As we have shown with our Tripadvisor analysis, online customer feedback – whether it’s shared on review sites such as Tripadvisor or Social Media platforms like Facebook and Twitter – can be an extremely rich data source to collect and gauge customer feedback.
No wonder, that the systematic analysis of Social Media activity has gained a lot of traction in market-research circles lately.
The big benefit: instead of running oftentimes expensive and time-consuming customer surveys to learn about customers’ preferences and tastes, Social Media sites offer thousands, if not millions of customer reviews at one’s fingertips. Free of charge. And constantly updated in real time.
How is a new product launch being received? Just look up the latest comments on Twitter for that respective brand…
And it’s getting even better.
Using Twitter to predict financial performance
According to a 2019 study by the ANU Research School of Accounting, Twitter data cannot only be used to easily understand customer satisfaction.
It can also give more accurate profit forecasts for companies in the consumer sector.
The findings challenge the traditional view from experts that social media chatter is just ‘noise’, that is of no value to financial analysts.
The study used positive and negative sentiment from around 250,000 tweets relating to the top 10 airlines in North America. The result: the more people are tweeting negatively about an airline’s service, including flight delays, food, crew, and luggage, the worse the carrier’s profit forecasts turn out.
Vice versa: the more positive tweets, the better the expected profit figures.
This correlation is confirmed by other academic studies (e.g. here) showing that the aggregate opinion from individual tweets successfully predicts a firm’s forthcoming quarterly earnings and returns.
We love unconventional indicators
We find this correlation extremely interesting, because as you know, we always look for new, unconventional indicators to identify the major trends affecting our industry.
And Twitter sentiment might tell us which travel providers will come out of this crisis financially stronger than others.
Let’s test it
We gave it a shot and took a concrete look at recent Twitter sentiment in the airline industry.
We identified all Twitter posts related to a handful of major Western airlines since March 2020 and compared their aggregated sentiment, meaning the tonality in terms of negative vs. positive tweets over time.
Unsurprisingly, the Twitter narrative has been extremely hostile towards airlines since the pandemic found its way around the globe in March.
Between 60 to 80% of all airline tweets tend to be negative in tone.
One major outlier took place at the end of August when several announcements went viral stating that major travel restrictions would likely be lifted and airlines would soon expand their flight schedules (which not turned out to be the case due to the severe uptake in 2nd wave Covid cases across Europe and the US shortly after).
Ranking the worst-performing airlines
But how about the Twitter narrative on airline level? Let’s take a look at the five airlines in our sample with the highest share of negative tweets throughout September.
It turns out – based on all English-speaking tweets over the past four weeks – EasyJet seems to struggle the most with 95% of all tweets being negative.
Hence, they might face the most pessimistic earnings outlook out of all carriers in our sample.
Of course, more Twitter posts over longer time horizons must be analyzed to come up with more robust results. But who knows, maybe our airline ranking is not too far off from how quarterly earnings will come in for these carriers.
Let’s play close attention to their next earnings updates and check whether the correlation holds true.
Will keep you updated.