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Airline stocks drop on fears Brexit could depress trans-Atlantic travel

Bloomberg News

Airline stocks dropped sharply on Friday after Britain’s decision to leave the European Union.

Fort Worth-based American Airlines, which has a joint business agreement with British Airways, saw its stock decline the most, down almost 11 percent. The shares (ticker: AAL) closed at $27.05, down $3.28.

“It is too soon to speculate,” American spokesman Ron DeFeo said about the impact of Britain’s exit. “We will learn more as the exit process unfolds and any effects of the exit become more clear.”

Trans-Atlantic travel may decline as a sinking British pound forces more Britons to stay home. And weaker demand may lead U.S. carriers to trim capacity across the Atlantic more than they were already contemplating, especially after the summer travel season, said Joseph DeNardi, a Stifel Financial analyst.

“It’s hard to picture how it’d be positive,” DeNardi told Bloomberg News. “It’s a question of how much of a negative it’s going to be.”

Wolfe Research analyst Hunter Keay said American is the U.S. carrier most likely to be affected in the short term by Britain’s decision to leave. However, U.S. airlines could benefit from London’s Heathrow Airport being closed to Middle Eastern carriers and low-fare Norwegian Air Shuttle.

“Foreign airlines with low costs subsidized by governments have been buying stakes in bad, money-losing airlines in recent years, propping up weak competition that should have vanished under normal market forces,” Keay told investors in a research note Friday.

Shares of United Airlines and Delta Air Lines also declined, dropping 9 percent and 8 percent respectively.

Of the major publicly traded U.S. airlines, Dallas-based Southwest Airlines had the smallest decline, about 3 percent, as it does not fly international routes to Europe.

Investors appear concerned that travel to and from Europe will decline, particularly if it becomes harder to go through customs when taking a multicountry vacation to Britain and the rest of Europe.

“What’s more worrisome, perhaps, is if Brexit becomes contagious and other disaffected European voters push through similar referendums,” said founder George Hobica. “No one wants to return to the days of long immigration lines when traveling within Europe and carrying 10 different currencies in purses and wallets. But it could happen.”

This report includes material from Bloomberg News.

Andrea Ahles: 817-390-7631, @Sky_Talk