The World Returns to a New Normal

From 2020 to 2023, the aviation industry has been encountering unprecedented challenges as a result of the pandemic, while also witnessing rapid changes in the global market. This is both a challenge and an opportunity for CAL. In the post- pandemic world, a new normal is emerging. People are beginning to travel again, and passenger transportation is actively recovering. However, the aviation industry continues to face several adverse factors in the overall environment, including geopolitical conflicts resulting from the Russia-Ukraine and Israel-Palestine wars. These conflicts have made an impact on flight capacity, fuel consumption, and crew deployment. Furthermore, the inadequate production capacity of aircraft manufacturers and related supply chains has led to bottlenecks in the supply chain. The manufacturing sector has been weakened by the economic slowdown and inflationary pressures in various countries, leading to imbalances in supply and demand. This has disrupted trade stability and impacted freight revenue levels, among other factors. Despite facing multiple unfavorable operating conditions, CAL is actively addressing the impact on regional and long-haul capacity in its supply chain by extending and increasing leases. Furthermore, CAL is actively promoting fleet renewal, including the replacement of the 737-800 with the A321neo, the A330-300 with the 787-9, and the gradual phasing out of the 744F with the 777F. CAL is also optimizing route planning, integrating passenger and cargo operations, and enhancing.

Inherit and Implement Corporate Sustainability

CAL has been consistently implementing ESG initiatives to foster sustainable competitiveness and achieve remarkable sustainability results. It has garnered recognition from both domestic and international sources. In 2023, CAL has once again been chosen as a constituent stock of the Dow Jones Sustainability Indices (DJSI) Emerging Markets, marking its eighth consecutive year of selection. It stands as the sole Taiwanese airline to receive this honor and ranks second highest in the global aviation industry. This year, a total of 61 airlines participated in the evaluation. CAL attained a perfect score in waste management, water conservation strategies, passenger safety, sustainable marketing and brand awareness, business ethics, transparency, and reporting. Moreover, CAL secured the highest score in 10 categories, encompassing biodiversity, talent attraction and retention, information security and system availability, and labor practices, effectively showcasing the integration of sustainable principles into its business operations. Furthermore, CAL has received the Taiwan Corporate Sustainability Awards (TCSA) for ten consecutive years, demonstrating exceptional performance. In 2023, CAL reached a new milestone by being honored with the prestigious Taiwan's Top 10 Sustainability Exemplary Enterprise Award for the first time. Additionally, it secured the top position in the global aviation industry evaluation of the 2023 S&P Global Sustainable Yearbook.

As a pioneer in the international aviation industry, CAL continues to set benchmarks for companies in various fields both domestically and internationally. Its sustainable development achievements consistently surpass expectations, thanks to its robust corporate environmental and energy risk management mechanisms. CAL has taken the lead in publishing an independent report on climate-related financial disclosures (TCFD) and has made commitments to forest and biodiversity conservation. In addition to adding 10% sustainable aviation fuel (SAF) to its A321neo fleet delivery and ferry operations, CAL has been supporting the SkyTeam in the "Sustainable Flight Challenge" for two consecutive years. In 2023, CAL achieved a groundbreaking milestone by operating Taiwan's first passenger flight using SAF, in collaboration with the ECO Travel program to offset carbon emissions for its entire fleet of passenger and cargo flights. This demonstrates CAL's commitment to supporting global renewable energy development and transition, and actively implementing carbon-neutral flying. Furthermore, in 2023, CAL became the first Taiwanese company to join an internationally renowned oil company and a blockchain platform to establish a sustainable aviation fuel program. This marks the introduction of a collaborative model for SAF procurement and provides traceable and verifiable carbon reduction reports. CAL is gradually promoting the use of SAF on its passenger and cargo flights, working together with supply chain partners and corporate customers to collectively reduce carbon footprints and support the global transition to sustainable energy. By upgrading its collaborative efforts to achieve carbon neutrality, CAL aims to create win-win carbon reduction outcomes and actively move towards its net-zero carbon emissions target by 2050.

Look into the Future at the Peak

As the world gradually goes back to a new normal, CAL, with its leading position in sustainable aviation, will pursue a business model of steady development and prudent planning. By leveraging Taiwan's strategic geographical location, CAL will expand its route network, strengthen its advantage in operating unique air routes, diversify its sources of passenger revenue, and solidify its corporate customer base and high-yield markets. Additionally, CAL will drive the digitization of its passenger transportation marketing system, cultivate the new generation of passengers, foster cross-industry cooperation, enhance product value, and consistently innovate to stay current with the times. Furthermore, CAL also consolidate its current advantages in freight transportation, continuously enhance revenue management, pursue high-profit opportunities such as special cargo, cold chain, charter flights, and high-value goods, and leverage its expertise in shipping semiconductors, technology industries, and aviation materials. Additionally, CAL will investigate the possibility of offering flights to and from new destinations. CAL will actively consolidate operational resources, plan crew and aircraft scheduling in advance, and flexibly adjust fleet plans, continuing to study and supplement passenger aircraft capacity, accelerate the retirement and replacement of cargo aircraft, and introduce fuel-efficient and efficient fleets. In 2024, CAL will continue to introduce new aircraft such as the A350-900, A321neo, and 777F. In 2025, CAL will welcome a brand new fleet of 787 aircraft, allowing for flexible deployment on long-haul/ultra-long-haul routes and further developing the overall passenger air transport network. The new 787 aircraft surpasses competing models in the industry by achieving a 12% reduction in fuel consumption, an 8-12% reduction in aircraft weight, and a faster cruising speed, effectively lowering operating costs. Additionally, it offers increased seating capacity and cargo space, contributing to revenue growth. The cabin is meticulously designed to replicate the pressure and humidity levels that ensure passenger comfort, enhancing the overall flying experience. As the aviation market continues to recover, CAL has plans to expand its fleet, strengthen route network, and enhance cooperation with partner airlines. Meanwhile, CAL will focus on improving revenue management, digitizing our marketing and membership systems, utilizing big data for precise management, strengthening cross-industry collaborations, expanding revenue, and effectively managing costs to create shared profits with the eight key stakeholders.

Standing at the peak of the world, CAL looks into the future with a steadfast commitment to sustainability. To realize its long-term vision for 2040, CAL has established a range oflong-term sustainable goals, including a 40% increase in the use of Sustainable Aviation Fuel (SAF), a 70% reduction in airborne waste compared to 2018, and the complete elimination of single-use plastic products in its inflight services. Additionally, CAL will adhere to the COP28 consensus by reducing reliance on fossil fuels, increasing the proportion of renewable energy and enhancing energy efficiency. The capacity of renewable energy installations will reach 15% of the contracted capacity. Through effective resource management, pollution prevention, and innovative systems, CAL is dedicated to providing environmentally sustainable products and services to its passengers.

Looking into the future at the peak of the world, we invite you to soar into the sky together with CAL for each sustainable flight.

• 8^th time selected for DJSI Emerging Markets Index

  The only Taiwanese airline selected for DJSI Emerging Markets for eight consecutive years and ranked in 2^nd place among the world's airlines.

• 8^th time selected for FTSE4Good Index Series

  Selected in the FTSE4Good Index Series for eight consecutive years.

• 2^rd time selected for the MSCI Index

  Has been selected as a constituent stock of the MSCI Global Standard Indexes Preface since 2022.

• 5^th time in GCSA Award

  CAL won the Sustainability Reporting Award for the fifth time and won the Silver Award in 2023.

• 10^th time in TCSA Award

  CAL won the Taiwan Corporate Sustainability Award for the 10th consecutive year, receiving Taiwan's Top 10 Sustainability Exemplary Enterprise Award for the 1^st time in 2023 and the Sustainability Report - Best Report of the Year Award (Service Industry) for the 2^nd consecutive year.

• 5^th time selected for FTSE4Good TIP Taiwan ESG Index

  Selected in the FTSE4Good TIP Taiwan ESG Index for the fifth time.

• 7^th time selected for the Sustainability Yearbook

  CAL became the only airline company in Taiwan that was selected for the Sustain- ability Yearbook for the seventh time, and was ranked among the top 5% among aviation companies in the Sustainability Yearbook in 2024.

• Taiwan Ratings maintained “stable” outlook

  In October 2023, Taiwan Ratings announced that CAL's long-term and short-term credit ratings were "twBBB+/twA-2" and the outlook remained "stable".