#1China Airlines 2020 Investor Conference December 1, 2020 TSE : 2610 8-18117 AIRLINES 8-8717 ДИА 4305 BONFAIRLY AMA43036C 4241 養平台論人” C-ffi#2Agenda 1. First Three Quarters Financial Results for 2020 1) Operating Performance 2) Composition of Op. Revenue & Cost 3) Financial Risk Management 2. Impact of COVID-19 Pandemic 1) Industry Environment Update 2) Operational Performance Update 3) Response to COVID-19 3. Post-COVID-19 Outlook CHINA AIRLINES 2#3CHINA AIRLINES First Three Quarters Financial Results for 2020 3#4Operating Performance-2020Q3 Consolidated Financial Statistics 2019Q3 2020Q3 Operating Revenue 430.05 266.12 TWD 100 Million YoY % -38.12% Net Operating Income (Loss) 14.62 -3.57 Net Income (Loss) After Tax 4.96 -8.17 Net Income(Loss) Attributable to 3.40 -7.08 Owners of the company Earnings (Loss) Per Share (TWD) 0.06 -0.13 Group Revenue TWD 100 Million 2019Q3 2020Q3 YoY % Passenger Revenue 290.96 32.41 -88.86% Cargo Revenue 106.82 215.09 101.36% Other Operating Revenue 32.27 18.62 -42.3% Total Group Operating Revenue 430.05 266.12 -38.12% CHINA AIRLINES 4#5Operating Performance-2020Q1-Q3 Consolidated Financial Statistics 2019Q1-Q3 2020Q1-Q3 Operating Revenue 1,263.02 854.84 Net Operating Income (Loss) 27.96 -5.8 Net Income (Loss) After Tax 0.58 -23.75 Net Loss Attributable to -3.46 -20.22 Owners of the company Loss Per Share (TWD) -0.06 -0.37 TWD 100 Million YoY % -32.32% Group Revenue Passenger Revenue TWD 100 Million 2019Q1-Q3 2020Q1-Q3 YoY % 845.52 234.83 -72.23% Cargo Revenue 318 560.46 76.25% Other Operating Revenue 99.5 59.55 -40.15% Total Group Operating Revenue 1,263.02 854.84 -32.32% CHINA AIRLINES 5#6Composition of Op. Revenue - Cl 2020 Q1-Q3 Passenger Revenue 24% Cargo Revenue 72% 4% Other Op. Rev. 2019 Q1-Q3 Passenger Revenue 67% Cargo Revenue 29% Other Op. Rev. 4% Passenger, Cargo and other operating revenue accounted for 24%, 72% and 4% respectively in the first three quarters of 2020. CHINA AIRLINES 6#71.9% 1.6% Composition of Op. Expenses - Cl 2020 Q1-Q3 Fuel 21.9% Pax Service Others 3.6% Sales & General Adm. Airport & Ground Handling Personnel Rental & Depreciation Maitenance 12.1% 16.5% 23.0% 19.4% 2019 Q1-Q3 Fuel 30.7% Airport & Ground Handling 13.7% Personnel Rental & Depreciation 13.6% 16.6% Maitenance 13.3% Sales & General Adm. Pax Service Others 3.7% 4.4% 4.0% Fuel cost accounted for 21.9% of operating expenses due to COVID-19 pandemic in the first three quarters of 2020. CHINA AIRLINES 7#8Financial Risk Management - Fuel (CI) Fuel Cost 2019Q1-Q3 2020Q1-Q3 YoY% Jet Fuel (MOPS) USD/BBL 77.69 44.04 -43.3% Fuel Consumption 10KBBL 1,300.39 1,026.71 -21% Fuel Expend TWD/100Million 333.14 166.23 -50.1% Hedging Loss TWD/100Million 0.14 0.34 142.9% Total Fuel Cost TWD/100 Million 333.28 166.57 -50% Fuel Hedging Year Hedging% 2020.12-2021.11 0.16% CHINA AIRLINES 8#9CHINA AIRLINES Impact of COVID-19 Pandemic Industry Environment Update 9#10% change year-on-year Air Travel Recovery Slower Than Expected IATA forecast global passenger traffic will not return to pre-COVID-19 levels until 2024 and full-year 2020 traffic to be down 66% compared to 2019. 20% 0% -20% -40% -60% -80% Global RPK growth Previous Forecast -63% Latest Forecast -66% -100% Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 BE IATA CHINA AIRLINES Source IATA Economics 10#11IMF Upgraded 2020 Economic Forecast The global economy is projected to contract by 4.4% in 2020 — an upward revision from an estimate of -4.9% made in June due to the better-than-expected growth in advanced economies and Mainland China. Major Economies 2020-2021 Economic Growth Rate Euro Zone ro zone → 6.0% Mainland China Japan 1.0% 8.2% -5.8% 2.4% 1.9% -8.2% -5.3% 2.3% Taiwan -10.2% America -8.0% → 4.5% -4.3% 3.1% -8.3% 5.2% Forecast in June Forecast in October Brazil -9.1% 3.6% →> -5.8% 2.8% CHINA AIRLINES Source: IME India -4.0% 3.5% -4.5% -6.0% 0.0% 3.2% -10.3% 8.8% Source: CIER#12CHINA AIRLINES Impact of COVID-19 Pandemic Operational Performance Update DD 12#13Passenger Performance Revenue Composition by Region TWD 78.82 Billion 2019 Q1-Q3 73.8% Trans Pacific Australia/ New Zealand Ocean 21% 9% Europe 12% Hong Kong 4% TWD 19.07 Billion South East Asia 21% North East Asia 2020 Q1-Q3 Mainland China 8% 25% Passenger revenue decreased by 73.8% to TWD 19.07 billion in the first three quarters of 2020. Northeast Asia accounted for the largest share (25%) of revenue, followed by Trans Pacific Ocean and South East Asia with revenue share of 21% respectively. CHINA AIRLINES 13#14Passenger Operation Index ASK (MN) Load Factor 39,255 ▼68.0% 12,569 Yield (TWD) 2.47 80.7% 2.30 ▲ 7.4% 19.3ppt 61.4% 2019Q1-Q3 2020Q1-Q3 2019Q1-Q3 2020Q1-Q3 2019Q1-Q3 2020Q1-Q3 ASK and load factor decreased by 68.0% and 19.3ppt respectively while yield increased by 7.4% in the first three quarters of 2020. CHINA AIRLINES 14#15Impact on Passenger Traffic 5,000 4% 0% 4,000 -23% 3,240 3,253 3,128 3,229 3,271 3,331 3,315 3,194 3,157 2,984 3,000 -40% 2,309 -65% 2,000 1,000 ,150 -80% -97% -98% -97% -95% -94% -93% 156 187 232 89 53 86 -120% Round Trips Jan Feb Mar Apr May Jun Jul Aug Sep 2019 2020 --YOY% • CAL provided a minimum passengers-carried schedule to meet market demand. Our frequencies between April and June plunged more than 97% compared to the same period last year; however there is slowly recovering with essential travelling in the third quarter. CHINA AIRLINES 15#16Passenger Impact-Skeletal Network Region North America Europe Oceania Northeast Asia Southeast Asia Mainland China (KHH departures included) Hong Kong (KHH departures included) Route Adjustments Los Angeles/San Francisco 3 Flights/wk, Vancouver 2 Flights/wk, New York 2 Flights/mth Amsterdam 2 Flights/wk, Frankfurt/ London 1 Flight/wk Sydney 1 Flight/wk, Melbourne/ Brisbane 2 Flights/mth, Auckland 1 Flight/mth Tokyo 3 Flights/wk, Seoul 2 Flights/wk, Osaka/ Fukuoka/ Nagoya 1 Flight/wk Jakarta 1 Flight/day, Manila 4-5 Flights/wk, Phnom Penh 2 Flights/wk, Vietnam 11-12 Flights/wk, Bangkok 3-4 Flights/wk, Singapore/ Kuala Lumpur 2 Flights/wk, Penang/Yangon 1-2 Flights/wk Shanghai 9 Flights/wk, Xiamen 3 Flights/wk, Chengdu 2 Flights/wk, Beijing 1 Flight/wk 10 Flights/wk CHINA AIRLINES 16#17Cargo Performance Revenue TWD 55.89 Billion ▲77.4% TWD 31.05 Billion 2019Q1-Q3 2020Q1-Q3 Composition by Region Trans Pacific Ocean 58% Australia/ New Zealand 3% Europe 9% Hong Kong 4% North East Asia 5% Mainland China 6% South East Asia 15% Cargo revenue totaled TWD 55.89 billion, a 77.4% increase, in the first three quarters of 2020. Trans Pacific Ocean accounted for the largest share (58%) of revenue, followed by Southeast Asia and Europe with revenue share of 15% and 9% respectively. CHINA AIRLINES 17#18Cargo Performance Index Load Factor FATK (MN) Yield (TWD) 6,286 5,860 7.3% 71.5% 66.3% ▲ 5.2ppt ▲ 53.4% 8.11 12.44 2019 Q1-Q3 2020Q1-Q3 2019Q1-Q3 2020Q1-Q3 2019Q1-Q3 2020Q1-Q3 FATK increased by 7.3% and load factor grew 5.2 ppt with a 53.4% rise in yield in the first three quarters of 2020. CHINA AIRLINES 18#19CHINA AIRLINES Response to COVID-19 Passenger Cargo CHINA AIRLINES 00000000 00005085 W-MISS | CHÀO ĐÓN QUÝ KHÁCH 好久不見 WELCOME BACK お帰りなさい Tan 體好久不见 WELCOME BACK 19#20Flight Schedule Adjusted in Line with Market Demand Operations remain active in adapting to the dynamic changes of the market landscape and governments regulations. Cacoo Operate selected routes to maintain network connectivity, taking advantage of sixth traffic rights. Gradually resume flights to align with boarder reopening, regional business travel needs and travel bubble. TLDRENS Increase Taiwan domestic air travel market via CAL Group's subsidiaries. GO BASE CHINA AIRLINES Operate charter flights to generate revenue. 20 20#21Resuming Operation with Safety Procedures CAL was also rated as the top safest airlines to fly during COVID-19 by Safe Travel Barometer in August, having implemented numerous pro-traveler health and safety initiatives. Clean Cabin Sky Boutique Duty Free Service COVID-19 Service Information Flight Messaging Service Prepare for Travel At the Airport Cabin Crew Protective Equipment PA Announcement O Inflight Supplies Inflight Meal Fresh and recycled air quality Onboard Lavatory On Board Arrival > Wear face masks Temperature checks Social distancing CAL Lounges are temporarily closed Safe Airport Journey Plan CHINA AIRLINES Cabin Disinfection & Cleaning Meal Carts Disinfection Luggage Disinfection upon Arrival 21#22CAL Ranked Top Global Cargo Carrier in 2019 With a fleet of 18 Boeing 747-400 freighters in operation and well-established network, CAL holds the edge on air cargo capacity during COVID-19. Airlines Freight Tonnes Carried ('000) Airlines FRTK(m) 1st Emirates 2,413 1st Qatar Airways 13,024 2nd Qatar Airways 2,281 2nd Emirates 12,052 3rd Federal Express 2,192 3rd Cathay Pacific Airways 10,930 4th Cathay Pacific Airways 1,716 4th Federal Express 8,851 5th United Parcel Service 1,539 5th Korean Air 7,390 6th Turkish Airlines 1,433 6th Lufthansa 7,723 7th Korean Air 1,383 8th China Airlines 1,374 13th China Airlines 5,334 2019 Top Airlines by International Cargo Traffic CHINA AIRLINES Source: WATS World Air Transport Statistics 2020 22 22#23Expanding Cargo Service to Seize the window of Opportunity CAL leverages Taiwan's strategic position and cargo capacity to make 10% more cargo flights per week. . Utilize CAL 18 747-400 freighters CARGO Make the most of belly capacity of passenger aircraft Improve operational efficiency with 3 upcoming 777F deliveries Monthly route review and flexible route adjustment • 鄭州。 南京。 上海 適 台北 廣州 · 廈門 深圳 阿姆斯特丹《法蘭克福 仁安克拉治 西雅圖 Priority for high-yield goods and regular project shipment for route profit boost Pursue charter or BSA business to maintain load factor and revenue uplift 盧森堡 香港」 河內 10 P馬尼拉 名古屋 大阪 東京 E 、德里 曼谷 ZE 胡志明市 tho 吉隆坡 新加坡 雅加達 舊金山 洛杉磯 達拉斯• 芝加哥 **哥倫布 σ4145 • 亞特蘭大 • 休士頓 二邁阿密 34 destinations with 100 flights per week for freighter service CHINA AIRLINES 23 223#24CHINA AIRLINES Post-COVID-19 Outlook 24 24#25New Normal of Air travel in Post-Covid-19 Age Market Domestic and regional air travel will recover first. 3rd/4th traffic rights will be dominant and 6th traffic right will complement. • Family visit and leisure travel will recover first. Local staycation becomes popular. Passenger • International travelers will be most concerned with safety. . Wearing masks, checking temperatures, and cleaning hands throughout the journey will be required. Service Digital solution will be implemented to reduce touchpoints literally in the check-in and boarding process CHINA AIRLINES 25#26Post-COVID-19 Cargo Market Outlook Potential Business •COVID-19 has led to a major change in consumer behavior toward online channels. • Online demand for essentials and entertainment has increased. Work-from-home triggers a jump in demand for chips, laptops and network goods. Vaccines against COVID-19 are under active development. CHINA AIRLINES ·都為你完美控溫 中華航空 榮狸製果等冷建認證 SCARGO 26#27Proactive COVID-19 Response Strategies 01 Conserve cash-flow & lower the cost 02 Maintain business continuity and stability 03 Integrate sales and marketing strategy 04 Rebuild passenger confidence in air travel CHINA AIRLINES 05 Comply with regulations to promote safe travel 27#28Giving Back to Society and Creating Social Value CAL wins awards for seventh consecutive year at the "Oscars" of Taiwan Corporate Sustainability- Taiwan Corporate Sustainability Awards (TCSA) and two consecutive year at Global Corporate Sustainability Awards (GCSA). GCSA CHINA AIRLINES D TCSA 永續華航 SUSTAINABILITY WE CARE 永續績 華航歷年 效 效年 Member of 連續5年 DowJones Sustainability Indices 連續5年 2016 2020 Powered by the S&P Global CSA 2016 2020 FTSE4Good 道瓊永續 新興市場指數 富時社會責任 新興市場指數 連續7年 TCSA 連續2年 GCSA 2014 2020 2019 2020 台灣企業永續獎 全球企業永續獎 28#29Thank you 2020.12 China Airlines | No.1, Hangzhan S. Rd., Dayuan Dist., Taoyuan City, Taiwan TEL | 03.399.8888 CHINA AIRLINES KAM. # We fly We fight # We will all be fine