· Big Chinese airlines grow brand value up to 21%
· American, Delta, and United Airlines brands still most valuable despite bumpy 2017
· Aeroflot continues as strongest airline brand with AAA brand rating
· Lufthansa enters top 10 ranking with 29% brand value increase
· Valued at US$5.3 billion, Emirates first in Middle East despite macro challenges
Chinese airline brand values are taking off as they spread their wings with greater growth beyond the domestic market, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy. China Southern (up 10% to US$4.1 billion) remains the Chinese brand leader, ahead of China Eastern (up 21% to US$3.8 billion), and Air China (up 19% to US$3.4 billion). In a reflection of the eastward-movement of the global airline business, British Airways (down 6% to US$3.5 billion) fell down the ranking to 8th place, behind two of the Chinese brands and only narrowly ahead of Air China.
Meanwhile, American Airlines remains the world’s most valuable airline brand, despite its brand value falling by 7% to US$9.1 billion. The other big, full service, US airlines each endured bumpy skies, including second-ranked Delta (down 6% to US$8.7 billion) and third-ranked United Airlines (down 2% to US$7.0 billion).
The trio of big American airlines have each failed to grow their brand values as they suffered from a series of larger macro-economic challenges in a post-consolidation phase. In addition, they have been beset by higher fuel costs and a number of flight cancellations caused by storms. Meanwhile, the rise of social media has allowed unhappy customers to share a number of stories that have spread virally, but this does not appear to be causing significant long-term damage to airline brands.
David Haigh, CEO of Brand Finance, commented:
“In the airline market, customers are making decisions about brands on a very narrow range of factors: price, routing, and schedules. Despite big viral news stories which gained media attention globally affecting several brands, in the airline business, it is reliability on delivering core services that customers find key in taking purchasing decisions.
Consequently, the Chinese brands are the big winners in this area as they have been able to grow their brands by giving customers greater confidence in their dependability and safety as they grow alongside the Chinese economy.”
Aeroflot Remains Strongest Airline Brand
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, familiarity, loyalty, staff satisfaction, and corporate reputation. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand. Aeroflot (up 13% to US$1.4 billion) remains the world’s strongest airline brand with AAA brand rating driven by consistently strong brand equity, built up through investments in its brand and marketing promotion in the Russian and key international markets.
Lufthansa Takes Flight to Enter Top 10
Lufthansa (up 29% to US$2.9 billion) became one of the world’s ten most valuable airline brands over the last year, on the back of being the fastest growing brand value amongst the top ten. Lufthansa benefited from a contraction in airline capacity caused by the collapse of Air Berlin, which reduced the competition that the brand faced in central European markets. These broader issues combined to boost the Lufthansa brand, which represents a bounce back from difficulties in 2015 and 2016, when the airline experienced a significant fall in consumer sales.
Qantas Leads Point-to-Point Shift
The global airline market is being reshaped by the development of ultra-long-distance aircraft, with greater fuel efficiency and smaller load capacities allowing more direct long-haul flights. This is demonstrated by the introduction of point-to-point flights by Qantas (up 1% to US$2.0 billion) between Australia and the UK. The number of international flights in Asia to second and third-tier airports is also growing, as operators like AirAsia increase fleets and develop new direct services.
Emirates First in Middle East despite Macro Challenges
With direct flights undermining the hub-and-spoke model favoured by Middle Eastern airlines, and due to broader geo-political issues, the three largest brands in the region decreased significantly in value. Ranked 4th globally, Emirates (down 12% to US$5.3 billion) remains the most valuable airline brand in the Middle East, ahead of Qatar Airways (down 11% to US$1.9 billion) in 16th place, and Etihad (down 11% to US$1.4 billion) in 25th.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 50 most valuable airline brands in the world are included in the Brand Finance Airlines 50 2018 league table.
Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand.
More information about the methodology as well as definitions of key terms are available in the Brand Finance Airlines 50 2018 report.
Data compiled for the Brand Finance league tables and reports is provided for the benefit of the media and is not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.