(Adds analyst quote, detail of downgrade and context) SYDNEY,...

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SYDNEY, March 6 (Reuters) - Australia's biggest listed private educator, Navitas Ltd (NVT), downgraded the outlook for its migrant language teaching division on Monday, sending shares tumbling to a 16-month low.

The company said it now expected fewer Australian government contracts for its migrant language division, erasing A$12-14 million ($9-10.6 million) of earnings. The division makes up a fifth of the firm's earnings.

Monday's announcement comes during a volatile period for the company, which recently blamed U.S. President Donald Trump's travel restrictions on several Muslim nations for a fall in enquiries at the company's U.S. schools.

With operations in Australia, North America and Britain, Navitas's main business is running English and pre-university courses for foreign students and migrants.

Shares plunged as much as 16 percent after the announcement to A$4.15, their biggest intraday fall in more than two-and-a-half years. The broader Australian market (xjo) rose 0.2 percent.

"It probably does justify the rather large fall that they're taking," said Evan Lucas, a strategist at IG Markets.

"It's their bread and butter...competition in this space is very, very hard," he said.

The company has been short-listed for a reduced number of government contracts for its migrant language division, Navitas said, without giving a reason. Its government contracts expire in June and renewals for 2018 have yet to be finalised.

Rivals were likely to win the contracts, as Australia's Commonwealth Education Department said in an email to Reuters that its budget for migrant language programmes was not cut and was forecast to grow. The email said the department would not comment on the tender process before it was finalised.

"The proposed reduction in contract regions is disappointing news as Navitas has been delivering this important programme to a high standard since 1998," Chief Executive Rod Jones said in the statement.

Shares in private educators like Navitas are heavily exposed to changing government policies, with government contract changes and visa restrictions a historical cause of volatile price moves.

The company said in January that while policies in the United States were affecting enquiry levels there, Muslim students might go to Navitas businesses in Australia and Canada instead.

Navitas in January reaffirmed guidance for full-year earnings before interest, tax, depreciation and amortization to be flat. But the new outlook issued on Monday amounts to an 8 percent drop. ($1 = 1.3187 Australian dollars)