How much value do we attach to airline brands?

First, let’s make something clear; airline brands really do make a difference.

The question ‘where are you going on holiday?’ is regularly followed by ‘who are you flying with?’ This becomes even more common when travelling to a distant destination. Often, comments about the chosen airline include something like ‘oh I’ve flown on them, they’re nice’, or ‘I’ve heard they’re really good’, or occasionally something less complimentary, such as: ‘hmm – they’re a bit overpriced’ (or even ‘you poor thing…’).

Okay, so we’ve established that they matter – but how much? The litmus test of how important a brand truly is is whether you are prepared to put your hand in your pocket and pay more for it.

Airlines operate in a dynamic pricing environment

It can be difficult to quantify the value of an airline brand because ticket prices operate in an incredibly dynamic pricing environment – as fans looking to get to Russia at short notice for the later stages of the World Cup discovered to their cost. Furthermore, there are a multitude of different routes. Airlines don’t operate on all of them, and tend to perform more strongly on certain routes.

To quantify the value of airline brands in this complex environment, we’ve developed a bespoke method called Airline Brand Margin®* to established the value of the airline brand on top of a set route, time and class of travel. This enables us to determine airline brand premium in a dynamic pricing environment.

We validated our method with a global pilot study of 1,241 interviews amongst verified international travellers. Some key results from this pilot are below (click to enlarge).

Emirates is clearly seen as a particularly valuable brand by our informed sample of frequent international travellers who make an average of 8 international trips per annum.

As we move forward with our main study (which has larger sample sizes), we will be able to examine how Airline Brand Margin® differs for airlines on some of the world’s major routes (see below).

Delivering brand diagnostics to show a path to improvement

To help understand what drives an Airlines Brand Margin®, we identified the key drivers in airline selection. To understand the relative importance of core operational drivers we employed the ‘Max-Diff’ technique (also known as pairwise comparisons, or stated importance), which forces a choice for respondents and produces a hierarchy of importance.

In our pilot study, in-flight comfort ranked as the leading driver, followed by price. The study also showed how the significance of in-flight cleanliness – clearly this is not just a 'hygiene factor!'

Having established the most important drivers, the study then provides a competitive scorecard for each airline vis-à-vis these drivers. This provides airlines with strategic direction and a clear path to improving their overall future Brand Margin®.

How price sensitive are airline passengers?

According to our pilot study, older (55+) flyers have the highest loyalty to the airline they have booked with – they would require a larger discount to switch to another airline than younger travellers.

Perhaps surprisingly, those travelling for business have very similar price sensitivity to those making a leisure trip. Corporate travel budgets are clearly not what they once were!

Looking at those flying on different airlines we found that Qantas passengers were particularly loyal; on average, a competitor would need to offer a 12% discount for a traveller to switch from Qantas for the ‘same’ flight (route, schedule, and class of travel).

Airline Brands – making a difference

The data clearly shows that airline brand matters. There are some marked differences in the perceived value of different airline brands.

With our full Airline Brand Margin® study, we are able to quantify the value of airline brands by route flown, class of travel, business vs. leisure travellers, nationality, ticket price, airline flown on, length of flight, and membership of loyalty schemes.

All of this can be compared by key competitors and assessed both offensively (what price would airlines need to charge to take business from competitors) and defensively (how price sensitive are airline customers).

Want to know more? Drop us a line.

*Airline Brand Margin® builds on our bespoke Brand Margin® methodology that was developed by BVA BDRC in 2013, and has been used across many sectors (including hotels) and featured on the cover of Marketing Week (UK) in 2014.