Sustainable Development Strategies

We begin by focusing on the four key strategies of "fleet and network", "products and services", "brand awareness", and "group's business operations". By taking into consideration the resources available to the enterprise is limited, we continue to adjust our corporate resource allocation and attempt to create higher values for stakeholders, those values including "trust, human resources, cooperation, environment, and society". By creating values, we aim to fulfill our corporate vision of "becoming the preferred airlines in Taiwan", and upgrade ourselves to become the benchmark for Taiwan's sustainable enterprises.

Value Creation Model

As a leader in Taiwan's aviation industry, in order to make mutual prosperity with stakeholders, move towards sustainability and endeavor to create the sustainable value for all stakeholders, CAL develops Sustainability Strategy Framework to picture the sustainability context of CAL. To help all stakeholders understand the true value of CAL, CAL discloses its six capitals (Financial, Natural, Manufactured, Intellectual, Human, Social and Relationship) publicly.

Capitals Input

Sustainability Strategies

Value Creation

Title Output Outcome
Financial
  • Operating revenue (TWD million): 150,620
  • Revenue grew by 7%
Manufactured
  • Number of new aircraft: 4
  • Number of passengers created by new aircraft: 1,224
  • Punctuality rate of high-level repair and maintenance service: 97%
  • Number of incidents causing casualties or flight crashes: 0
  • Number of existing destinations (including new ones): 77 passenger destinations/35 freight destinations
  • Number of passengers/freight worldwide: RPK 41,748 (million) / FRTK 5,908 (million)
  • Passenger flight experience was improved
  • The punctuality rate of high-level repair andmaintenance service was above the target (95%)
  • The goal of 100% flight safety was achieved
  • Ontario, Canada was added as a passenger destination to enhance the scope of passenger transport service
  • A new freight destination of Columbus, Ohio was added to offer multi-leg flights so as to optimize the route network
  • Compared to 2017, the number of passengers grew by 2.39%and the volume of freight grew by 2.9% worldwide
Intellectual
  • Number of cost-saving patents: 61
  • Number of patents obtained: 2
  • Number of R&D employees trained: 282
  • 42.7 man-month / year was saved
  • The cost of TWD 65.88 million was saved
  • CAL's intellectual property rights were continuously maintained
  • The skills of information employees were enhanced in responseto the development of or updates to information systems
Human
  • Number of new employees: 506
  • Retention rate: 96.54%
  • Employee turnover: 5.88%
  • Total number of employee training hours: 330,000
  • Total number of middle or top management training hours
  • New employees were hired to improve the business capacity and competitiveness of CAL
  • Compared to 2017, the retention rate increased by 2.5%
  • Compared to 2017, employee turnover decreased by 0.5%
  • Related training was organized based on the needs of business operations
  • Job-related training was organized to improve management knowledge and consensus
Natural
  • Electricity consumption (kWh): 36,009,284
  • Carbon reduction (tons): 8,898,019
  • Waste reduction (kg): 4,684,656
  • Water consumption (thousand tons): 148.22
  • Number of water-saving projects: 4
  • Number and percentage of green buildings: 2/66.67%
  • Sustainable aviation fuel added (tons): 20
  • 837,377 kWh of electricity was saved through a sound energy management system
  • Carbon emission reductions of 144,882 tons were achieved through various carbon reduction measures
  • 149,649 kg of waste was reduced through improved waste management
  • 3,276 liters of water were saved through continuous water management
  • Compared to 2017, the percentage of green buildings increased by 33.67%, and electricity from the elevator power regeneration system increased by 764 kWh
  • Compared to 2017, 80,000 tons of carbon emissions were reduced
Social and Relationship Capital
  • Number of charitable activities: 15
  • Number of beneficiaries: 1,169
  • Number of community activities: 33
  • Number of participants: 855
  • Number of sponsorships: 57
  • Number of brand promotion projects: 1
  • Result of brand promotion (TWD million): 46.5
  • Passenger transport customer satisfaction rate: 87.2%
  • Number of passenger transport customer complaints: 3,252
  • Freight customer satisfaction rate: 87.3%
  • Number of freight customer complaints: 0
  • Number of industry-academia partnerships: 33
  • Number of industry-academia partnership projects: 6
  • Number of participants: 109
  • Coverage of sustainable supply chain management: 87.65%
  • Support was provided for the disadvantaged to improve quality of life, level of education, and social balance
  • Students were trained to develop a habit of independent reading
  • Revenue of TWD 27,571,992 was created through improved business development and brand image
  • The effect and quality of brand promotion was enhanced
  • Our brand video, “The Trip You Promised,” was recognized as the most successful video at Best Ad.com for the week of August 1, 2018, thereby enhancing our brand image and sales
  • Compared to 2017, the overall passenger satisfaction rate increased by 2.1 points
  • Compared to 2017, passenger transport customer complaints decreased by 25.9%
  • Compared to 2017, freight customer complaints decreased by 100%
  • The purpose of industry-academia partnerships was to develop national aviation professionals
  • The purpose was to obtain insights into the sustainability issues of Tier-1 critical suppliers

True Value of China Airlines

In order to embrace mutual prosperity along with our stakeholders and endeavoring to create sustainable value for all stakeholders, CAL has integrated six forms of capital (financial, natural, manufactured, intellectual, human, and social) to its corporate vision and strategy, introducing the concepts of true value to monetize the environmental and of social externality’s costs and benefits. This true value is viewed as an important reference point for corporate sustainability, and it helps all stakeholders understand the Company's sustainability performance.

True Value

According to the result of the calculation, CAL's true earnings in 2018 came to around TWD 23.2 billion, reflecting a positive difference of TWD 2.49 billion compared with traditional financial performance measures (EBITA). Given the small differences with EBITA in 2017 and 2018, the true earnings in 2018 were TWD 1.17 billion more than that seen in 2017 due to the positive benefits created by respective increases of 10.56% and 135.28% in "employee salary and benefits" and "green procurement" in 2018. In line with the characteristics of the aviation industry, waste treatment, waste recycling, and green fares were added to the scope of environmental external costs in 2018. In CAL's true earnings of 2018, environmental external costs totaled TWD 17 billion. Out of this, greenhouse gas (GHG) emissions and noise pollution were the main sources generating this cost. Meanwhile, positive benefits created by additional economic value and social externalities totaled TWD 19.5 billion.

Sustainable Development Goals

Sustainability becomes more crucial for our busi- ness management nowadays. CAL is deeply aware that business should not only pursue financial performance, but also create stakeholders’ value through a company's core competence to build the win-win situation for its stakeholders and the company. To show its determination to create value for stakeholders, CAL has established a sound sustainable management mechanism in line with 17 Sustainable Development Goals (SDGs) officially launched by the United Nations(UN) in 2016, hoping to maximize the benefits for the country, society, and all stakeholders. As a corporate citizen, CAL supports the UN's SDGs and focuses its sustainable development on nine SDGs in accordance with the SDG Compass and related sustainability reports of the International Civil Aviation Organization (ICAO), the Air Transportation Action Group (ATAG), and the international transportation industry.

Corporate Sustainability Management

Under the challenging and rapid changing environment with the growing trend regarding sustainability, CAL followed by the international trend of sustainability and referred to the experience from the benchmarking companies to establish its Corporate Sustainability Committee in 2014 (see figure below), the highest governing body of sustainability promotion, and set the Corporate Social Responsibility and Sustainable Development Best Practice Principles. The Corporate Sustainability Committee comprises six task forces in all, and they are responsible for setting and implementing short-term, middle-term, and long-term sustainable development goals to enforce the sustainable development.

Sustainability Goals of Each Task Force
Task Force 2020 2025 2030
Corporate Governance
  1. Achieving 100% of sustainability tasks for the year and establishing the employee awareness improvement plan
  2. Enforcing the operating mechanism for SDGs
  1. Regularly reporting the progress of CSR tasks to the Corporate Sustainability Committee and holding at least two CSR training sessions for affiliates
  2. Assisting industry partners in building up capacity for sustainable development
  1. Disclosing sustainable development of airline transport affiliates
  2. Supporting global sustainability initiatives to expand the industry influence
Customer Relation
  1. Implementing the personal information management system and obtaining certification of BS10012 personal information management system
  2. Increasing the freight customer satisfaction rate to 88%
  3. Promoting an intelligent business model- develop talents on information security, AI, Big Data, and APP, introducing AI Robot that optimizes customer service mechanism.
  4. Cooperating with aviation and tourism industry peers to develop business opportunities through new distribution capability (NDC)
  5. Continuously participating in aviation organizations and increasing influence
  6. Strengthening the promotion of the safety management system (SMS)
  1. Including all CAL employees in training on personal information management
  2. Increasing the freight customer satisfaction rate to 89%
  3. Promoting a smart airport-Establish a smart airport at Terminal 3 of Taiwan Taoyuan International Airport with digital and innovative technology application
  4. Improving customer satisfaction through digital innovation
  5. Publishing the results of flight operations studies to improve technical capacity of aviation industry
  6. Strengthening safety culture
  1. Creating a corporate culture of personal information security, encouraging employees to propose for innovation or improvement, improving customer trust, and maximizing privacy protection
  2. Increasing the freight customer satisfaction rate to 90%
  3. Promoting intelligent tourism-Integrate tourismrelated industries (such as transportation, hospitality,insurance, catering, and tourist attractions) to provide a one-stop smart travel eco-system
  4. Integrating digital innovation with the core value chain of products and service
  5. Developing innovation plans with industry peers to increase the momentum for innovation of the aviation industry
  6. Continuously enhancing the safety management system
Human Resources
  1. Organizing eight insider sharing sessions that provide an opportunity for internal cross disciplinary networking
  2. Establishing the Company's aviation management talent pool
  3. Percentage of female manager reaching 24.5%
  1. Completing the establishment of all internal online training materials in various professional fields
  2. Establishing the optimal learning path of the Company's aviation management talent pool
  3. Percentage of female manager reaching 25%
  1. Applying to Taiwan's aviation talent development
  2. Promoting Taiwan's aviation talent development
  3. Percentage of female manager reaching 27%
Supply Chain
  1. Maintaining SAQ Score at 85 Points
  2. Optimizing risk management for sustainable supply chain, implement SAQ, and audit 30% of critical tier-1 suppliers by 2020
  1. Maintaining SAQ score at 87 points
  2. Expanding the scope of supply chain management, implement SAQ audits, and audit 100% of critical tier-1 suppliers by 2025
  1. Maintaining SAQ score at 89 points
  2. Providing supply chain training, improve assistance mechanisms, and continuously implement a SAQ
Environment
  1. Improving annual aviation fuel efficiency by 1.5% (flight operations)
  2. Reducing carbon emissions by 38% compared with 2009 (ground operations)
  3. Implementing TCFD (Taskforce on climate-related financial disclosure) evaluation and disclosure
  4. Reducing general waste (non-recyclable) by 2% compared with 2018
  5. Industrial waste recycling ratio reaching 40%
  6. Reducing water consumption by 1.5% compared with 2018 (Ground)
  7. Reducing paper consumption by 5% compared with 2018
  8. Embargoing illegal wildlife species and prohibiting use of illegal species as food ingredients
  1. Improving annual aviation fuel efficiency by 1.5% and maintaining carbon-neutral growth from 2020 (flight operations)
  2. Reducing carbon emissions by 40.43% compared with 2009 (ground operations)
  3. Implementing carbon pricing operation
  4. Reducing general waste (non-recyclable) by 7% compared with 2018
  5. Industrial waste recycling ratio reaching 45%
  6. Reducing water consumption by 5% compared with 2018 (Ground)
  7. Reducing paper consumption by 10% compared with 2018
  8. Embargoing illegal wildlife species and prohibiting use of illegal species as food ingredients
  1. Improving annual aviation fuel efficiency by 1.5% and maintaining carbon-neutral growth from 2020 (flight operations)
  2. Reducing carbon emissions by 42.34% compared with 2009 (ground operations)
  3. Implementing carbon pricing operation
  4. Reducing general waste (non-recyclable) by 12% compared with 2018
  5. Industrial waste recycling ratio reaching 50%
  6. Reducing water consumption by 7% compared with 2018 (Ground)
  7. Reducing paper consumption by 15% compared with 2018
  8. Embargoing illegal wildlife species and prohibiting use of illegal species as food ingredients
Society
  1. Increasing the proportion of educational sponsorships
  2. Calculating SROI (social return on investment) for the sponsorship
  1. Developing opportunities for students to receive international education
  2. Promoting economic growth and employment assistance in underdeveloped areas / developing countries
  1. Improving the quality of education in underdeveloped areas / developing countries
  2. Enhancing the benefits of sponsorships regarding improving society

Governance Structure

Board of Directors

As the highest governing organization at CAL, the Board of Directors is responsible for supervising and resolving on crucial issues and guiding management. The composition of directors is diversified and talent-based. A total of eight male directors and three female directors (including one male independent director and two female independent directors) having expertise or experience in management of international companies have been elected in the 21st term of Board of Directors. The tenure of 21st term Board of Directors is three years from June 27, 2018 to June 26, 2021. Moreover, CAL convenes the Board meeting at least five times every year and may convene extraordinary meetings in case of emergencies.

Note: For experience / education, concurrent posts, expertise, field of experience, compliance of independence, and the operations of the Board of Directors, refer to the CAL's Annual Report.

Personal Data of Directors of the Board


Board Diversity


Diversity Policy

China Airlines advocates and respects the director diversity policy, and is convinced that diversity can improve the overall performance of the Company. Members of the Board of Directors shall be based on personal capability and the diversification from different aspects shall also be taken into consideration, including basic characteristics (e.g., age, gender, race, nationality, birth date and cultural background, etc.), experience and skills (e.g., aviation, sea freight, transportation, finance and accounting, law and insurance, academia, electricity, technology, and public utilities), operation and management, leadership and decision-making, and crisis management ability. In order to strengthen the Board's functions to achieve the ideal goals of corporate governance, the Company has established the“Corporate Governance Principles,” Article 20 of which specifies the overall abilities the Board of Directors shall be equipped with, which are as follows:

  • The ability to make operational judgment.
  • The ability to perform accounting and financial analysis.
  • The ability to conduct management administration.
  • The ability to conduct crisis management.
  • Industrial knowledge.
  • Perspective of the international market.
  • The ability to lead.
  • The ability to make decisions.

Moreover, the status of diversity among China Airlines' current Board members is as follows:

Status of diversity among the Company's current Board members
Name of Board Member Gender Operations Management Perform Accounting And Financial Analysis Conduct Management Administration Conduct Crisis Management Industrial Knowledge Perspective Of The International Market Lead Make Decisions
Hsieh, Su-chien Male
Charles C.Y. ,Chen Male
Ting, Kwang-hung Male
Chen, Han-ming Male
Ko, Sun-ta Male
Wei, Yung-yeh Male
Lin, Su-ming Male
Wang, Shih-szu Female
Chung, Lo-min Male
Chang, Hsieh Gen-sen Female
Shen, Hui-ya Female

Note: ✓Indicates the director has the capability. ○ indicates the director has some capability.

Functional Committees of the Board

The Board of Directors has three functional committees: the Remuneration Committee, the Audit Committee, and the Risk Management Committee which help the Board of Directors perform its duties and convene meetings, exercise functional authority conferred by the Board of Directors and the law, and review and discuss related issues in accordance with the charters approved by the Board of Directors. Corresponding conclusions and recommendations are then submitted to the Board of Directors for final resolutions.

General Audit Office

To enforce corporate sustainability, the General Audit Office is responsible for auditing the corporate governance system to prevent fraudulent activities and corruption. The results of audits are continually followed and required to be corrected by the given time limit. The audited cases in 2018 are summarized below by category. All of the cases have been corrected and reported to the General Audit Office for approval.

The General Audit Office has also established a whistle-blowing mechanism to report fraudulent activities and unethical conduct. If it is found that an employee of CAL or its affiliates is misusing his / her position to take bribes or behave in violation of his / her duties for the purpose of obtaining unlawful benefits for himself / herself or others, thereby causing losses to CAL's property or reputation, an employee or an external partner (e.g., a supplier) is encouraged to report this matter through the management mechanism or through the independent mailbox (auditor@china-airlines.com) published on the website (Stakeholder Contact-Business Conduct) and in the Annual Report (Corporate Governance Report-Corporate Governance).

Audited Cases in 2018

Type of Cases Number of Cases Audited Number of Comments Number of Corrections
Head Office 20 125 125
Branch 47 285 285
Subsidiary 13 80 80
Transaction in Derivative Products 12 None,all complying with regulations -
Procedures for Lending Funds and Making Endorsements / Guarantees 4 None,all complying with regulations -
Subsidiary Supervision and Management 1 3 3
Information and Communication Security Inspection 1 2 2
Procedures for Meetings of Board of Directors / Audit Committee / Remuneration Committee 1 1 1

CAL Group's Operation Achievements

CAL's management and employees continuously apply themselves to strengthening its operating structure through a variety of improvement strategies and integration of Group business. Despite rising global oil prices in 2018, joint efforts in passenger and freight transport on the part of CAL, Mandarin Airlines, and Tigerair Taiwan allowed consolidated operating revenue to hit a nearly four-year high at TWD 170.71 billion. This comprised TWD 108.35 billion from passenger transport, TWD 49.85 billion from freight transport, and TWD 12.52 billion from other segments. Consolidated net profit before tax was TWD 3.08 billion. CAL has thus shown a positive pre-tax profit for four consecutive years.

Historical Financial Performance

  2015 2016 2017 2018
Passenger revenue
94.96 95.28 102.22 108.35
Cargo revenue
40.29 35.72 43.34 49.85
Other revenue
9.8 10.08 10.57 12.52
Consolidated operating Revenue
145.06 141.08 156.12 170.71
Pretax profit
7.13 1.88 3.52 3.08
Operating revenue
133.44 127.52 139.82 150.26
Operating cost
115.82 112.25 121.85 137.62
Operating expense
9.74 10.80 10.61 10.80
Income tax expense
1.07 0.97 0.88 0.53
Salary expenses
14.19 14.18 15.18 15.01
An analysis of employee benefits expense by function
19.12 19.72 21.22 21.55
Post-employment benefits
0.72 1.05 1.24 1.69

Unit: TWD billion