What: Shares of American Airlines (NASDAQ:AAL) slumped on Friday following the success of the U.K. referendum to exit the European Union. At 3 p.m. ET, the stock was down about 10%.
So what: While many stocks have been hit hard due to the Brexit, investors appear particularly worried about American Airlines. The company has more exposure to the U.K. than other major U.S. carriers, with 6% to 7% of its capacity affected, according to analyst estimates. The U.K. will presumably need to renegotiate agreements that allow domestic carriers to access foreign markets once it officially exits the European Union, potentially disrupting American Airlines' partnership with British Airways.
Currency is another problem. With the value of the British pound plunging relative to the U.S. dollar on Friday, currency translation effects could take a bite out of American Airlines' numbers. General economic uncertainty is another problem. Any slowdown in travel to and from the U.K. could hurt American Airlines' results.
Now what: There may be short-term pain for American Airlines (and for any company exposed to the United Kingdom). But a 10% decline in the stock price seems like an overreaction. Investors were panicking on Friday, selling pretty much everything, and American Airlines stock got knocked down as a result.
Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.