Friday, December 3, 2010

Big brands fly into storm

Three of the world's leading brands have encountered severe turbulence in recent weeks - Qantas, Rolls Royce and Airbus and all three may be on a collision course in the courts, with Rolls Royce the company in the firing line.

The issue went public when one of Qantas' new Airbus A380 Rolls Royce engines blew in mid air, resulting in a grounding of the fleet, an investigation that pinned the source of the problem on faulty engineering or manufacture in an engine component and a recall by Rolls Royce of A380 engines from Airbus.

It seems that the upshot of this is going to be a significant dent in the cowling of one of the UK's most venerated brands and collateral damage to the other two. For Qantas in particular, this is an awkward situation. While there have been some concerning incidents involving Qantas over the past few yeasrs, the media has ensured every minor glitch discovered on the tarmac or elsewhere is magnified out of all proportion. So the Rolls Royce incident, not of Qantas' making, simply tags onto a conga line of stories damaging to the brand.

Qantas' brand problem is that customers generally do not analyse the veracity of some of these issues in any depth. Their perceptions are mainly shaped by their experience of on-time service and reliability. The question of unreasonable media scrutiny, helped by some mischief making by some stakeholders, doesn't register. Add personal experience to subconscious doubts about safety issues and you have a potent mixture of brand-eroding agents.

Airbus customers are airlines, who you would think would apply a fair level of analysis to the reasons for delays to orders due to the Rolls Royce recall. But it still isn't good news that refitting aircraft already in service will place priority demands on the supply of new engines, thus delaying deliveries of new aircraft scheduled for 2011.

Quite apart from the financial impacts, these companies, especially Qantas with its direct exposure to reputational risk among consumers, will be turning a lot of attention to restoring the lustre of their brands. So it's no surprise that Qantas has already announced it reserves the right to sue Rolls Royce for financial losses incurred through the grounding of its aircraft, should it not be able to reach a commercial settlement with the engine manufacturer.

Of course, that amount is calculable. But how calculable is the cost of restoring reputation? It will be interesting to see if that is built into the equation should the matter go to court. How do you calculate loss of brand equity?

And where does this leave the Rolls Royce brand? Perhaps it's flown under the radar of consumer consciousness, even the company's well-heeled automotive customers. There is no research yet to bear this out. However, if you want some insight on the burgeoning chorus of discontent, perhaps visit my old mate, Ben Sandilands' report, Rolls Royce under fire from all parties over A380 engines.

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