Tuesday, February 14, 2017

World’s most valuable airline brands belong to Big 3 U.S. carriers

According to the annual evaluation performed by valuation and strategy consultancy Brand Finance, the world’s most valuable airline brands in 2017 all belong to U.S. airlines.

American Airlines jet departs SEA Seattle-Tacoma International Airport
American Airlines jet departs SEA
Rising to No. 1 from the No. 3 position in last year’s evaluation is Dallas-Ft. Worth-headquartered American Airlines (NASDAQ:AAL), whose brand carries an estimated value of $9.8bn.

Holding the No. 2 position it occupied in 2016, Atlanta-headquartered Delta Air Lines (NYSE:DAL) has a brand value of $9.23BN. Ascending from No. 5 last year, Chicago-headquartered United Airlines (NYSE:UAL) has a brand value of $7.16bn.

For the last five years, Emirates held the title of world’s most valuable airline brand, but 2017 saw a dramatic shift as the U.A.E.-headquartered carrier dropped to No. 4 with a brand value estimated at US$6.08bn. Among the factors contributing to the year-over-year decline was a 75 percent drop in half-year profits, according to Brand Finance, but that wasn’t the only factor.

“The lower oil price might have been expected to help all airlines, however it has worked against [all] the Gulf carriers, reducing demand from [their] home region,” the consultancy said.

Doha-headquartered Qatar Airways dropped to No. 12 this year from No. 9 last year, with a 2017 brand value estimated at US$2.16bn. While the brand value of Abu Dhabi-headquartered Etihad stayed flat at US$1.56bn, it slid to No. 23 this year from No. 18 last year.

“The lower oil price has also levelled the playing field for international rivals, leading to increased competition, driving down fares,” the consultancy continued. “The discount rate applied to all Gulf airlines has increased in tandem with this less favourable environment, reducing long term value. Finally, the strength of the dollar has increased operating costs and also had a negative FX impact on all non-US domiciled brands.

Value v. strength

Despite these drops in brand value, brand strength has not been affected. Etihad and Qatar Airways retain their AA and AA+ brand ratings while Emirates continues to challenge for the title of world’s strongest airline brand, with an AAA rating.

Brand strength is determined by analyzing marketing investment, brand equity (the goodwill accumulated with customers, staff and other stakeholders) and the impact of those factors on business performance. Following the analysis of brand strength, each brand is assigned a score out of a possible 100 points. Based on the score, each brand is assigned a rating between AAA+ and D in a format similar to a credit rating. AAA+ brands are exceptionally strong and well managed while a failing brand would be assigned a D grade.

Perhaps surprisingly, Russian carrier Aeroflot was determined to have the world’s strongest brand and scored a AAA rating, although its brand value was No. 26, at US$1.27bn. Aeroflot’s brand strength stems in part from dominance of its domestic market, the consultancy said.

“Its brand equity scores for metrics such as familiarity, consideration, preference and loyalty are formidable, both when compared against other Russian airlines and against foreign ones within their home markets,” Brand Finance noted. “This is all the more impressive given that there are no air routes for which Aeroflot has exclusive access, demonstrating that its strength is underpinned by competitive advantage rather than monopoly.”

Airline officials were, predictably, pleased by the ranking.

“This recognition reflects not just our 93-year legacy as the No.1 air carrier in the world’s biggest country, but also our best-in-class service offering on domestic and international routes, the youngest fleet of any major carrier globally, and of course our marketing efforts,” Vitaly Saveliev, CEO of Aeroflot, said. “We are confident that the Aeroflot brand will grow ever stronger and both passengers and the industry will continue to recognise it as synonymous with excellence.”

Whether passengers will do so is an open question. According to the SKYTRAX 2016 World Airline Awards, Aeroflot was No. 40 among the World’s Top 100 Airlines, an improvement from No. 46 in 2015 and from No. 51 in 2014. Among U.S.-based carriers, Virgin America and Delta ranked higher than Aeroflot, at Nos. 25 and 35, respectively.

While Aeroflot’s ranking puts it ahead of jetBlue Airways (No. 53; NASDAQ:JBLU), Alaska Airlines (No. 60; NYSE:ALK), Southwest Airlines (No. 66; NYSE:LUV), United (No. 68), Hawaiian Airlines (No. 72; NYSE:HA), and American (No. 77) in terms of customer satisfaction, it still has a long way to go before cracking the Top 10.

One thing about which there is little doubt: Aeroflot caused a stir in 2014 for an in-flight safety video that critics said was overtly sexy. Which is not necessarily a bad thing if it gets people to pay attention.

Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.



Photos by Carl Dombek
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