options USD NT$11,463 2021.12.31- 2022.6.30 US$65- US$99 Financial assets for hedging - current/ liabilities for hedging - current	Carrying Amount
	Asset Liability $ 20,219 $ 424

Hedge accounting is continued to be applied to the abovementioned hedging instruments. The carrying amount of other equity which belongs to each hedging item (fuel payments) was $11,463 thousand.

December 31, 2020

Notional Forward Line Item in Hedging Instrument Currency Amount Maturity Rate Balance Sheet Cash flow hedges - fuel options USD - - - Financial assets for hedging - current/ liabilities for hedging - current	Carrying Amount
	Asset Liability $ - $ -

Hedge accounting is continued to be applied to the abovementioned hedging instruments. The carrying amount of other equity which belongs to each hedging item (fuel payments) was $0 thousand.

September 30, 2020

Notional
Forward
Line Item in
Hedging Instrument
Currency
Amount
Maturity
Rate
Balance Sheet
Cash flow hedges - fuel
options
USD
NT$10,714
2020.12.31
US$55-
US$68.05
Financial assets for
hedging - current/
liabilities for
hedging - current

Cash flow hedges - fuel
swap contract
USD
NT$22,527
2020.12.31
US$67.48
Financial assets for
hedging - current/
liabilities for
hedging - current

Carrying Amount

Asset
Liability
$ 2 $ 10,716
-
22,527

Hedge accounting is continued to be applied to the abovementioned hedging instruments. The carrying amount of other equity which belongs to each hedging item (fuel payments) was $(33,241) thousand.

For the nine months ended September 30, 2021

	Hedging Gain	Amount
	(Loss)	Reclassified to
	Recognized in	Profit and Loss
	Other	and the
	Comprehensive	Adjusted Line
Comprehensive Income	Income	Item
Cash flow hedges - fuel options	$ 11,463	$ 1,629	(Note)

48 -

Note: Decreasing in operating costs.

For the three months ended September 30, 2021

		Hedging Gain	Amount
		(Loss)	Reclassified to
		Recognized in	Profit and Loss
		Other	and the
		Comprehensive	Adjusted Line
Comprehensive Income		Income	Item
Cash flow hedges - fuel options		$ 710	$ 2,472	(Note)
Note:	Decreasing in operating costs.
For the	nine months ended September 30, 2020

		Hedging Gain	Amount
		(Loss)	Reclassified to
		Recognized in	Profit and Loss
		Other	and the
		Comprehensive	Adjusted Line
Comprehensive Income		Income	Item
Cash flow hedges - fuel options		$ (16,238)	$ (26,720)	(Note)
Cash flow hedges - fuel swap contract		(22,527)	-
		$ (38,765)	$ (26,720)
Note:	Increasing in operating costs.
For the three months ended September 30, 2020
		Hedging Gain	Amount
		(Loss)	Reclassified to
		Recognized in	Profit and Loss
		Other	and the
		Comprehensive	Adjusted Line
Comprehensive Income		Income	Item
Cash flow hedges - fuel options		$ 8,927	$ (5,525)	(Note)
Cash flow hedges - fuel swap contract		(2,852)	-
		$ 6,075	$ (5.525)

Note: Increasing in operating costs.

49 -

Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to fuel price risks at the end of the reporting period.

Fuel price increase 5% Fuel price decrease 5%	For the Nine Months	Ended September 30
	2021 Pre-tax Profit Increase (Decrease) Other Compre- hensive Income Increase (Decrease) $ 1,040 $ 573 (1,040) (573)	2020
		Pre-tax Profit Increase (Decrease) Other Compre- hensive Income Increase (Decrease) $ 622 $ 1,624 (622) (5,537)

2) Credit risk

The goal, policies and procedure of credit risk management are same as the consolidated financial statements for the year ended December 31, 2020. Related illustration can be referred to in Note 32.

3) Liquidity risk

Except for the following, the objectives, policies and procedures of liquidity risk management are same as the consolidated financial statements for the year ended December 31, 2020. Related illustration can be referred to in Note 32.

	Unused Bank
	Loan Limit
	(Unsecured)
The Group (China Airlines, Ltd., Mandarin Airlines and Tigerair Taiwan Co.,
Ltd.)	$ 34,043,895

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 be required 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 are included in the second column of the table below 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 the agreed-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 gross cash inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by yield curves at the end of the reporting period.

50 -

September 30, 2021

The Weighted Average Effective Interest Rate (%) Lease liabilities 2.3213 Floating interest rate liabilities 1.0412 Hedging instruments 2.9120 Bonds payable 0.8872 December 31, 2020 The Weighted Average Effective Interest Rate (%) Lease liabilities 1.1128 Floating interest rate liabilities 1.6269 Hedging instruments 3.0492 Bonds payable 2.4622 September 30, 2020 The Weighted Average Effective Interest Rate (%) Lease liabilities 2.3229 Floating interest rate liabilities 0.9430 Hedging instruments 3.0497 Bonds payable 0.9674	Less than 1 Year $ 3,383,178 16,712,067 11,559,260 1,458,515 $ 33,113,020 Less than 1 Year $ 3,494,299 26,195,346 9,249,609 12,531,511 $ 51,470,765 Less than 1 Year $ 3,347,633 27,816,081 10,039,917 11,938,111 $ 53,141,742	1 to 5 Years $ 9,320,267 63,586,972 26,837,567 16,713,244 $ 116,458,050 1 to 5 Years $ 9,770,964 60,977,026 32,978,809 9,303,608 $ 113,030,407 1 to 5 Years $ 10,262,311 41,208,946 36,035,514 8,412,218 $ 95,918,989	Over 5 Years $ 7,124,893 14,010,034 310,856 - $ 21,445,783 Over 5 Years $ 7,982,767 17,175,894 1,815,449 1,280,778 $ 28,254,888 Over 5 Years $ 7,188,594 32,420,708 2,687,815 3,331,924 $ 45,629,041

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32. TRANSACTIONS WITH RELATED PARTIES

The transactions between subsidiaries (obtain business) relationship with China Airlines, Ltd., remaining account balance, revenue and expense are eliminated when combined, which is not disclosed in the note. Unless otherwise stated, the transactions between the merged company and other business related parties are as follows:

a. Related party’ name and relationships

Related Party Name China Aircraft Service Airport Air Cargo Terminal (Xiamen) Co., Ltd. Airport Air Cargo Service (Xiamen) Co., Ltd. Eastern United International Logistics (Hong Kong) Dynasty Holidays China Pacific Catering Services China Pacific Laundry Services Nordam Asia Ltd. Delica International Co., Ltd. China Aviation Development Foundation Others	Relationship with the Company
	Associate 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 and second-degree relative

b. Operating income

Account Items Related Party Type Other income Major shareholders of the Company Associate Joint venture investment	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Three Months Ended September 30	For the Nine Months Ended September 30 2021 2020 $ 10,075 $ 5,097 $ 56 $ 122 $ 14,554 $ 17,604	For the Nine Months Ended September 30 2021 2020 $ 10,075 $ 5,097 $ 56 $ 122 $ 14,554 $ 17,604	For the Nine Months Ended September 30 2021 2020 $ 10,075 $ 5,097 $ 56 $ 122 $ 14,554 $ 17,604
		2021 $ 2,040 $ - $ 4,959	2020 $ 1 $ 10 $ 4,415		2021 $ 10,075 $ 56 $ 14,554	2020 $ 5,097 $ 122 $ 17,604

c. Purchases of goods

Related Party Type Major shareholders of the Company Associate Joint venture investment		For the Three Months Ended September 30 2021 2020 $ 4,714 $ - $ 143,994 $ 105,438 $ 51,472 $ 67,760		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 4,714 $ 143,994 $ 51,472		2021 $ 23,286 $ 350,512 $ 160,833	2020 $ 11,418 $ 328,418 $ 443,479

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d. Accounts receivable - related parties (generated by operations)

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
Related Party Type		2021		2020		2020
Major shareholders of the Company	$	718	$	-	$	-
Joint venture investment		1,683		1,667		1,537
	$	2,401	$	1,667	$	1,537

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)

	September 30,	September 30,	December 31,	December 31,	September 30,	September 30,
Related Party Type		2021		2020		2020
Major shareholders of the Company	$	1,657	$	-	$	-
Associates		59,738		52,187		41,630
Joint venture investments		51,112		76,380		68,323
	$	112,507	$	128,567	$	109,953

The remaining balance of notes and accounts payable - related parties will be paid in cash if they are not secured.

f. Lease arrangements (operating leases)

Under an operating lease agreement, the Company rented flight training machines and flight simulators from China Aviation Development Foundation to train pilots, and the Company paid the rental based on usage hours. For the nine months ended September 30, 2021 and 2020, the Company paid rentals of $23,286 thousand and $11,418 thousand, respectively; for the three months ended September 30, 2021 and 2020, the Company paid rentals of $4,714 thousand and $0 thousand, respectively.

g. Endorsements and assurances

The Company Cal Park Tigerair Taiwan Co., Ltd. Taiwan Aircraft Maintenance and Engineering Co., Ltd.	September 30, 2021	December 31, 2020 Authorized Amount Amount Used $ 3,850,000 $ 1,892,540 2,656,591 265,062 2,000,000 1,336,000	September 30, 2020
	Authorized Amount Amount Used $ 3,850,000 $ 1,663,320 2,671,771 259,894 2,000,000 1,400,000		Authorized Amount Amount Used $ 3,850,000 $ 1,914,690 2,718,372 464,095 2,000,000 1,301,327

h. Compensation of key management personnel

Short-term employee benefits Post-employment benefits		For the Three Months Ended September 30 2021 2020 $ 11,459 $ 7,926 516 657 $ 11,975 $ 8,583		For the Nine Months Ended September 30	For the Nine Months Ended September 30
		2021 $ 11,459 516 $ 11,975		2021 $ 30,126 41,654 $ 71,780	2020 $ 23,977 1,822 $ 25,799

53 -

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

33. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

September 30, 2021 Property, plant and equipment $ 32,399,027 Right-of-use asset 56,761,245 Restricted assets 572,632 $ 89,732,904	December 31, 2020 September 30, 2020 $ 34,170,076 $ 35,211,100 59,861,537 62,866,981 302,807 193,471 $ 94,334,420 $ 98,271,552

34. SIGNIFICANT COMMITMENTS AND CONTINGENT LIABILITIES

The Group had commitments and contingent liabilities (except for those mentioned in other notes) as follows:

a. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20 years from the date of transfer of the chartered operation rights from CAA to TACT. TACT filed an application for a 10-year extension of the COP for the cargo terminals in the Taiwan Taoyuan International Airport and Kaohsiung International Airport and received the approval from the Taoyuan Airport Corporation and CAA in July 2013 and July 2015, respectively.

However, TACT filed an arbitration in 2012 to revise the total amount of expenditure to $6,840,000 thousand.

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

		Contract
		Amount (VAT
Client Name	Contract Title	Included)
CECI Engineering	Cargo Terminal Expansion Construction Consultant	$ 552,285
Consultant, Inc., Taiwan	Contract
Bin Li Construction Co.,	Cargo Terminal Expansion and Enhancement	275,000
Ltd., Taiwan	Construction
Trade-Van Information	TACT warehouse management system integrated	30,000
Services Co.	revision contract

As of September 30, 2021, the accumulated payments of construction in process for consultant service and construction equipment were $26,609 thousand (VAT included) and $222,726 thousand (VAT included), respectively. The amounts were recognized as 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 the chartered operating license expires.

54 -

TACT should pay royalties to Taoyuan Airport Corporation and the CAA during the chartered operation 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 the chartered operation rights on the basis of actual revenue and expenditures. The current royalty rate is 6%.

b. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20, 2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights on this contract from the CAA. The contract is effective for 50 years (consisting of the development stage and operating period) from the contract date. Three years before contract expiry date, CAL Park has the first option to renew the contract with a 20-year extension.

CAL Park’s business scope includes providing business and other operating space related to civil air transport, 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 for the 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 in Infrastructure Projects,” which states that rental calculation in the development stage should include the land value added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of the amount based on the National Building Land Rental Standard plus land value tax, value-added tax and the necessary maintenance fees.

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.

CAL Park should submit the asset transfer plan within five years before the expiry date of the chartered operation period, begin the negotiation of the asset transfer contract, and complete the assignment no later than three years before the expiry date of the chartered period. If CAA decides not to keep the building and equipment on the base area, CAL Park should remove all related building and equipment within three months after the expiry date.

c. In October 2019, the Company signed a contract with Airbus S.A.S. to purchase eleven A321neo aircraft and an option to purchase five A321neo aircraft. The total list price of the eleven aircraft is US$1,676,413 thousand, and the list price of the option to purchase five aircraft is US$769,922 thousand. The expected delivery periods of the eleven aircraft are from 2024 to 2026. As of September 30, 2021, the list price had been paid in the amount of US$32,578 thousand (recognized as prepayments for aircraft). In October 2019, the Company signed a contract with International Aero Engines Company to purchase four backup engines of A321neo. The total list price of the four engines is US$60,289 thousand, for details please refer to Note 21.
55 -
d. In July and August 2019, the Company signed a contract with the Boeing Company to purchase three 777F aircraft and exercised the option to purchase three 777F aircraft. The total list price of the six aircraft is US$2,282,012 thousand, and the expected delivery periods are from 2020 to 2023. As of September 30, 2021, three out of the six aircraft has been delivered, the total list price of the remaining three aircraft is US$1,172,357 thousand, and the list price has been paid in the amount of US$234,471 thousand (recognized as prepayments for aircraft).
e. In September 2019, Tigerair Taiwan Co., Ltd. signed a contract with Airbus S.A.S. to purchase seven A320neo aircraft and an option to purchase two A320neo aircraft. The total list price of the seven aircraft is US$729,746 thousand, and the list price of the option to purchase two aircraft is US$208,499 thousand. The expected delivery periods of the seven aircraft are from 2025 to 2027. As of September 30, 2021, the list price of the seven aircraft had been paid in the amount of US$18,549 thousand (recognized as prepayments for aircraft). In addition, in December 2019, Tigerair Taiwan Co., Ltd. signed a contract with International Aero Engines Company to purchase two backup engines of A320neo aircraft. The total list price of the two engines is US$27,345 thousand. As of September 30, 2021, the list price had been paid in the amount of US$2,988 thousand (recognized as prepayments for aircraft), for details please refer to Note 21.

35. IMPACT OF COVID-19

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

The Group continues to adjust the response measures according to the situation. In addition, to ensure the adequate liquidity, the Group also implements measures for human resource management such as postponing the hiring of newcomers, relaxing the application of special leave, loosening the restrictions on leave without pay, encouraging employees to take leave, adjusting working hours and salaries, etc. The Group’s policies to control spending include suspension of non-urgent capital expenditures, reduction in and postponement of payments.

Also, the Group received several relief measures such as government subsidy for operation and reduction on rent. For the nine months ended September 30, 2021, because of the COVID-19 pandemic, the Group received subsidy of $1,019,223 thousand for the airport landing fees and parking fees, etc. The subsidy for housing and land rental, and salary and interest expenses of $844,554 thousand was recognized as other income or deduction from other expenses. The Group has obtained relief loan from the government. Refer to Note 19 for details on the amount of loan and its allocation.

The Group cooperates in contact tracing efforts, expands screening tests and fulfils other requirements to cooperate with the Central Epidemic Command Center. The Group has properly responded to and flexibly adjusted its flight schedules. Currently, the operation is mainly based on cargo flights, and passenger flights will be adjusted according to the status of crews’ dispatch.

56 -

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currency of entities in the Group and the exchange rates between foreign currencies and respective functional currencies were disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

(In Thousands of Foreign Currencies)

September 30, 2021

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	778,458	27.8552	$ 21,684,068
EUR		19,749	32.3625	639,136
HKD		455,844	3.5778	1,630,927
JPY		3,845,893	0.2490	957,665
RMB		599,672	4.3066	2,582,565
Financial liabilities
Monetary items
USD		2,157,688	27.8552	60,102,740
EUR		4,912	32.3625	158,955
HKD		69,559	3.5778	248,869
JPY		4,341,156	0.2490	1,080,992
RMB		109,383	4.3066	471,074
December 31, 2020
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	702,507	28.4091	$ 19,957,598
EUR		18,250	34.8432	635,899
HKD		344,577	3.6603	1,261,257
JPY		3,475,525	0.2750	955,769
RMB		560,252	4.3440	2,433,737
Financial liabilities
Monetary items
USD		2,208,214	28.4091	62,733,383
EUR		6,513	34.8432	226,949
HKD		73,825	3.6603	270,223
JPY		3,725,514	0.2750	1,024,509
RMB		144,376	4.3440	627,168

57 -

September 30, 2020

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	702,459	29.0698	$ 20,420,314
EUR		17,096	34.1297	583,488
HKD		307,321	3.7481	1,151,878
JPY		3,950,045	0.2750	1,086,281
RMB		460,200	4.2644	1,962,475
Financial liabilities
Monetary items
USD		2,224,950	29.0698	64,678,772
EUR		8,058	34.1297	275,018
HKD		84,584	3.7481	317,033
JPY		2,803,819	0.2750	771,064
RMB		135,520	4.2644	577,912

For the three months ended September 30, 2021 and 2020, net foreign exchange gains (losses) were $(17,152) thousand and $161,378 thousand, respectively, and for the nine months ended September 30, 2021 and 2020, net foreign exchange gains (losses) were $(19,211) thousand and $212,336 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the entities in the Group.

37. SEPARATELY DISCLOSED ITEMS

a. Following are the additional disclosures required by the Securities and Futures Bureau for the Company and its investees:
1) Financing provided: Table 1 (attached)
2) Endorsements/guarantees provided: Table 2 (attached)
3) Marketable securities held: Table 3 (attached)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None
5) Acquisitions of individual real estate at costs or price of at least NT$300 million or 20% of the paid-in capital: None
6) Disposals of individual real estate at cost or prices of at least NT$300 million or 20% of the paid-in capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-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)
58 -
9) Names, locations, and related information of investees over which the Company exercises significant influence: Table 6 (attached)
10) Trading in derivative instruments (Notes 7 and 31)
b. Investments in mainland China: Table 7 (attached)
c. Business relationships and important transactions between China Airlines, Ltd. and its subsidiaries: Table 8 (attached)
d. Information of major shareholders: Table 9 (attached)

38. SEGMENT INFORMATION

The Group mainly engages in air transportation services for passengers, cargo and others. Its major revenue-generating asset is its aircraft fleet, which is used jointly for passenger and cargo services. Thus, the Group’s sole reportable segment is its flight segment. For operating segment reporting in the consolidated financial statements, the reportable segment of the Group and its subsidiaries comprises the flight and the non-flight business departments. The accounting policy applied for reportable segments are consistent with the policies aforementioned in Note 4.

For the nine months ended September 30, 2021 and 2020, financial information of segments is listed below:

Operating revenue Operation profit and loss Interest revenue Investment income accounted for using the equity method Revenue Financial costs Expenses Gain before income tax Identifiable assets Investments accounted for using the equity method Assets Total assets	For the Nine Months Ended September 30, 2021	For the Nine Months Ended September 30, 2021	For the Nine Months Ended September 30, 2021	For the Nine Months Ended September 30, 2021
	Air Transportation $ 88,752,596 $ 5,052,803 $ 182,480,080	Others $ 5,469,501 $ (268,245) $ 14,621,616	Adjustments and Write-offs $ (2,547,457) $ (62,431) $ (6,263,595)	Total $ 91,674,640 $ 4,722,127 97,677 (382,599) 445,413 (1,850,981) (1,761,562) $ 1,270,075 $ 190,838,101 1,576,556 83,472,179 $ 275,886,836

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Operating revenue Operation profit and loss Interest revenue Investment income accounted for using the equity method Revenue Financial costs Expenses Loss before income tax Identifiable assets Investments accounted for using the equity method Assets Total assets	For the Nine Months Ended September 30, 2020	For the Nine Months Ended September 30, 2020	For the Nine Months Ended September 30, 2020	For the Nine Months Ended September 30, 2020
	Air Transportation $ 82,786,966 $ (18,730) $ 190,748,755	Others $ 5,377,233 $ (498,247) $ 15,288,594	Adjustments and Write-offs $ (2,679,849) $ (63,682) $ (6,198,148)	Total $ 85,484,350 $ (580,659) 242,761 (176,235) 492,920 (2,367,841) (170,567) $ (2,559,621) $ 199,839,201 2,009,318 82,176,470 $ 284,024,989

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TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Party	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limit	Note
													Item	Value
1	Cal-Dynasty International	Dynasty Hotel of Hawaii, Inc.	Notes receivable	Y	$ 100,000	$ 97,493	$ 97,493	2.25	Short-term financing facility is necessary	$ -	Operating cycle capital expenditure	$ -		$ -	$ 141,318	$ 282,636

Note 1: The maximum amount of loans to others by the Group is up to 40% of the Group's net worth as stated in its latest financial statements.

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

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TABLE 2

CHINA AIRLINES, LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorsement/ Guarantee Provider	Counterparty	Counterparty	Limits on Each Counter party’s Endorsement/ Guarantee Amounts (Note 1)	Maximum Balance for the Period	Ending Balance	Actual Borrowing Amount	Value of Collaterals Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statement (%)	Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Nature of Relationship
0	China Airlines (the “Company”)	Cal Park Tigerair Taiwan Ltd. Taiwan Aircraft Maintenance and Engineering Co., Ltd.	100% subsidiary 82.27% subsidiary by direct and indirect holdings 100% subsidiary	$ 12,658,202 12,658,202 12,658,202	$ 3,850,000 2,671,771 2,000,000	$ 3,850,000 2,604,791 2,000,000	$ 1,663,320 259,894 1,400,000	$ - - -	6.08 4.12 3.16	$ 31,645,506 31,645,506 31,645,506	Yes Yes Yes	No No No	No No No

Note 1: Based on the Group’s guidelines, the maximum amount of guarantee to an individual counterparty is up to 20% of the Group’s shareholders’ equity.

Note 2: Based on the Group’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of shareholders the Group’s’ equity.

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TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD SEPTEMBER 30, 2021

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Marketable Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account		September 30, 2021	September 30, 2021		Note
				Shares/Units	Carrying Amount	Percentage of Ownership (%)	Market Value or Net Asset Value
China Airlines (the “Company”) Mandarin Airlines Cal-Asia Investment Sabre Travel Network (Taiwan) Taiwan Airport Services Dynasty Aerotech International Corp. Kaohsiung Catering Services Tiger Taiwan Co., Ltd.	Shares Everest Investment Holdings Ltd. - common shares Everest Investment Holdings Ltd. - preferred shares Chung Hua Express Co. Jardine Air Terminal Services The Grand Hi Lai Hotel Shares China Airlines Shares Taikoo (Xiamen) Landing Gear Services Taikoo Spirit Aerospace Systems (Jinjiang) Composite Beneficiary certificates Franklin Templeton SinoAm Money Market Fund FSITC Money Market Fund Shares TransAsia Airways Beneficiary certificates Taishin 1699 Money Market Fund Beneficiary certificates Prudential Financial Money Market Fund Taishin 1699 Money Market Fund Government bond Philippines government bond	- - - - - Parent company - - - - - - - - -	Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at amortized cost - current	1,359,368 135,937 1,100,000 12,000,000 4,021 2,074,628 - - 730,686 308,094 2,277,786 349,523 5,407,832 1,106,807 -	$ 49,452 4,945 27,181 - - 35,684 - 9,601 7,634 55,499 - 4,778 86,437 15,131 1,550	13.59 - 11.00 15.00 0.02 - 2.59 5.45 - - 0.40 - - - Not applicable	$ 54,398 - 27,181 - - 35,684 - 9,601 7,634 55,499 - 4,778 86,437 15,131 1,550	Note 1 - - - - - Note 2 Note 2 - - - - - -
							(Continued)

63 -

(Concluded)

Note 1: The subsidiary’s net asset value was $54,398 thousand, which included ordinary shares and preference shares as of September 30, 2021.

Note 2: The Company does not issue shares because it is a limited company.

Note 3: The table only listed financial assets that are IFRS 9 regulated.

64 -

TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Note/Account Payable or Receivable	Note/Account Payable or Receivable	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
China Airlines, Ltd. Mandarin Airlines	Taiwan Air Cargo Terminal Cal Park China Pacific Catering Services Taoyuan International Airport Service Dynasty Aerotech International Corp. Mandarin Airlines Eastern United International Logistics (Holdings) Ltd. Global Sky Express Tigerair Taiwan Co., Ltd.	Subsidiary Subsidiary Equity-method investee Subsidiary Subsidiary Subsidiary Equity-method investee Subsidiary Same parent company	Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Purchase	$ 553,919 157,276 148,552 794,083 268,972 273,533 310,112 (144,496) 146,436	0.74 0.21 0.20 1.06 0.36 0.37 0.42 (0.17) 5.85	30 days 2 months 90 days 40 days 2 months 2 months 2 months 15 days 1 months	$ - - - - - - - - -	- - - - - - - - -	$ (72,641) - (48,915) (213,209) (53,404) (143,775) (49,609) 8,040 (7,076)	(4.32) - (2.91) (12.69) (3.18) (1.25) (2.95) 0.07 (14.27)	- - - - - - - - -

65 -

TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL SEPTEMBER 30, 2021

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amount	Action Taken
Mandarin Airlines Taoyuan International Airport Service	China Airlines China Airlines	Parent company Parent company	$ 143,775 213,209	Note 3.75	$ - -	- -	$ 117,938 128,789	$ - -

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

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TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of September	Balance as of September	30, 2021	Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				September 30, 2021	December 31, 2020	Number of Shares	Percentage of Ownership	Carrying Amount
China Airlines, Ltd. Mandarin Airlines Cal-Asia Investment Taiwan Airport Services Kaohsiung Catering Services	Cal Park Mandarin Airlines Taiwan Air Cargo Terminal Cal-Dynasty International China Pacific Catering Services Taoyuan International Airport Services Cal-Asia Investment Sabre Travel Network (Taiwan) China Aircraft Service Taiwan Airport Services Kaohsiung Catering Services Cal Hotel Co., Ltd China Pacific Laundry Services Dynasty Aerotech International Corp. Yestrip Dynasty Holidays Global Sky Express Tigerair Taiwan Co., Ltd. Taiwan Aircraft Maintenance and Engineering Co., Ltd. NORDAM Asia Ltd. Tigerair Taiwan Co., Ltd. Taiwan Airport Services Eastern United International Logistics Taiwan Airport Service (Samoa) Delica International Co., Ltd	Taoyuan, Taiwan Taipei, Taiwan Taoyuan, Taiwan Los Angeles, U.S.A. Taoyuan, Taiwan Taoyuan, Taiwan Territory of the British Virgin Islands Taipei, Taiwan Hong Kong International Airport Taipei, Taiwan Kaohsiung, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taipei, Taiwan Tokyo, Japan Taipei, Taiwan Taipei, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taipei, Taiwan Taipei, Taiwan Hong Kong Samoa Kaohsiung, 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 and equipment Travel business Travel business Forwarding and storage of air cargo Air transportation and maintenance of aircraft Aircraft maintenance Composite repair and manufacturing business Air transportation and maintenance of aircraft Airport services Forwarding and storage of air cargo Airport services and investment Catering business	$ 1,500,000 4,039,140 1,350,000 US$ 26,145 439,110 147,000 US$ 7,172 52,200 HK$ 58,000 12,289 383,846 465,000 137,500 77,270 - JPY 8,000 2,500 5,640,197 1,350,000 37,975 154,330 11,658 HK$ 3,329 US$ 5,877 10,200	$ 1,500,000 2,042,368 1,350,000 US$ 26,145 439,110 147,000 US$ 7,172 52,200 HK$ 58,000 12,289 383,846 465,000 137,500 77,270 26,265 JPY 20,400 2,500 3,109,907 1,350,000 37,975 154,330 11,658 HK$ 3,329 US$ 5,877 10,200	150,000,000 387,831,234 135,000,000 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 77,270 - 160 250,000 313,631,656 135,000,000 3,797,500 15,433,000 469,755 1,050,000 - 1,020,000	100.00 96.96 54.00 100.00 51.00 49.00 100.00 93.93 20.00 47.35 53.67 100.00 55.00 100.00 100.00 20.00 25.00 78.41 100.00 49.00 3.86 1.08 35.00 100.00 51.00	$ 1,636,211 2,202,180 1,601,425 1,170,834 533,279 492,251 496,005 193,849 28,174 138,810 443,738 329,831 121,458 131,569 - 3,493 6,979 3,450,745 594,253 33,484 169,802 3,157 59,620 394,269 7,871	$ 7,734 (1,119,850) 363,895 4,911 (318,980) (225,381) 37,142 (41,556) (1,224,926) (128,192) (102,372) (74,985) (50,718) 33,281 - (6,512) 5,145 (1,638,738) (105,557) (8,741) (1,638,738) (128,192) 25,656 24,220 -	$ 39,593 (1,053,294) 196,492 5,787 (162,680) (110,437) 37,142 (39,034) (244,985) (60,699) (64,464) (75,523) (27,895) 33,312 - (1,302) 1,286 (1,245,666) (105,539) (4,283) (63,227) (1,381) 8,980 24,220 -	Note 4 Notes 1 and 4 - Note 2 - - - - - - Note 5 Note 4 - Note 4 Note 4 - - Note 4 - - - - - Note 3 -

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

Note 2: Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

Note 3: The Company does not issue shares because it is a limited company.

Note 4: The difference is due to lease arrangement between consolidated entities.

Note 5: The difference is due to acquisition.

67 -

TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 (In Thousands of New Taiwan Dollars/Renminbi/U.S. Dollars in Thousands, Unless Stated Otherwise)

China Airlines

Investee Company Name	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of January 1, 2021	Accumulated Outflow of Investment from Taiwan as of January 1, 2021	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of September 30, 2021	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Amount as of September 30, 2021	Accumulated Inward Remittance of Earnings as of September 30, 2021
							Outflow	Inflow
Airport Air Cargo Terminal (Xiamen) Co., Ltd. Airport Air Cargo Service (Xiamen) Co., Ltd. Taikoo (Xiamen) Landing Gear Services Taikoo Spirit Aerospace Systems (Jinjang)	Forwarding and storage of air cargo Forwarding and storage of air cargo Landing gear maintenance services Composite material		$ 1,095,952 (RMB 254,480) 60,293 (RMB 14,000) 2,314,485 (US$ 83,090) 324,875 (US$ 11,663)	Indirect (Note 1) Indirect (Note 1) Indirect (Note 1) Indirect (Note 1)	$ 116,601 (US$ 4,186) 54,246 (US$ 1,947) 59,922 (US$ 2,151) 17,716 (US$ 636)		$ - - - -	$ - - - -	$ 116,601 (US$ 4,186) 54,246 (US$ 1,947) 59,922 (US$ 2,151) 17,716 (US$ 636)	$ 109,576 (RMB 25,290) 75,243 (RMB 17,366)	14.00 14.00 2.59 5.45	$ 13,859 (RMB 3,541) 9,832 (RMB 2,431)	$ 251,560 (RMB 58,413) 144,158 (RMB 33,474) - 9,601 (RMB 2,229)	$ 98,511 (US$ 3,537) (Note 2) 43,469 (US$ 1,561) (Note 2) - 9,931 (US$ 357)

Accumulated Outward Remittance for Investment in Mainland China as of September 30, 2021		Investment Amounts Authorized by Investment Commission, MOEA				Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$248,485 (US$8,920)		$607,076 (Note 3)				$37,974,608 (Note 4)

(Continued)

68 -

Taiwan Airport Services

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2021	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2021	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of September 30, 2021	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Income (Loss)	Carrying Amount as of September 30, 2021	Accumulated Repatriation of Investment Income as of September 30, 2021
							Outward	Inward
Airport Air Cargo Terminal (Xiamen) Co., Ltd. Airport Air Cargo Service (Xiamen) Co., Ltd.	Forwarding and storage of air cargo Forwarding and storage of air cargo		$ 1,095,952 (RMB 254,480) 60,293 (RMB 14,000)	Indirect (Note 5) Indirect (Note 5)	$ 111,932 (US$ 4,018) 53,670 (US$ 1,927)		$ - -	$ - -	$ 111,932 (US$ 4,018) 53,670 (US$ 1,927)	$ 109,576 (RMB 25,290) 75,243 (RMB 17,366)	14 14	$ 15,341 (RMB 3,541) 10,534 (RMB 2,431)	$ 249,611 (RMB 57,960) 143,848 (RMB 33,401)	$ 126,494 (US$ 4,541) 58,268 (US$ 2,092)

Accumulated Outward Remittance for Investment in Mainland China as of September 30, 2021		Investment Amounts Authorized by Investment Commission, MOEA				Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$165,602 (US$5,945)		$165,602 (US$5,945)				$175,895 (Note 6)

Note 1: The Company invested in Cal-Asia Investment, which, in turn, invested in a company located in mainland China.

Note 2: As of September 30, 2021, the inward remittance of earnings amounted to US$3,536,561 and US$1,560,538.

Note 3: The amounts comprised US$19,828,324, RMB4,200,000 and NT$36,666,667.

Note 4: The limit stated in the Investment Commission’s regulation, “The Review Principle of Investment or Technical Cooperation in mainland China,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.

Note 5: Taiwan Airport Services invested in Taiwan Airport Services (Samoa), which in return, invested in a company located in mainland China.

Note 6: The RMB and U.S. dollar amounts of assets are translated at period-end rates and those of gains (losses), at the average of the period-end rates of refer for the reporting period.

(Concluded)

69 -

TABLE 8

CHINA AIRLINES, LTD. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINES, LTD. AND ITS SUBSIDIARIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(In Thousands of New Taiwan Dollars)

No.	Company Name	Related Party	Natural of Relationship (Note 1)	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
				Financial Statement Account	Amount (Note 2)	Transaction Criteria	% of Total Consolidated Total Revenue or Assets
0	China Airlines, Ltd.	Mandarin Airlines Global Sky Express Taoyuan International Airport Service Dynasty Aerotech International Corp. Taiwan Air Cargo Terminal Cal Park Taoyuan International Airport Service Mandarin Airlines	a a a a a a a a	Air transportation cost Cargo revenue Terminal and landing cost Terminal and landing cost Other operating cost Other operating cost Accounts payable - related parties Accounts payable - related parties	$ 248,951 142,800 794,083 268,972 553,919 157,276 213,209 143,775	The same as ordinary transactions The same as ordinary transactions The same as ordinary transactions The same as ordinary transactions The same as ordinary transactions The same as ordinary transactions The same as ordinary transactions The same as ordinary transactions	0.27 0.16 0.87 0.29 0.60 0.17 0.08 0.05
1	Taiwan Air Cargo Terminal	China Airlines, Ltd.	b	Sales revenue	553,919	The same as ordinary transactions	0.60
2	Mandarin Airlines	China Airlines, Ltd. China Airlines, Ltd.	b b	Passenger revenue Accounts receivable - related parties	248,951 143,775	The same as ordinary transactions The same as ordinary transactions	0.27 0.05
3	Taoyuan International Airport Services	China Airlines, Ltd. China Airlines, Ltd.	b b	Airport service revenue Accounts receivable - related parties	794,083 213,209	The same as ordinary transactions The same as ordinary transactions	0.87 0.08
4	Dynasty Aerotech International Corp.	China Airlines, Ltd.	b	Operating revenue	268,972	The same as ordinary transactions	0.29
5	Cal Park	China Airlines, Ltd.	b	Operating revenue	157,276	The same as ordinary transactions	0.17
6	Global Sky Express	China Airlines, Ltd.	b	Operating cost	142,800	The same as ordinary transactions	0.16

Note 1: Three categories of business relationships between China Airlines, Ltd. and its subsidiaries were as follows:

a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were eliminated in the consolidated financial statements.

Note 3: The Company only discloses transaction amounts or balances more than $100,000 thousand.

70 -

TABLE 9

CHINA AIRLINES, LTD. AND SUBSIDIARIES

INFORMATION OF MAJOR STOCKHOLDERS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
China Aviation Development Foundation (CADF) National Development Fund (NDF)	1,867,341,935 519,750,519	32.53 9.05

Note 1: The table presents information provided by the Taiwan Depository & Clearing Corporation on shareholders holding greater than 5% of the Company’s ordinary shares that have completed the process of dematerialized registration and delivery as of the last business day for the current quarter. Number of shares in the consolidated financial report may differ from actual number of dematerialized securities that have completed the process of registration and delivery due to different basis of computation.
Note 2: If the shareholders transferred shares for trust, the accounts are disclosed separately by the principal who opened a trust account for the subcontractor. Insiders’ shares of shareholders who held more than 10% of shares based on the laws and regulations of securities transaction include those held by the shareholders plus the shares for trust while the shareholders have controlling interest over trusted property. For the shareholder’s rights in filing information of insiders, please refer to the Market Observation Post System website.
71 -

AI assistant

CAL — Interim / Quarterly Report 2021

52164_rns_2021-11-15_d008e917-8c5a-40f5-a06a-de91f9113a91.pdf

China Airlines, Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Notice to Readers

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CHINA AIRLINES, LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

Basis of Preparation

Basis of Consolidation

Employee Benefits

Income Tax

Lease

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

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

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in Equity Instruments

9. FINANCIAL ASSETS AT AMORTIZED COST

10. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE, NET

September 30, 2021

December 31, 2020

11. INVENTORIES, NET

12. NON-CURRENT ASSETS HELD FOR SALE

13. SUBSIDIARIES

Note: Based on the Group’s proportion of ownership.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

a. Investments in associates

15. PROPERTY, PLANT AND EQUIPMENT

16. INVESTMENT PROPERTIES

17. OTHER INTANGIBLE ASSETS

18. OTHER ASSETS

19. BORROWINGS

c. Long-term borrowings

20. BONDS PAYABLE

Related issuance conditions were as follows:

21. LEASE AGREEMENTS

a. Right-of-use assets

Influence of comprehensive income

22. OTHER PAYABLES

23. CONTRACT LIABILITIES

24. PROVISIONS

25. RETIREMENT BENEFIT PLANS

26. EQUITY

Ordinary shares

b. Capital surplus

c. Appropriation of earnings and dividend policy

1) Offsetting deficit in 2019

2) Offsetting deficit in 2020

d. Other equity items

e. Non-controlling interests

f. Treasury shares

27. NET INCOME

a. Revenue

b. Other income

c. Other gains and losses

d. Finance costs

f. Employment benefits expense

28. INCOME TAX

29. EARNINGS (LOSS) PER SHARE

CAL Interim / Quarterly Report 2021