Top 25 aerospace and defence brands could lose over $22bn from COVID-19
The world’s top 25 most valuable aerospace and defence brands could lose over US$22.8 billion worth of brand value as a result of the COVID-19 pandemic, according to the latest Brand Finance Aerospace and Defence 25 2020 report. Brand Finance’s analysis shows that the aerospace and defence sector is a heavily impacted industry globally and could face a potential 20% loss in brand value.
Looking beyond the aerospace and defence 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 aerospace and defence brands around the world, which stand to lose 20% of overall brand value. On the aerospace side of the industry, brands are fighting to negotiate the virtual standstill of global aviation and, with the future uncertain, the true damage to the sector in the long run is unknown. Conversely, defence brands are likely to fare better, as demand is protected by contracts allocated and secured prior to the pandemic, which are more often than not crucial in a given nation’s defence strategy.”
Boeing continues to nosedive
Boeing has retained the title of the world’s most valuable aerospace and defence brand despite its brand value declining a significant 29% to US$22.7 billion. The brand continues to be in a state of crisis following the fatal crashes involving the Boeing 737 MAX. Boeing quickly turned from a company of safety first to one laden with a reputation for cover-ups, and its future is now on the line. The fallout from these crashes has been felt sector wide and across Boeing’s supply chain.
The turbulence for Boeing shows no signs of easing with jet orders continuing to nosedive and with the ramifications of COVID-19 hitting the aerospace sector hard.
Lockheed Martin soars 15%
Lockheed Martin is the fastest growing brand in this year’s ranking posting a 15% brand value growth to US$12.6 billion. The American global security and aerospace brand generates approximately 70% of its annual revenue from US Government contracts, and last year was awarded a further two worth over US$30 billion – a significant contribution to the brand’s solid financial performance in 2019.
Lockheed Martin’s former CEO (as of June 2020), Marillyn Hewson, topped Brand Finance’s Brand Guardianship Index 2020 – a ranking that rates CEOs to capture how well they measure up as brand managers. Marillyn Hewson has been at Lockheed Martin for 37 years, her whole career, and was CEO for the last 7 years, presiding over a 14% increase in Enterprise Value. Hewson has led the charge for the defence brand’s position as a leader in security, aerospace, and technology. Hewson remains the Executive Chairman.
Safran 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. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria, Safran (up 2% to US$6.4 billion) is the world’s strongest aerospace and defence brand with a Brand Strength Index (BSI) score of 84.5 out of 100 and a corresponding AAA brand strength rating.
The brand prides itself on its CSR activities as it strives towards building high-tech solutions to contribute towards a more sustainable and safer world. With a commitment to cover 12 out of the 17 UN Sustainable Development Goals, the brand is truly showcasing its positive moves to combat the major challenge of climate change.
The brand has been negotiating industry wide complications that have arisen from the grounding of the Boeing 737 MAX – issues that have further been exacerbated by coronavirus – resulting in Safran’s activity and profitability taking a hit in Q2 this year. With its COVID-19 Adaption Plan currently in motion the brand will be hoping that its robust model will be enough to tackle these unpresented times head-on.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 25 most valuable aerospace and defence brands are included in the Brand Finance Aerospace and Defence 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 Aerospace and Defence 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.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined 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. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
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 Finance calculates the values of brands in its rankings 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, while 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 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.