The ongoing crisis surrounding the COVID-19 pandemic could result in the top 50 most valuable airline brands losing up to 20% of their brand value. According to a report by Brand Finance, the world’s leading independent brand valuation consultancy, the total drop in value could equate to more than $20bn.
The firm’s Airlines 50 2020 report revealed that US carriers dominate the top three with Delta Air Lines taking the top spot with a brand value of $9.2bn despite a drop of 9% from last year. American Airlines came in second place at $8.8bn, down 7% from 2019 while United Airlines placed third on the list with a price tag of $8.2bn, only 2.8% below last year’s value.
Air Canada recorded the greatest growth, breaking into the top ten for the first time with a brand value of $3.7bn, up 25% from last year. Emirates and Air China also saw development with values set at $6.9bn and $4.3bn respectively with the former increasing by 6.1% and the latter by 9.4%.
Savio D'Souza, valuation director, Brand Finance, commented: “The COVID-19 crisis presents a dangerous threat to airlines, who stand to lose 20% of overall brand value and could struggle to cope with ever-decreasing demand in the face of global travel restrictions. This problem will not be easy to solve, particularly for an industry that has suffered during previous global challenges, taking over five years to return to profit after the 2001 terror attacks and 2008 financial crisis. It will no doubt be a long, hard journey back for the sector, and some airline brands may not survive the crisis, but the industry has always adapted to a changing landscape and this time will not be different.”
Within Europe, Norwegian logged the biggest fall in brand value dropping 42% to $527m. According to Brand Finance, the low-cost carrier’s failure to generate any income over the last three years, has resulted in a damaging lack of trust in the airline to achieve robust financial performance in the future. British Airways, which was the only UK carrier in the top ten, ranked nineth with a brand value of $3.6bn, down 12% from the previous year.
The airline industry is among 15 other sectors – which include, insurance, hotels, retail and airports – that are in the High Impact category, which Brand Finance says could lose up to 20% of their brand value due to the effects of the COVID-19 pandemic.
The consultancy firm analysed the cash position of the 50 airlines in the report as well as the strength and value of the brands to create a heatmap of which companies have highest chance of seeing the crisis through and which look vulnerable. The analysis of the ratio of cash and other short-term investments to revenue in 2019, indicates that 20 operators in the top 50 only have enough cash to survive another 60 days or less. Some of the big names include American Airlines, Delta, United and Lufthansa.
The remaining 30 brands, Brand Finance says, are likely to survive beyond 60 days. This is either due to a strong cash position, being state-owned or being able to tap into the public or private markets to shore up their balance sheets. These brands include Emirates, Southwest Airlines, Air Canada and British Airways.
Ultimately, the recovery of the industry depends on how long the crisis lasts, but according to Brand Finance, it seems like the airlines sector is in it for the long haul.