China Airlines attributed the loss, its first deficit in 12 years, to Asia's recession, haze that plagued Southeast Asia for much of the past year and unspecified "air safety incidents".

The February 16 crash of a China Airlines Airbus at Taipei's international airport was Taiwan's worst air disaster, killing 202 people, including central bank governor Sheu Yuan-dong.

The accident, China Airlines' second catastrophic crash of an Airbus A300-600R in four years, was one of a spate of deadly crashes and other safety problems among Taiwan's 14 airlines that caused grave concern over the industry's airworthiness.

Some lawmakers called for the grounding of China Airlines and travellers flocked to other carriers.

China Airlines has said it had agreed to pay T$9.9 million ($285,000) in compensation to relatives of each of the 202 victims of the February crash, or about $57 million.

Since the crash, China Airlines has teamed up with Singapore Airlines and brought in two top SIA pilots to tackle its safety and management problems.

The Singapore carrier said it was considering taking a stake in China Airlines, whose stock was trading on Saturday at its year low at T$20.4.

China Airlines said it had T$23.7 billion in operating income in the first six months and a net loss of T$1.56 billion. It gave no comparative figures.Aside from the safety issue, Asia's financial woes also have eaten into China Airlines' revenues as much of Southeast Asia has sunk into recession, cutting regional spending power and travel significantly.

Air travel in Southeast Asia also was hurt by a pall of health-harming haze across the region caused by Indonesia's burning of forests for land development and other wildfires.

"All this led to a decline in the volume of regional travel and a drop in air ticket prices," the airline said.

China Airlines nonetheless expected a better second half, citing the summer travel peak and other holidays.

"Past experience indicates a certain rise in passenger volume during these periods and the likelihood that ticket prices will increase as well," China Airlines said.It gave no forecast for second-half sales or profits.

China Airlines said a survey of financial conditions at local airlines by the state Civil Aeronautics Administration gave the top three overall ratings to China Airlines, its affiliate Mandarin Airlines and Far Eastern Air Transport.

China Airlines said despite the loss, it has been able to maintain competitiveness through organisational and personnel downsizing, saving on non-essential spending, exploring new business opportunities and foreign exchange and fuel-purchase hedging operations.