It is without doubt that Covid-19 has and will continue to have an impact on the economics of sport. Sponsors of different sports have had to make their own decisions about how they will move forward. Some have announced their intentions of renegotiating contracts and others have withdrawn their sponsorship altogether.
One area outside of sport that has been significantly impacted by the pandemic is the airline industry, including the state-owned Middle Eastern airlines that sponsor a number of football clubs across Europe, where economic problems are likely to occur for both the sponsor and the club.
Jean-Michel Aulas, President of Ligue 1 outfit Olympique Lyonnais (Lyon), saw his side miss out on a Champions League place after the season was cancelled in a move that was not followed by the other top European leagues. However, in February this year, Aulas and Lyon reached an agreement with Fly Emirates to formally become partners in a five-year deal for €20 million per season. The sponsorship would see the Rhone club have ‘Fly Better’ inscribed across their jersey and the Emirates branding in around their stadium. The deal is the biggest sponsorship contract in the club’s history.
When it was announced, Jean-Michel Aulas made no secret of the importance of such a deal.
“The arrival of Emirates among us represents an incredible opportunity for our club and for our metropolis. We are delighted to be accompanied by a true world-class leader. It is a premium brand with proven experience in football and sports sponsorship.”
If the economic crisis had come into effect just a few weeks earlier, Emirates may have reconsidered formalising a contract of such a magnitude with Lyon, despite clearly being interested in expanding the amount of sporting organisations they have involved themselves with. The Australian Open, the US Open and Formula 1 are just some of the sports outside of football where Emirates branding can be found.
Real Madrid and Arsenal FC are two teams that have an important relationship with the airline company. Emirates pay Arsenal around €45 million per season and Real Madrid around €70 million.
Talking about the three main state airlines (Emirates, Qatar Airways and Etihad Airways), Professor Simon Chadwick of Birkbeck Sport Business Centre discussed why it is necessary for them to be involved with sport: “Engaging with football and sports clubs allows them to connect with brands that are recognised,” he stated, “The objective is to attract people to their country to develop the business tourism in the region.”
The Brand Finance Group, who assessed the power of brands around the world, found that companies from the Middle East make up over 30 per cent of sponsorship contracts with the 50 largest European football clubs, with Director Bryn Anderson explaining that “these sponsorship contracts work because football is a globalised sport, which allows airlines with global aspirations to reach customers and potential customers around the world.”
With both sport and aviation almost completely grounded in the last few months, all 69 organisations that are tied with Emirates, Qatar Airways and Etihad Airways have expressed their concern about the financial implications of there being no flights. The International Air Transport Association estimated that in mid-April, there was a fall in revenue of US$314 billion leading to plans of 9,000 employees being laid off by Qatar Airways and 30,000 employees at Emirates.
Professor Simon Chadwick doesn’t believe that this will have an impact on the agreed deal between Emirates and Olympique Lyonnais or a disengagement from sport altogether from the Middle Eastern airline: “I don't see the current contracts ending prematurely. There is a question of pride and logic of partnership to which these companies hold: one does not break up with one's partner along the way.
“Sports sponsorship is so important for these countries and their soft power, that they cannot really disengage completely."
There could be bigger concerns for Real Madrid and AS Roma whose deals with Emirates and Qatar Airways end in 2021 and 2022 respectively. Both clubs may find it difficult to negotiate a deal as big as they currently have with the airline company.
According to the International Events Group, sponsorship in 2020 is expected to drop significantly, in a figure around 10 billion dollars in which this market represents US$62.8 billion in total.
Olympique Lyonnais and Jean-Michel Aulas can be relieved that the contract was agreed prior to the COVID-19 crisis and that they were able to get hold of some sort of financial security in a world where many do not.
Author: Jake Wilkin