Top 25 airport brands could lose up to $1.7bn from COVID-19
The world’s top 25 most valuable airport brands could lose up to US$1.7 billion worth of brand value as a result of the COVID-19 pandemic, according to the latest Brand Finance Airports 25 2020 report. Brand Finance’s analysis shows that the airport sector is a heavily impacted industry globally and could face a potential 20% loss in brand value.
Looking beyond the airport sector, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated US$1 trillion as a result of the Coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. The likely impact on brand value was estimated for each sector. The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the level of brand value loss observed for each sector in the first quarter of 2020.
Savio D'Souza, Valuation Director, Brand Finance, commented:
“The COVID-19 crisis presents a dangerous threat to airports around the world, which stand to lose 20% of overall brand value and could struggle to cope with ever-decreasing demand in the face of travel restrictions as global aviation reaches a virtual standstill. With the future effectively out of their hands, airports will have to rely on the strength of their brands and their ability to influence key stakeholders such as governments, airlines and investors to recover once the world returns to some form of normality.”
Heathrow retains top spot
Heathrow Airport has retained the title of the world’s most valuable airport brand despite recording a 7% brand value decrease to US$853 million. The 7th busiest airport in the world, and Europe’s busiest, posted flat retail revenue per passenger last year and show signs of slowing long term growth rate.
With plans for the controversial third runway hitting a major obstacle in February this year with the Court of Appeal ruling it illegal due to lack of consideration of the government’s climate commitments, Heathrow has a monumental task ahead to ensure plans are kept alive while also fitting the UK’s climate policy.
Heathrow reported a damaging 85% drop in revenue in Q2 2020, with cargo numbers dropping 30% and passenger numbers down a staggering 96%.
Bangkok Airport soars 24%
Bangkok Airport is the fastest growing brand in this year’s Brand Finance Airports 25 ranking, following a 24% brand value increase to US$260 million, simultaneously jumping 4 spots from 16th to 12th.
Welcoming over 67 million passengers in 2018, Bangkok Airport is the 6th busiest air gateway in Asia. With tourism booming across the nation and in South East Asia, Airports of Thailand has recently approved a second terminal at Suvarnabhumi, as well as further terminal developments and another runway. This US$1.4 billion investment will approximately triple the capacity of the airport.
Hong Kong International is sector’s strongest
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction, and corporate reputation. According to these criteria, Hong Kong International Airport (down 3% to US$321 million) is the world’s strongest airport brand with a Brand Strength Index (BSI) score of 88.6 out of 100 and a corresponding AAA brand strength rating.
Hong Kong International Airport is committed to its Master Plan 2030, focusing on expansion and development of the airport to ultimately reach its goal of handling an additional 30 million passengers per year. The brand has celebrated better airport utilisation and punctuality rates – both of which are key drivers behind its 2.3 BSI point increase.
The civil unrest that has swept Hong Kong has not only resulted in a sharp decline in travel demand but has directly affected the airport with protestors occupying departure and arrivals halls. This, paired with the turmoil surrounding coronavirus, has impacted both airlines and the airport alike, with capacity significantly cut. As with all airport brands in the ranking, recovery for Hong Kong International depends on how long the COVID-19 crisis engulfs the world, but it seems likely the sector is in for the long haul.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 25 most valuable airport brands are included in the Brand Finance Airport 25 2020 report.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in the Brand Finance Airport 25 2020 report.
Data compiled for the Brand Finance rankings and reports are provided for the benefit of the media and are 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 independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).
Brand Finance’s brand value rankings have been certified by the Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.
Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a 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 Brand 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.