Buying Qantas shares? You'll want to know about this 'red flag'

In 2019, Qantas ranked as Australia's strongest brand.

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Qantas Airways Ltd (ASX: QAN) shares are in the red today.

Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed yesterday trading for $5.19. In early afternoon trade on Wednesday, shares are swapping hands for $5.17 apiece, down 0.4%.

For some context the ASX 200 is down 0.2% at this same time.

That's today's price action for you.

Now, if you're buying Qantas shares, here's a red flag you'll want to keep an eye on.

ASX 200 airline's brand strength takes another hit

According to the 2023 brand ranking report from Brand Finance Australia, Qantas fell 22 places in its brand strength over the year.

After coming in as the strongest Aussie brand in 2019, the airline now ranks as Australia's 41st strongest brand. A precipitous fall that could throw up some unwanted headwinds for Qantas shares.

The report noted that following a four-point drop in the prior year's rankings, "Qantas has experienced a further drop of seven points in brand strength, with its score now standing at 71 out of 100."

According to the report, Qantas' fall in the rankings "was mainly due to reputational issues that generated negative media coverage".

Indeed, as Motley Fool analyst James Mickleboro noted earlier in January, "The company couldn't stay out of the news for all the wrong reasons. This includes selling seats on cancelled flights, illegal sackings, and a backlash over sky-high ticket prices."

The latter months of 2023 also saw long-standing CEO Alan Joyce step down from his position earlier than planned, handing over the reins to Vanessa Hudson.

Commenting on the big brand fall that could impact Qantas shares in the months ahead, Brand Finance Australia managing director Mark Crowe said (quoted by The Australian Financial Review), "A 10-point drop is a red flag to say something very significant has happened here."

Crowe added:

Last year, when Qantas declined by four points, they saw decreases across value for money, recommendation, reputation and loyalty. But this year, these decreases have become more profound. And they come at a time when, if you looked at our global 500, many airlines are increasing in brand strength and brand value.

Crowe pointed out that the next two to three quarters will be crucial for Qantas shares.

"The strength of Qantas' brand came to the fore during the pandemic," he said.

According to Crowe:

During a downturn, people have a tendency to take assurance in strong brands, well-known brands, and when your brand strength has declined, people's tendency to seek comfort in it is less. The next six to nine months are going to be critical in that respect.

How have Qantas shares been tracking?

The real pain for Qantas shares started in late July.

The ASX 200 airline's stock is down 19.5% over the past six months.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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