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Boeing’s Brand Value To Nosedive by US$7.5 billion

Boeing

Boeing is world’s most valuable aerospace brand, value up 61% since last year to US$32.0bn but brand reputation in jeopardy.

Boeing’s brand will immediately feel the effects of this week’s Ethiopian Airlines crash and subsequent worldwide call to ground its 737 aircraft to the tune of US$7.5bn, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy.

Brand Finance valued the Boeing brand on 1st Jan 2019 at US$32.0 billion. Since the incident last week, we estimate the loss to Boeing’s brand to be at US$7.5bn. The aerospace giant has already seen its shares plummet 11% since last weekend’s incident involving one of its 737 Max 8 aircraft which plummeted just 7 minutes after taking off from Addis Ababa for Nairobi, killing all 157 people on board.

Brand Finance estimates revenues solely from the 737 aircraft to be US$24.0 billion, accounting for roughly a third of Boeing’s profits. Nevertheless, the brand value gap between Boeing and Airbus remains colossal as Boeing’s brand value (up 61% to US$32.0 bn) is well over double that of Airbus (up 19% to US$ 13.0bn).

Savio D’Souza, Aviation Director of Brand Finance, commented, “Given the importance of the 737 aircraft to the airline business, it is no surprise that the market is reacting with such immediacy. We estimate that the brand value lost by Boeing to be approximately $7.5bn and the maximum brand value loss up to US$12.5 bn.

The market tells us that the business has already lost $30bn in intangible value. This value loss could potentially increase to US$50bn based on analyst estimates.”

Boeing before the crash had an elite AAA+ brand rating, of which there were only 15 brands globally. Following the recent events, we estimate that brand rating will drop to AAA as Boeing’s reputation takes an almost immediate dent.”

David Haigh, CEO of Brand Finance, commented, “Boeing CEO Dennis Muilenberg has been ranked the world’s 14th top CEO in our Brand Guardianship Index study which we launched at Davos earlier this year. All eyes are now on Mr Muilenberg as Boeing enters into crisis communications mode to rescue the brand.

If Boeing is to retain its status as the world’s most valuable and strongest aerospace brand, it needs to adopt a proactive rather than reactive strategy and remain wholly transparent throughout the investigation.

This could well be just a temporary blip in the long run for Boeing. We’ve seen brands such as Toyota suffer from similar high-profile reputational crises and who have since seen their brand and business value recover.”

Rolls Royce in turmoil
Rolls-Royce reported ‘expensive repairs to its Trent 1000 engine’ as well as ‘turbulence from restructuring costs and the weaker value of the Brexit-hit pound’, causing the brand to slip four places in the ranking since last year, its brand value dropping 3% to US$3.9 billion. The brand is cutting labour to improve and streamline its performance as it faces more challenges to make profit and net cash flow.

Having publicly expressed frustration at the disarray over Britain’s departure from the EU, UK aerospace brand Rolls Royce is concerned that UK competitiveness would be hit if extra parts had to be ordered and stored to mitigate the impact of any disruption caused by failure to agree trade terms.

US giants dominate aerospace and defence industry
In the face of US taxes on steel and aluminium ordered by President Trump last year, US aerospace and defence brands continue to dominate the ranking with 50% of the brands coming from the US. General corporation tax has been adjusted from 40% to 27% in Brand Finance analysis.

US aerospace brand General Dynamics has held firm in 4th place in this year’s Brand Finance Aerospace & Defence 25 2019 ranking, with its brand value up a whopping 75% since last year to US$7.6 billion. The brand has acquired CSRA and combined its business into GDIT. Considering CSRA’s annual revenue of US$5.0 billion, General Dynamics forecast jump and brand value increase is substantiated. The forecast however may not be so positive as the group is expected to deliver both underlying profit and cash flow.

In fifth place, Northrop Grumann has seen a 69% growth in its brand value, sitting at US$7.6 billion in this year’s Brand Finance Aerospace & Defence 25 2019 ranking. This can be attributed to the brand’s acquisition of Orbital ATK.

Boeing is also strongest aerospace and defence brand
Aside from calculating overall brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Along with the level of revenues, brand strength is a crucial driver of brand value.

Boeing is the only brand in the Brand Finance Aerospace & Defence 25 2019 ranking to post the elite AAA+ brand rating. With a Brand Strength Index (BSI) score of 89.5 out of 100, Boeing is still the strongest brand in the industry.



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