Flight Centre has warned that earnings could fall as much as 4 per cent this financial year due to a slowdown in spending on leisure travel in Australia in recent months.

Shares in Flight Centre slumped almost 10 per cent to $31.65 late on Thursday morning in the wake of the profit downgrade. The stock has now fallen 43 per cent since reaching a record high of $55.57 in March.

The nation's largest travel agency has forecast underlying profits before tax of between $360 million and $390 million this financial year. The bottom of the range represents a 4 per cent decline on last financial year when it made a record $376.5m profit, while the top is a 4 per cent rise.

Flight Centre managing director Graham Turner said leisure sales growth in Australia had been lower than usual over the first five months of this financial year, leading to weaker margins. 

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Sales staff had been forced to reduce commissions in order to lower overall ticket prices and stimulate demand.

Australia's leisure travel market is Flight Centre's largest operation.

Flight Centre has also forecast its pretax profits for the first half to fall up to 7 per cent to $136 million. 

Mr Turner said he still expected solid contributions from its overseas operations, including those in the UK and the US, but the growth outlook for its core Australian operations was unclear.

"When we set our full-year growth targets in August, we expected the uncertainty surrounding Australia's federal budget would have abated as the first half drew to a close and consumer confidence and spending would have started to rebound," he said.

"Unfortunately, we are yet to see tangible signs of a full recovery and the overall leisure travel market in Australia continues to be flat year-on-year."

The total transaction value, or the price at which goods and services are sold, from Flight Centre's Australian business is up just 2 per cent, which is significantly lower than the compound annual growth rate of 10 per cent that it has achieved over the past five years.

Mr Turner again rejected suggestions that a slowdown in outbound travel from Australia was due to the significant decline in the value of the Australian dollar against the US greenback in recent months.

Despite the slowdown in leisure travel sales, Mr Turner said the corporate market had been relatively stable.

The downgrade comes just six weeks after Flight Centre told shareholders that it was on track to achieve its forecast for an underlying profit before tax of between $395 million and $405 million this financial year, a 5 to 8 per cent rise on 2013-14. However, it did caution at the time that the targets would not be a formality.