#1China Airlines 2021 Investor Conference Nov 16, 2021 TSE : 2610 8-18117 8-8717 ДИА 43051 G AMA43036C 4241 处平台灣人” C-ffi#2Legal Disclaimer The information contained in this presentation, including all forward-looking information, is subject to change without notice, whether as a result of new information, further events or otherwise, and China Airlines(the "Company") undertakes no obligation to publicly update or revise the information contained in this presentation. No guarantees regarding the completeness, accuracy, and reliability of information contained are made explicitly or implicitly. They are not intended to represent complete statement of the Company, industry or future development. CHINA AIRLINES 2#3Agenda 1. Financial Results for First Three Quarters of 2021 1) Operating Performance 2) Composition of Op. Revenue & Cost 3) Financial Risk Management 2. Impact of COVID-19 Pandemic 1) Operational Performance Update 2) Industry Environment Update 3) Response to COVID-19 and outlook for post COVID CHINA AIRLINES 3#4CHINA AIRLINES Financial Results for First Three Quarters of 2021#5Consolidated Financial Statistics 2020Q3 Operating Performance - 2021Q3 Operating Revenue TWD 100 Million YoY % 29.54% 2021Q3 26,612 34,474 Net Operating Income (Loss) -358 3,985 Non-Operating Income (Loss) -817 2,801 Net Income (Loss) After Tax -708 2,917 Earnings (Loss) Per Share (TWD) -0.13 0.51 Group Revenue TWD 100 Million 2020Q3 2021Q3 YoY % Passenger Revenue 3,241 1,189 -63.31% Cargo Revenue 21,509 31,247 45.27% Other Operating Revenue 1,862 2,038 9.45% Total Operating Revenue 26,612 34,474 29.54% CHINA AIRLINES 5#62020Q1-Q3 Operating Performance - 2021Q1-Q3 Consolidated Financial Statistics Operating Revenue TWD 100 Million YoY % -7.24% 2021Q1-Q3 85,484 91,675 Net Operating Income (Loss) -581 4,722 Non-Operating Income (Loss) -2,375 1,098 Net Income (Loss) After Tax -2,022 1,555 Earnings (Loss) Per Share (TWD) -0.37 0.28 Group Revenue TWD 100 Million 2020Q1-Q3 2021Q1-Q3 YoY % Passenger Revenue 23,483 4,569 -80.54% Cargo Revenue 56,046 81,310 45.08% Other Operating Revenue 5,955 5,796 -2.67% Total Operating Revenue 85,484 91,675 7.24% CHINA AIRLINES 6#7Composition of Op. Revenue - Cl Cargo Rev 72% 2020Q1-Q3 Other Op. Rev 4% Passenger Rev 24% Cargo Rev 93% 2021Q1-Q3 Other Op. Rev 4% Passenger Rev 3% Cargo revenue accounted for 93%, and Passenger and other operating revenue accounted for 3% and 4% respectively in 2021Q1-Q3. CHINA AIRLINES 7#8Composition of Op. Expenses - Cl 2020Q1-Q3 Airport & Ground Handling Labor Cost Fuel 22% Charge 12% 17% 2021Q1-Q3 Fuel 28% Airport & Ground Handling Charge 11% Others 3%. Labor Cost Others 4% 16% Pax Service 2% Sales & General Adm. 2% Maitenance 19% Rental & Depreciation & Amortization Pax Service. Rental & 1% Maitenance Depreciation Sales & General Adm. 17% & Amortization 1% 23% 22% Fuel cost accounted for 28% of operating expenses due to the increase in fuel price during 2021. CHINA AIRLINES 8#9Financial Risk Management (CI) 1.Fuel Cost: Hedging ratio is 4.5% during next six months 2020 Q1-Q3 Jet Fuel (MOPS) USD/BBL Fuel Consumption 10KBBL Fuel Expend TWD/100Million Hedging Loss (Gain) TWD/100Million Total Fuel Cost TWD/100Million 2. Exchange rate hedging 2021 Q1-Q3 YOY% 44.04 70.75 60.65% 1,026.71 1,059.95 3.24% 167.38 223.27 33.39% 0.34 167.72 -0.02 223.25 33.11% The current cash position of US Dollars well manages to offset the unrealized gains(losses) of the US Dollars liabilities caused by the exchange rate, as the effect of natural hedging. 3. Interest rate hedging → As of Sep 30 2021, The portion of Fixed-rate borrowing positions was approximate 18%. ✈ Keeping a close watch on the monetary policy trends of major economies and formulate hedging strategies based on market dynamics. CHINA AIRLINES 9#10CHINA AIRLINES Impact of COVID-19 Pandemic- Operational Performance Update DD 10#11Passenger Performance Revenue Composition by Region 16,295 19,075million in 2020Q1-Q3 Australia/ ▼86% Trans Pacific Ocean 31% New Zealand 5% 2,579 million in 2021Q1-Q3 Europe 9% - Hong Kong 3% 1,808 972 1,433 1,287 Mainland North East 612 680 South East China 23% Asia 2% Asia 27% 7] Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 Q3 93 Passenger revenue decreased by 86% to TWD 2,579 million in 2021Q1-Q3. Trans Pacific Ocean accounted for the largest share (31%) of revenue, followed by South East Asia and Mainland China with revenue share of 27% and 23% respectively. CHINA AIRLINES 11#12Passenger Performance Index Load Factor ASK (MN) Yield (TWD) 5.7 10,731 67% 36% 2.3 26% 16% 1,977 17% 20% 17% 1,342 1,348 496 811 669 5.5 5.2 4.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 03 Q3 2020 2021 2020 ASK Pax LF 5.0 4.5 00 Q4 Q1 Q2 2021 Q3 03 ASK and load factor decreased by 77% and 43.8ppt respectively while yield was 5.0 which increased by 110% in 2021Q1-Q3. CHINA AIRLINES 12#13Impact on Passenger Traffic Our frequencies between 2020 and 2021 plunged more than 90% compared to the same period during 2019. There was no rebound tendency in demand for passenger transport capacity from 2021 to the third quarter due to the worldwide Alpha and Delta variant, domestic outbreak of epidemics and low vaccinated population in Asia-Pacific. 5000 0% 4000 3,240 3,128 3,253 3,229 3,271 3,331 3,315 3,194 3,157 3,247 3,214 3,091 -40% 2,984 3000 2,309 2000 -89% 1,150 -80% -93% -95% -93% -96% -99% -98% -96% -96% -96% 1000 O 336 160 216 89 231 232 132 156 187 286 346 325 53 8632 75 149 129 134 0 -120% Round Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Trips 2019 2020 2021 2021 v.s 2019 Diff% CHINA AIRLINES 13#14Cargo Performance Revenue Composition by Region Australia/ ▲ 45% 81,106million in 2021Q1-Q3 New 55,894million in 2020Q1-Q3 31,170 Trans Zealand 25,798 25,978 Pacific 3% 23,400 23,958 Europe 21,448 Ocean 8% 61% Hong Kong 11,046 4% North East Mainland Asia China South East Asia 5% 6% Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 70 63 Q3 13% Cargo revenue totaled TWD 81,106 million, a 45% increase, in 2021Q1-Q3. Trans Pacific Ocean accounted for the largest share(61%) of revenue, followed by Southeast Asia and Europe with revenue share of 13% and 8% respectively. CHINA AIRLINES 14#15Cargo Performance Index Load Factor FATK (MN) 69% 72% 73% 74% 76% 76% 75% 2,669 2,542 2,392 2,329 2,328 8.8 2,092 1,802 15.6 Yield (TWD) 15.6 14.7 13.8 13.5 12.3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 2020 2021 2020 2021 FATK CGO LF FATK increased by 17% and load factor grew 4.03 ppt. Yield was 15.6 which increased by 18% in 2021Q1-Q3. CHINA AIRLINES Q3 03 15#16CHINA AIRLINES Impact of COVID-19 Pandemic- Industry Environment Update 16#172020-2021 Air Passenger / Freight Demand International Air Passenger(RPK) / Freight(CTK) ( % YoY, vs 2019 ) 2020 RPK 20% 75.6% CTK | 11.8% 2021 RPK 80.2% CTK 1 8.7% (til Sep) 1.2% Freight 0% -29.5% -20% -40% -60% -80% APR 2020 low point -100% Jan-20 Feb-20 Mar-20 Apr-20 May-20 -98.4% Jun-20 CHINA AIRLINES Jul-20 Aug-20 Sep-20 Oct-20 2021/1 1st positive growth vs. pre-pandemic level Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Passenger Source IATA 17#18Demand of Pax Market is far below the pre-crisis levels International Pax Traffic decreased by 69.2% in Sep, 2021. and decreased by 80.2% from Jan to Sep, which is still far lower than the pre epidemic level. > The recovery of international pax market of airlines in the Asia lags behind other regions, because delta variant virus epidemic and strict border control measures. International Pax capacity/traffic/LF YOY% International Capacity/Traffic 20% Capacity 0% -20% LF Traffic -40% -60% 2020 (vs 19) -80% Capacity -68.1% Capacity -69.9% Traffic -75.6% 62.8% 2021 YTD (vs 19) Traffic -80.2% LF 54.2% -100% LF -120% 2019 100% 2021/01-09 (international capacity ) 2021/01-09 ( international traffic) 80% 0% -50% -100% 60% -94.5% Asia -86.5% 40% -76.7% Middle East 20% -61.5% -74.7% 0% Europe -65.1% -73.3% -67.3% -71.0% -56.7% 2020 2021 Year Capacity Yoy% 202101 202102 202103 -74.4% -77.9% -77.4% 202104 202105 202106 202107 202108 -76.0% -74.6% -71.0% -63.8% -59.0% 202109 -59.1% Latin America Traffic -85.6% -88.7% -87.8% -87.3% -85.1% -80.9% -73.6% Yoy% -68.8% -69.2% North America LF % 44.9% 40.8% 43.7% 43.8% 47.3% 55.2% 62.1% 65.3% 61.6% CHINA AIRLINES 2021 (vs the same month in 2019) * 2021 (vs the same month in 2019) Source IATA 18#19CHINA AIRLINES Tylan Impact of COVID-19 Pandemic- Response to COVID-19 and outlook for post COVID ICHINA AIRLINES 00000000000 CHINA AIRLINES CARGO 19#20Air cargo continue to rise Demand surge still spread across various sectors from hi-tech, automotive to pharma. E-commerce contributed to robust air demand. Cargo demand remains strong amidst the upcoming e-commerce heavy events (Black Friday, Singles Day) and holiday shopping along with new tech product launched. Healthy PMI index, historically low I/S ratio & peak season indicate strong air cargo demand. Continued conversion of ocean freight to air as US port congestion worsens. Air Cargo Yields and Load Factors Air Cargo vs Global Good Volumes, Indexed to 100 in 2019 US$ per kilo 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 2015 2016 Industry-wide cargo load factor (RHS) 2017 Dotted lines are seasonally adjusted Index (Jan 2012=100, SA) Global air cargo yield 127 incl. fuel and other 115 surcharges (LHS) CTKs 122 110 -Global goods trade 117 105 112 100 2018 2019 107 95 102 90 97 85 80 92 2020 2021 Yields elevated, load factors close to historical highs CHINA AIRLINES 2015 2016 2017 2018 2019 2020 2021 2022 Air cargo continue to rise, trend above goods trade Source: IATA; DHL#21Ease travel restrictions for vaccinated tourists Government policies will play a huge role in air traffic recovery, with travel restrictions mostly impacting cross-border flights. More and more countries beginning to reopen was not only welcome news to airlines but also represents a structural improvement in the international travel landscape. 2021/11/01 Countries for Taiwan vaccinated travelers can visit 2021 JUL travel restriction Iceland Sweden Norway United Kingdom Russia Belarus Ukraine France Kazakhstan Mongolia Spain Turkmenistan China Morocco raq Iran Pakistan Libya Egypt Bangladesh Omain Mauritania Niger Yemen Ethiopia Cameroon Kenya Tanzania Cambodia Maldives Malaysia Papua New Guinea- Angola Madagascar Namibia South Africa Australia Canada 36% 29% United States Mexico Cuba. Colombiay Perun Brazil Bolivia Chile Uruguay 34% 2021 NOV travel restriction I completely closed partially closures testing or quarantine New Zealand The travel status of individual countries can change suddenly. 17% 26% 52 Travel is open > 92 Open for travel. COVID-19 testing or Test & travel > Open for travel with required 24 Testing & quarantine > 34 000001 quarantine is not COVID-19 testing. required. Open for travel with required COVID-19 testing and quarantine upon arrival. Entry is restricted > Travel is only open for returning citizens and those meeting strict requirements. Entry is restricted 57% testing or quarantine travel is open CHINA AIRLINES Ssource: travelweekly; UNWTO 21 24#22Passenger volume recovery projection Looking ahead to projected air traffic into July 2022 Most major flows are expected to recover by 2023 or 2024 Projected recovery by region, index(2019=100) Intraregional flow 25 Canada: 73% EU: 80% Russia: 84% 8 जै 8 75 Asia Flow overall South America Europe Australasia North America UK: 68% France: 69% Germany: 70% 25 United States: 82% Turkey: 79% South Korea: 70% Italy: 73% Japan: 67% For intraregional flights, we expect close to full recovery as early as 2022. 0 China: 100% 2019 Mexico: 77% Saudi Arabia: 74% 2021 Interregional flow 2023 India: 57% Indonesia: 84% 125 100 Brazil: 66% Argentina: 71% South Africa: 69% Australia: 62% 75 50 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 25 Flow overall Others Asia - Europe Europe North America Asia North America Baseline scenario projection of G20 countries' total airline passenger volume in July 2022, as percentage of July 2019 numbers. CHINA AIRLINES 2019 2021 2023 Overall air traffic demand will still be hampered by the low level of interregional flights, which is currently at 20 percent of pre-COVID-19 levels. Source Bain & Company, Inc.; PaxIS ; McKinsey analysis of global airline demand 22#23Operational strategies during pandemic → Mainly rely on air cargo supplemented by passenger service, during pandemic air cargo is our core source of revenue. ✈ Cargo Differentiation pricing strategy, maximize cargo capacity, consolidate source of goods, optimize rate structure, hold on to cargo business opportunities. ✈ Passenger Stay ahead of market trends, maintain schedule stability, consolidate rigid demand and pay a close attention to border & quarantine-free policy. Fleet Planning Cargo Biz Flexible Schedule Fly Safe Financial Stability ✈ Fleet modernization ✈ Expand cargo fleet ✈ Max capacity ✓ Belly hold ✓ 21 Freighter ✈ Market opportunity ✓ Sea-to-Air conversions ✓ Charter ✓ Board package ✓ Valuable cargo ✈ Passenger aircraft for cargo demand ✈ Schedule stability (core routes) ✈ "IATA Travel Pass" trial → Disinfection & deep cleaning ✈ Fly safe information & Service ✈ Touchless services → Aircrew Safety and Health ✈ Stable cash-flow → Adequate liquidity ✈ Minimize costs CHINA AIRLINES 23 23#24CAL Expands Cargo Service CAL leverages Taiwan's strategic position and cargo capacity during the pandemic, increasing by 23% of schedule flights per week. The overall weekly capacity will be up to 130 flights including charter flights in 2021. AMA 43058CH Fully utilize CAL 18 747-400 freighters Leverage belly space to support cargo demand Maintain high efficiency with 3 777F operation Monthly route review and flexible route adjustment Prioritize high-yield goods and regular project shipment for route profit boost Pursue high yield charter to uplift load factor and revenue 阿姆斯特丹法蘭克福 盧森堡 CHINA AIRLINES 鄭州。 南京 上海 台北 廣州 深圳: P 曼谷 香港臺 大阪 東京 台北 河内 AR 胡志明市 O 吉隆坡 新加坡 雅加達 馬尼拉 二安克拉治 西雅圖 舊金山 e洛杉磯 達拉斯• 芝加哥 哥倫布 • 紐約 ·亞特蘭大 ▶休士頓 仁邁阿密 24#25. The fifth cargo capacity in the world IATA ranked China Airlines the fifth in the world in terms of cargo capacity, three places higher than 2019, ranking first among Asian airlines. It also ranked ninth in the world in terms of CTK. CHINA CHINA AIRLINES CARGO 2020 Top 10 Airlines: Ranked by Cargo Traffic (Freight Tonnes Carried) (Cargo Tonne-Kilometres) Rank Airline Thousands Rank Airline Millions 2 NP 1 Federal Express 2,555 1 Qatar Airways 13,740 Qatar Airways 2,329 2 Federal Express 10,266 3 Emirates 1,814 3 Emirates 9,569 4 United Parcel Service 1,552 4 Cathay Pacific Airways 8,137 5 China Airlines 1,550 5 Korean Air 8,091 6 Korean Air 1,500 6 Cargolux 7,345 7 Turkish Airlines 1,421 7 United Parcel Service 7,017 8 Cathay Pacific Airways 1,220 8 Turkish Airlines 6,958 9 Asiana Airlines 880 9 China Airlines 6,317 10 Cargolux 858 10 China Southern Airlines 5,595 CHINA AIRLINES 資料來源:IATA WATS 25#26Flight Schedule Adjusted in Line with Market Demand Operations remain active in adapting to the dynamic changes of the market landscape and governments regulations. LHR 直飛倫敦不中停 Non-stop to London 就。很。帛琉。 TPE 您有多久没出了....正在期待您的到来 LCOME BACK CHINA AIRLINES Operate selected routes to maintain network connectivity, and enhance revenue management. Gradually resume flights to align with boarder reopening, regional business travel needs and travel bubbles. Operate charter flights to generate revenue. 26 26#27N Resume Passenger flights as borders progressively reopen Asia-Pacific: Indonesia: CECC has removed Indonesia from list of high-risk countries. flight services to Jakarta have resumed since 20th Oct. Myanmar having been removed from list of high-risk countries because of the Delta variant by CECC since 6th Nov. Flight services will resume according to market demand. Singapore: It is going to the scheme of "Vaccinated Travellers Lane "to welcome the reopen to foreign visitors. Flight frequency tends toward stability. Oceania: Australia Australia' s intemational borders have progressively reopened since 1st Nov. New Zealand: Non-New Zealand citizens as fully vaccinated are permitted to travel to New Zealand from 1st Nov. Bookings on our current ANZ flights will increase after travell restrictions were lifted. USA: From 8th Nov, borders reopen to Non US citizens who must be fully vaccinated. We have responded to maintain stable flight operations to and from several gateways in US. UK: having been removed from list of high-risk countries because of the Delta variant by CECC since 6th Nov. Flight services to and from London will resume in Dec. CHINA AIRLINES 27#28Cargo opportunity | Passenger recovery CARGO CHAAKES ✈ Economic recovery, strong cargo demand, sea- to-air conversions, supply chain disruption, low inventory, air cargo becomes a sellers' market, freight rates at a higher level and outlook for cargo stays positive. ✈ Stay ahead of market trends, seize the chance to manage rate, ship high-value goods as priority, schedule flexible cargo operation, optimize revenue. 10,000,000 tonne 00 N 7 6 5 4 3 2 - International cargo Traffic (thousand tonne) 6.9 6.6 6.2 5.6 +12.7% +7.6% -8.8% 0 ( % vs 2019) 2015 2016 2017 2018 2019 2020 2021E 2022F CHINA AIRUNES! ✈ Increasing vaccination coverage, reopening of international travel, new international travel vaccine rules, herd immunity is the key to lead the way in travel recovery. → Introduce Airbus A321neo, featuring the new touchless Audio and Video On Demand (AVOD) system to meet post Covid-19 passenger demand. IATA 50 45 100,000,000 RP 40 35 30 25 20 15 10 5 0 2015 International pax Traffic (100 million RP) 45.4 34.3 0 22.8 -24.5% 18.1 -49.9% -60.2% ( % vs 2019) Market Dynamics & Demand 2016 2017 2018 2019 2020 2021E 2022F Demand, Border & Quarantine Epidemic Prevention & Manpower Demand Strengthen Revenue management system Source of Goods Restock Inventory Schedule Stability (Bulk Heavy • Value ) (Low inventory) Sea-to-Air Conversions CHINA AIRLINES Flexible Pricing Strategy A321neo Delivery 28#29Proactive COVID-19 Response Strategies ة Conserve cash- flow & lower the cost Integrate sales and marketing CHINA AIRLINES strategy Maintain business continuity and stability Rebuild passenger confidence in air travel Comply with regulations to promote safe travel#302021 Boeing 737-800 Oct Fleet status 2022 Dec 2021 Oct 2022 Boeing 747-400F 18 18 15 (-3) Narrow Body Airbus 321neo 12 Freighters Boeing 777F 3 (+2) 5 0(+10) New 10 Freighters 21 Airbus 350-900 23 14 14 Boeing 777-300ER 10 10 Wide 2022年 Body Airbus 330-300 23 (-2) 21 Boeing 747-400 Completed sold 0 23 Passengers 62 67 2021 OCT Airline industry will recover, 67 > especially start from Total 83 aircraft 90 regional market Due to port congestion, Lack of cargo capacity remains a key obstacle for the rising demand,. CHINA AIRLINES 30 30#31S&P revised rating outlook to stable CHINA AIRLINES BOEING Rating Organization Long-Term Rating Outlook Rating Date Taiwan Ratings twBBB+ Stable 2021/10/28 Taiwan Ratings twBBB+ Negative 2020/3/16 Taiwan twBBB+ Stable 2019/10/30 Ratings | CAL is the first airline that received revised rating outlook to stable in Asia CHINA AIRLINES 中學信用評等 Taiwan Ratings An S&P Global Company 31#32• • Sustainability We Care The only Taiwanese airline selected for DJSI Emerging Markets for six consecutive years. China Airlines ranked in 2nd place among the world's airlines(DJSI). 永續華航 SUSTAINABILITY WE CARE Sustainability Performance of CAL 2012-2020 Excellent Corporate Governance 2014-2021 7 consecutive years Top 6%-20% TWSE/TPEX listed companies in the seventh corporate governance review. Pioneer in Environmental Protection 9 consecutive years CDP Achieved great CDP DISCLOSURE INSIGHT ACTION score on climate change Establish Happy Workplace 5 consecutive years Taiwan High Compensation 100 Index (HC 100) Taiwan Employment Creation 99 Index (EMP 99) 6 Member of AIRLINES CARGO SUSTAINABILITY WE CARE Dow Jones 6 CONSECUTIVE YEARS Sustainability Indices CONSECUTIVE YEARS 2016 2021 Powered by the S&P Global CSA Included in the DJSI Emerging Markets 2016-2021 FTSE4Good Included in the FTSE4Good Emerging Index 2017-2021 8 CONSECUTIVE YEARS 2014 2021 TCSA 3 CONSECUTIVE YEARS 2019 2021 Won the Taiwan Corporate Sustainability Award GCSA Won the Global Corporate Sustainability Award CHINA AIRLINES 32 32#33Thank you 2021.11 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