Tour operator Thomas Cook said the impact from unrest in the Middle East and North Africa (MENA) would be worse than expected as holidaymakers avoided destinations in Egypt, Tunisia and Morocco.
Europe's second-biggest travel firm said on Monday it expected around 35 million pounds (US$57 million) to be knocked off its profits in the second half of the year compared with its initial projection of 20 million.
The impact has been compounded by challenging trading conditions in the UK, where Thomas Cook said it expected its performance to be worse than last year as inflation, unemployment and fears of higher interest rates hit sentiment.
The company has been offering cut-price deals in Britain in an effort to stimulate demand but still expects its results in the UK to be worse than last year.
"It's tough in the UK because of MENA but you put on top of that what the UK's facing -- a really tough economic climate," CEO Manny Fontenla told reporters on a conference call.
"I certainly don't foresee an upturn in consumer confidence right now," he added.
The group is looking to mitigate the MENA impact by offering holidays to alternative destinations such as Turkey and Spain and has also targeted 30 million pounds of cost savings this year through a restructuring including more than 500 job cuts.
Thomas Cook said the ongoing unrest in Libya and other countries in the region was continuing to impact demand and the recovery had been slower than expected.
The group currently expects to offer around 60 per cent of the original programme of holidays to Egypt, Tunisia and Morocco but said that number could be cut further if the political situation does not improve.
Thomas Cook said travel restrictions to Egypt and Tunisia had resulted in about 160,000 cancellations, of which 120,000 were for travel to Egypt and 40,000 to Tunisia. The cost of the disruption in the second quarter was 22 million pounds.
Rival TUI Travel's Chief Executive Peter Long told Reuters the company was factoring in a hit of up to 40 million pounds each year from conflict and natural disasters.
Thomas Cook said it made an underlying operating loss of 166 million pounds ($272 million) in the six months to end March, compared with a 130 million loss in the same period last year, in line with forecasts.
Tour operators traditionally make a loss in the first half of the year, which does not include the key summer period.