Airline brands play a more important role in customer decision-making than many investors might assume, according to Bernstein analysts.
In a report this week, the firm concludes that brands “do matter, largely as information communication and expectation management mechanisms.”
While price and schedule remain the primary factors in consumer choice, Bernstein argues that brand acts as an “information surrogate” for unobservable aspects like delays or in-flight experience.
“The brand sets expectations,” the report says, especially in areas where service is uncertain at the time of booking.
The analysts note that good brands are not always premium ones. Ryanair, often perceived as cheap, actually benefits from well-managed customer expectations.
“Few people deplane from Ryanair disappointed, as few boarded expecting luxury or free snacks,” Bernstein wrote.
In contrast, premium brands can sometimes be ineffective: “The Alitalia brand was associated with delays and a tired product,” said Bernstein.
Using pricing data across overlapping point-to-point routes in Europe, Bernstein found brand power does translate into revenue.
On 24 routes where easyJet (LON:EZJ) and Ryanair compete directly, easyJet is said to command a roughly 20% price advantage.
Wizz also generally prices above Ryanair. “Consumers have a revealed preference for easyJet,” Bernstein concluded.
Among European network carriers, brand pricing power is harder to measure due to complex routing, but Bernstein highlights British Airways as undergoing a notable brand revival.
“The brand currently undergoing the most meaningful improvement is in our view IAG’s British Airways,” the analysts said, citing investments in IT and operational resilience as potential drivers of future yield gains.
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