Flight Centre's bottom line has been hit by a drop in holiday spending caused mainly by the federal government's unpopular budget.
The company has cut its annual profit forecast because of challenging trading conditions in Australia, a surprise move that has wiped more than $300 million from the company's share market value.
Chief executive Graham Turner said consumer confidence has been hit by government's struggle to get the Senate to pass the spending cuts announced in the May budget.
"That is one of the factors in consumer confidence, they don't like the uncertainty," he told AAP.
Flight Centre had expected the budget's impact on consumer sentiment to have abated by December when it set its initial full year growth targets in August.
But confidence has instead fallen, meaning flat annual spending growth at Flight Centre.
"Unfortunately, we are yet to see tangible signs of a full recovery," Mr Turner said.
The company now expects to achieve an underlying pre-tax profit of between $360 million and $390 million in 2013/14, down from its earlier target range of $395 million and $405 million.
Mr Turner said the falling Australian dollar, which is now below 82 US cents for the first time in more than four years, was not a factor in the company's weaker-than-expected performance.
"We don't believe that affects things much," he said.
"People may start travelling a little bit more domestically or they might start buying more stuff in Australia."
Transactions in Flight Centre's Australian leisure business were up just two per cent in value for the year to date, significantly lower than annual growth of about 10 per cent achieved in the past five years.
Mr Turner expects demand for holiday travel to pick up as the financial year progresses and travellers start taking advantage of cheaper airfares.
He said Flight Centre's UK and US businesses had made solid starts to the year, with strong demand for corporate and leisure services expected to deliver a record full year profit for the US division.
Mr Turner said Flight Centre's future remained bright, with the revised profit guidance still higher than last year's record result.
"We could easily end up with another record this year, albeit it might be a small improvement," he said.
Investors weren't as upbeat, with Flight Centre shares dropping $3.17, or 9.05 per cent, to $31.87, their lowest price in almost two years.
Lonsec senior client adviser Michael Heffernan said he expected Flight Centre's performance to improve once the budget stalemate is ended.
"Their fundamentals are very strong," he said.
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