The Beijing-based airline said late Tuesday that profit margins in the passenger business shrank as competition intensified in China's fast-growing air travel market, the world's second biggest, while the air cargo market remained weak.
"The global economy continued its sluggish recovery whilst China's economic growth slowed," the company said.
A protracted slowdown in the world's second-biggest economy is biting into travel budgets while an uncertain global outlook is cutting demand for exports from Chinese manufacturers.
Air China Ltd., one of China's three major state-owned airlines, reported that profit rose to 1.14 billion yuan ($180 million) in the January-June period.
Revenue slipped 2 percent to 46 billion yuan as sales from its core business shrank.
The airline made 1.12 billion yuan in foreign currency gains as China's currency strengthened against the dollar. The yuan, which is not freely convertible into foreign currencies, has gained 1.8 percent this year.
The airline lost 341 million yuan in the same period last year as the currency slipped against the dollar.
Profitability at Chinese airlines is affected to a large degree by currency fluctuations because while they mostly earn revenue in yuan, expenses for jet fuel and new airplanes are priced in dollars.
Air China also earned 101 million yuan from its shareholding in Hong Kong's Cathay Pacific Airways Ltd., compared with a loss a year earlier.
Air China: http://www.airchina.com