A travel retailer has warned its annual underlying profit could drop due to discounted airfares provided by airlines, particularly in the key markets of Australia, the US and India.

According to a report by Inside Retail, Flight Centre expects its underlying profit before tax to be between $320 million and $355 million in 2016/17, compared to the $352 million from the previous corresponding period.

The warning comes as the travel retailer reported a profit drop in August and strengthened its presence in India and Europe.