Air China profit rises on yuan gains but says passenger, cargo business remain tough

State-owned Air China says half-year profit rose 10 percent as foreign currency gains more than made up for declining passenger and cargo revenue.

The Beijing-based airline said late Tuesday that earnings from its stake in Hong Kong's Cathay Pacific Airways also contributed to January-June profit.

The company warned of tough conditions in its core business as it reported that profit rose to 1.14 billion yuan ($180 million).

The airline said profit margins in the air passenger business shrank as competition intensified while the air cargo market was weak.

Air China made 1.12 billion yuan in foreign currency gains as China's currency strengthened against the dollar.

Chinese airlines are affected by currency fluctuations because they mostly get revenue in yuan but have expenses in dollars.