China Eastern Airlines reported a first-half net profit of CNY14 million ($2.3 million), down 98% from net income of CNY624 million in the year-ago period. The Shanghai-based carrier had predicted the profit drop in July.

First-half operating revenue increased 2.7% to CNY42.59 billion while operating expenses grew 2.7% to CNY39.27 billion. Industry analysts cited exchange losses as the main reason for the sharp profit decline. China Eastern reported CNY660 million in exchange losses, reversed from exchange gains of CNY1.17 billion in the year-ago period.

First-half passenger boardings increased 7% to 40.42 million with an average load factor of 80%, up 0.63 point over the year-ago period. Passenger capacity increased 5.5% to 76.93 billion ASKs while passenger revenue rose 6.3% to 61.5 billion RPKs. Cargo traffic volume dropped 0.91% to 6.6 million tonnes.

China Eastern introduced 23 new aircraft and phased out 17 aircraft in the first half. As of June 30, it operated a total fleet of 485 aircraft.

Looking forward, the carrier expects China’s air transport market to keep growing in the second half as China’s economy stabilizes. However, it warned, “A lot of uncertainties still remain as the global economic recovery and market competition are increasingly fierce.”