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Airlines
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Airlines - Global sponsorship analysis

Executive Summary

The airline industry is arguably the most volatile large scale business there is. Carriers can suffer dramatic revenue fluctuations as a result of numerous factors such as rising fuel prices, political unrest and interference, terrorism, environmental disaster, health scares and economic downturn.

In the past two decades, the industry has witnessed massive change due to the rise of low
cost carriers, de-regulation, mergers among the world’s leading operators, the catastrophic
impact of Sept 11, 2001 and a culture in which passengers have taken more control of their
bookings options through online comparison sites and direct booking.

The period has also seen the rise of Middle Eastern operators backed by huge sovereign
wealth funds and airlines from China and Russia enter the global market on a competitive
basis.

The net result has been a massive test for the big ‘legacy’ carriers such as American Airlines,
British Airways, Air France/KLM, Alitalia, Qantas etc. Faced with short-haul competition from
low cost carriers, and long-haul competition from a new breed of airline based in the Middle
East and Asia, these carriers have had to cut costs and reduce capacity with profitability
becoming a more important objective than market share.

The legacy carriers have, however, needed to maintain strong brands in order to attract the all-important and highly profitable business-class passengers.

Airline sponsorship growth

Total spend among airlines on sponsorship rights is estimated at $515m annually. The
industry has witnessed a major growth in sponsorship expenditure during the past ten years
and this has been driven by Middle Eastern carriers in particular. The likes of Emirates and
Etihad have been buying rights to major sports properties around the world in an attempt to
establish their brands and promote their route networks.

In the USA, the world’s leading air transport market, major carriers have tended to use
sponsorship purely for national marketing, taking rights to domestic teams in American
football, baseball and basketball in particular. Among other legacy carriers, there is a very
mixed pattern in terms of use of sponsorship. Many of the big European carriers use
sponsorship sparingly. Air France/KLM and Lufthansa, for example have a relatively small
portfolio of rights and British Airways (now merged with Iberia as part of IAG) has few rights
other than its domestic London 2012 sponsorship.

The biggest Russian carrier, Aeroflot, has started to build a portfolio with some high profile
acquisitions whereas in Asia the large carriers have tended to buy only lower profile rights.
Many of the legacy carriers have agreed deals with individual athletes, especially those
involved in Olympic events, but in many cases this is little more than in-kind support which
offers flights to the individuals and their support teams.

Low cost airlines take opposing sponsorship positions

The marketing strategies of low cost airlines have similarly shown diverse positions when it
comes to sponsorship. In Europe the low cost carriers have shunned sponsorship with
Ryanair, EasyJet and Wizz Air taking no rights to properties of any significant size. In the
USA and Asia, however, the picture is very different. Southwest Airlines (including AirTran) and
JetBlue in the USA have invested considerable sums in sponsorship as part of their marketing
effort. Similarly, Asian carrier AirAsia has used sponsorship extensively to develop its brand
and this has included rights to major properties both in Asia and in Europe.

Airline sponsorship - the future

The airline industry is, as discussed, unpredictable and marketing budgets can be at the
mercy of events beyond the control of any airline boardroom. That said, it does appear that it
is an industry that is realising the value of sponsorship as a means of developing brands and
promoting routes.

It is, however, unlikely that the so-called legacy carriers will significantly increase investment
in sponsorship in the near future. These carriers have already developed their brands over a
period of several decades and there are serious pressures on their budgets. Where carriers will spend is in taking domestic rights to major global events such as the Olympics. There is
arguably an element of protectionism here in that the big domestic carriers from the host
nation don’t want outside competitors to steal their thunder. Hence the deals for British
Airways (London 2012), Aeroflot (Sochi 2014) and TAM taking rights to the Brazilian national
football team during the 2014 FIFA World Cup.

New and ambitious international airlines, such as Emirates and Etihad, have clearly seen the
need to develop global brand awareness and enhancement in order to meet their rapid growth objectives. For other major Middle Eastern carriers such as Qatar (despite a recent
curtailment of rights acquisition) and Gulf Air, there is every likelihood that they will move to
take more rights, including primary rights to significant properties.

Similarly as Chinese carriers start to develop internationally, there is a very strong possibility
that they will take strategic rights to help increase brand awareness globally.

Among low-cost carriers, there seems to be a policy among European-based airlines of
shunning sponsorship. Marketing budgets are primarily directed at print/poster advertising and online. In Asia and the USA, on the other hand, there is significant spend from the likes of Southwest, JetBlue, Frontier, AirAsia and Virgin Australia.

With competition in Asia in particular increasing, there is a strong possibility that up and
coming airlines such as Peach and Jetstar will invest in sponsorship, although it is unlikely
that any will opt for major rights in the near future.

 

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