The Emirates Group has announced a sharp drop in profits for the financial year ending 31st March 2017 following what it said was one of its most challenging years to date. The group reported profits of $340m (down 70% from last year’s record result) on sales of $28.5bn (+2%).

The airline reported a profit of $340m (–82%) on sales more or less unchanged at $23.2bn. Total operating costs increased by 8%. During the year, the carrier took delivery of a record 35 new aircraft (19 A380s and 16 Boeing 777-300Ers), as 27 older aircraft were retired from service.

The company was hit by headwinds due to significant currency devaluations against the US dollar and a highly competitive business environment. The carrier says the rise of the US dollar against currencies in most of Emirates’ key markets had a $572m impact on airline revenue, and on the airline’s bottom line.

Europe was the highest revenue contributing region ($6.5bn), followed by East Asia and Australasia ($6.2bn), up 1%.

On the bright side, the group’s dnata ground and cargo handling arm reported its highest profit ever, at $330m and said international business now accounted for 66% of sales ($3.3bn, +15%). The revenue increase was achieved through organic growth, and bolstered by the acquisition of dnata Aviation Services in the U.S. in April 2016 and Air Dispatch in the Czech Republic in July 2016.

Looking ahead, CEO Sheikh Ahmed bin Saeed Al Maktoum warned that the carrier faced a “volatile business climate and fast changing consumer expectations … with hyper competition squeezing airline yields”.