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Procurement Practices and Audit Management

Aircraft Manufacturing, Leasing and Modification

The Aircraft Purchase and Lease Procedure is set to stipulate how we, EVA Air, expand our fleet through self-purchase or leasing in accordance with the long-term operation policies as well as passenger and cargo demands. Before an aircraft is purchased or leased we will evaluate aircraft performance and flight route profitability based on existing aircraft models or models that have not yet been introduced. We will negotiate with well-known commercial aircraft manufacturers or leasing companies for the purchase and lease requirements and major terms and conditions and placed orders after aircraft models, quantity and delivery schedule are decided. Due to the particularity of aircraft manufacturing, it usually takes about three to five years to carry out detailed planning and negotiations. The aircraft manufacturer only starts to build the aircraft after orders are made. At the time of aircraft delivery, flight test teams and pilots will jointly perform a ground test and performance flight test to ensure that the aircraft performance meets the contractual requirements.

Engine Manufacturing

The engine is a critical component of the aircraft; it affects important functions like flight distance and flight efficiency. EVA Air mainly selects engine types and their suppliers according to factors like aircraft model requirements, maintenance cost, maintenance operation standardization and the capacity of maintenance technologies, etc.

Aviation Fuel Supply

Aviation fuel accounts for a significant share of EVA Air’s operating costs. The international fuel prices are susceptible to factors like global situations, collective reduction in production by oil-producing countries and exchange rate fluctuations, making the control of fuel cost very difficult. To stabilize fuel cost, EVA Air has stipulated the key points for fuel procurement; every 1 to 2 years, long-term contracts will be signed with major international fuel suppliers in accordance with flight operational needs to obtain bigger discounts, The trends of fuel prices will also be observed at all times so that appropriate steps can be taken to avoid risks.

Aircraft Maintenance

In addition, outstation aircraft maintenance outside the Taiwan region is provided through agencies; these agencies are selected in accordance with the “Contract Procedures for EVA Air and Outstation Maintenance Agencies”, IATA standard terms and the agencies’ capacity for maintenance. Suppliers of aviation materials and spare parts are reviewed, and then the procurement of the items is conducted in accordance with the “Regulations Governing Supplier Review” and the “Procurement Operating Procedures”.

Airline Catering

To control in-flight meal quality, a series of regulations governing all Airline Caterer has been established by EVA Air; from course design & development, meal taste testing, meal related passenger feedback handling and on-board meal assessment. For EVA Air home base Taipei station, catering service is provided by Evergreen Sky Catering Corp, a subsidiary corporation of EVA Air. As for other stations, local airline catering service suppliers are cautiously evaluated and those qualified suppliers will carry out the relevant operations.

To manage the In-flight meal catering suppliers, EVA Air has three different check methods: Internal Check, External Check and Inspection. We will check all meals of all classes, including main course, side dishes, Online Exclusive dishes and special meals, and the check points are taste, presentation and weight specification, to make sure the best meal quality for our passengers. For Internal Check, our representatives will visit catering company at least three times a month, or the catering company will prepare the meals and send them to our office to check meals. As for External Check, we have two methods: meal check on board, or ask the caterers to send meal samples to Taipei headquarter. We check three different suppliers a month. Every month we check the meals of Evergreen Sky Catering, and two other catering companies worldwide.

Ground Handling

Each station monitors ground handling company’s performance as well as conducts annual performance evaluation. In a case that a supplier’s performances are rated as “Poor”, the supplier will be notified in writing of either a deadline to make improvements or the termination of agreements. At present, EVA Air’s consolidated subsidiary Evergreen Airline Services Corp. is responsible for the ground handling opera tion at most stations in Taiwan to ensure qualified operation quality. As for overseas stations, different ground handling task are consigned to international counterparts or professional ground handling agents at the local airports.

EVA Air draws up the annual supplier audit plan every year. Outsourced maintenance supplier at each destination airport is to be audited at least once every 2 years. The audit frequency will be increased in the event of major incidents, or if the audit results are consistently poor. Audit methods include on-site audit and desk audit. Different levels of audit are adopted according to flight safety. In case of major aircraft maintenance, major components (engine, landing gear) maintenance, major repair/modification and main components maintenance, suppliers are primarily audited through on-site audits, and supplemented by desk audits. Other suppliers are audited mainly through desk audits. A list of qualified suppliers is made after audits have been completed. Suppliers that failed the audits are requested to complete the root cause analysis within 14 days after they receive the notice of non-conformity, and to put forward corrective and preventive measures. The original auditors will then review their improvement results.

Before working with suppliers, EVA Air evaluates their past credit records as well as other aspects, including supplier image and whether there are any records of serious law (regulation) violations. The Company has announced the “Supplier Partnership Social Responsibility Policy for Sustainable Development”, and all contracts with our major suppliers include termination or rescission clauses. If any supplier is found to have violated the corporate social responsibility policy, the Company reserves the right to terminate or rescind the contract.

Intellectual Property Rights Statement

Please contact us if you have any questions and comments regarding our Intellectual Property Statement.