How Covid-19 Has Undermined Gulf Airlines’ Sports Sponsorships
Nick Burton, Brock University; Simon Chadwick, Emlyon Business School; Paul Widdop, Manchester Metropolitan University
This paper explores the potential impacts of the COVID-19 pandemic on soft power sports sponsorships, within the context of Gulf nations’ use of sport to practice the politics of persuasion. As a mechanism for soft power projection and national strategic communication and influence, sport sponsorship has emerged as a central tool of nations seeking to inform and persuade external actors and partners on a geo-political scale. The implications of the global pandemic for soft power sponsorship are thus examined here through the shutdowns experienced in global air travel. The networks of three Gulf airline sponsorship portfolios are analyzed, illustrating the breadth and scope of the Middle East’s soft power projection. The findings provide evidence of the considerable scope of COVID-19’s ramifications for sport, and the potential implications for the national strategies of Abu Dhabi, Dubai and Qatar in exploiting sport sponsorship for political ends.
The global sponsorship industry is currently estimated to be worth approximately $62.8 billion, with annual growth in sponsorship expenditure having averaged 4.4% over the last five years (ADMAP, 2017). Estimates indicate that between 2014 and 2019 alone, market size has grown by up to $25 billion, with between 80% and 90% of annual spending allocated to sports properties (European Sponsorship Association, 2017).
Importantly, while North American and European investment in sponsorship continues to dominate the industry, IEG (2017) has highlighted the growing importance of both East and West Asia as sources of sponsorship spending: a reality reflected in the proliferating portfolios of top tier sponsorship partnerships and the exponential growth in spending from those regions in recent years.
The investments made by countries in these regions may, however, be at risk following the global shutdown and widespread economic and political response to the COVID-19 pandemic. The corresponding postponement or cancellation of major events, leagues, and competitions, alongside the severe economic impacts incurred internationally as part of nations’ measures to counteract the virus, have called into question the future of sport and sponsorship in the post-coronavirus world.
Estimates suggest sponsorship spending may fall as much as $17.2 billion as a result of the pandemic (Cutler, 2020), while large sectors such as the aviation, automotive, and financial services face significant financial and economic challenges. Indeed, COVID-19 has had a considerable and adverse effect on the airline industry, with up to 95% of flights at one stage having been grounded (Ellwood, 2020), and the industry projected to lose upwards of $314 billion in revenue internationally (IATA, 2020).
Equally at risk may be those nations and brands engaged in sponsorship agreements that are seeking to exert soft power through global sports partnerships.
Defined here as “A contractual relationship between a fully or partly state-owned entity and a property aimed at promoting the attractiveness of the former’s country, culture and/or policies, and with the intention of altering the attitudes and behaviors of key target audiences (which may include overseas politicians, decision-makers, as well as customers).” Soft power sponsorship describes the activities of nation-states engaging in sponsorship agreements for the purposes of soft power projection and the politics of persuasion (Nye, 1990). The impact of the COVID-19 on global sport sponsorship and market economics thus bears monitoring, given the global reach of both sport and the prevailing health crisis.
This paper therefore seeks to explore the potential implications of the coronavirus pandemic for soft power sport sponsorship, examining the sponsorship networks of three Gulf region airlines (Emirates Airlines, Etihad Airlines and Qatar Airways) as proponents of, and actors within, previously extensive soft power sport sponsorship strategies.
Soft Power, Sponsorship, and Sport
Nye’s (1990) soft power framework merits considerable focus in contemporary politics, sport and, increasingly, political marketing. Conceptualized as an alternative to “hard power” – the more traditional use of military force and coercive politics by nations – soft power has been viewed as a contemporary response to changes in international relations and accelerated globalized processes (Nye, 2004).
In affording nations the opportunity and ability to construct and communicate shared cultural, social, economic, and political values, soft power encourages and facilitates international relations through attraction (Nye, 1990). In so doing, the goals of nations are myriad, including the building of political and commercial influence (Nye 1990, 2004), used to convince another state that two nations’ interests are convergent (Nygård & Gates, 2013).
Soft power is thus founded upon the ability of a nation to shape the preferences of others, so that they admire its values, seek to emulate its example, and follow what it is doing (Plavsak, 2008; Simons, 2018). Subsequent soft power scholarship has consequently examined the mechanisms and machinations underlying such “politics of attraction” (Grix & Lee, 2013), which transmit through the role a nation’s personality, culture, political values, institutions, and policies play in establishing its legitimacy and moral authority.
Within this soft power discourse, varied objectives and strategic manifestations of soft power have been observed. What is at stake here is the courting of publics from other states, which is what sits at the heart of soft power. It is used as a means to enable states to shape the preferences of others so that they align with one’s own (Grix & Lee, 2013); furthermore, setting or influencing political agendas (Brannagan & Giulianotti, 2015).
Importantly, sport sponsorship has increasingly emerged as a channel through which soft power can be projected, affording nations the opportunity to construct and communicate an image globally through sport.Chadwick et al., 2020
On this basis, the Gulf airlines’ employment of sponsorship represents a means through which the respective countries seek to establish and exert soft power. We have defined soft power sponsorship as: A contractual relationship between a fully or partly state-owned entity and a property aimed at promoting the attractiveness of the former’s country, culture and/or policies, and with the intention of altering the attitudes and behaviors of key target audiences (which may include overseas politicians, decision-makers, as well as customers) (Chadwick, et al., 2020).
Soft Power Sponsorship Networks
Evidence indicates that among those organizations most lavishly spending on sports sponsorship are some of those in the aviation industry. Indeed, airlines have been prominent sponsorship vehicles across Asian nations (Brand Finance, 2020). The likes of Turkish Airlines, Russia’s Aeroflot and Garuda of Indonesia all maintain portfolios of highly diverse sports sponsorship properties.
However, it is among carriers from the Middle East that the most extensive networks of airline sponsorship deals are seen, where national strategy and investment have been central to the development of an array of sponsorship agreements. There are three prominent examples – Dubai’s Emirates Airlines, Etihad Airways of Abu Dhabi and Qatar Airways – although Bahrain’s Gulf Air has been involved in the sponsorship of motorsport, and Kuwait Airways in the sponsorship of basketball and power boat racing.
The impact of the COVID-19 pandemic on the aviation industry, however, has been substantial. In the Gulf region, reports indicate that Emirates Airlines and Qatar Airways could make 30,000 people redundant (Meuse, 2020), amid projections of revenue declining by up to 80%, due to the virus. Furthermore, Etihad’s position is speculated to be so precarious that Abu Dhabi’s state airline could be forced to merge with Emirates Airways to alleviate losses and stablilize state debts (Alkhalisi, 2019).
Alongside the pandemic’s immediate health effects, oil prices have fallen dramatically which has further, and disproportionately, affected the United Arab Emirates and Qatar. With reduced passenger travel, route reductions, and virus-related impacts to service quality and in-flight protocols and delivery, commercial operators across the airline industry are likely to suffer as a consequence, although the soft power carriers of the Gulf may suffer more. Already, these countries have instigated dramatic fiscal austerity programs, cutting expenditure and selling debt on the international markets.
Therefore, by identifying these structures we can better understand the processes. These structures can be thought of as networks stretching across the globe, from country to country. To that end, by taking a structural snapshot of the airlines that form the basis for this study, we can better understand soft power sport sponsorship.
Furthermore, these airlines exhibit diverse and global sponsorship portfolios and therefore offer clear insights into sport soft power sponsorships that have been in operation. The alliances created through sport sponsorship agreements allow us to capture this structure, and using the tools of social network analysis we were able to mapped them to provide a structural viewpoint of the sponsorship portfolios for Emirates, Etihad and Qatar Airways.
The analysis presented here was constructed using an archival method, common in network analysis (see Crossley, 2014; Crossley et al., 2018). A systematic analysis of company records, newspapers and trade press uncovered 69 organizations (nodes represented as circles) tied to the three airlines’ ego nets (see Figure 1.0). These networks then enabled a further analysis of the emergent patterns, connections, and key actors impacted and implicated within the three nations’ soft power investments.
Mimetic Isomorphism and Soft Power Sponsorship
Based upon the network analysis presented here, Emirates Airline is arguably the most aggressive gulf airline in its sponsorship of sport with 31 individual sponsorships arrangements, followed by Etihad Airways, and Qatar Airways with 20 and 19 respectively.
Whilst there may be varying ways in which the ties of these organizations overlap and interconnect through other forms of economic alliances, here we find that they only share sponsorship through Formula 1 (in which both Emirates and Etihad are involved), which is surprising given that there appears to be a degree of mimetic isomorphism between the nature and profile of their various sponsorship portfolios.
In many ways, the sponsorships in which each of these airlines have engaged are entirely consistent with other sponsorship deals: there are bottom-line considerations, notably the need to turnover business which is pursued through the use of carefully planned strategies, incorporating into targeted marketing campaigns that are appropriately activated.
As one might expect, among the sponsorship goals being pursued are the likes of promoting of brand awareness and building consumer recall. However, there is a fundamental difference between Emirates, Etihad and Qatar Airways, and many other sponsors. Specifically, these airlines are state-owned rather than being privately-run; decisions made by these state-owned operations, although appearing economically driven, are embedded in social and political relationships, making them more complex and politically significant.
Hence, spending significant sums to establish and sustain these state-owned brands has not just been a competitive or commercial move, it has been a political one as well. Such sponsorship deals are embedded within global political networks that have enabled the countries in question to use their airlines as a means through which to create and project soft power (Chadwick et al., 2020).
Taking Qatar as one illustration of how soft power sponsorships are used, the small Gulf nation has previously employed its state-owned airline to secure prominent global sponsorships with FIFA, FC Barcelona, FC Bayern Munich, and the Asian Games to effect attitudinal and behavioral changes among key target audiences. By engaging with prestigious events and organizations, the airline has sought to establish a premium position with the intention of raising the nation’s profile, accentuating its national values and, hence, shifting global perceptions of the country.
Importantly, as the networked sponsorship agreements held by each airline illustrate, to date other Gulf nations have followed similar strategies in engaging with sports properties, exhibiting a degree of mimetic isomorphism – the process of establishing conformity among actors through imitation – within their sponsorship dealings (Gerrard, 1999; Slack & Thwaites, 1997).
The airlines have pursued similar targets in their sponsorship dealings, mirroring one another’s efforts geographically and geopolitically. In so doing, the three Gulf nations have each succeeded in establishing a presence in global sport and used their growing stature to secure diplomatic and economic objectives. Indeed, the Qatari owned Qatar Airways has relationships with iconic football institutions, such as FC Barcelona and Paris St Germain, whilst having a strong portfolio within France.
Similarly, Dubai’s Emirates, also favors iconic sporting institutions in Europe, namely Italy, Spain and England. Etihad airways of Abu Dhabi again mirror their neighbors by prizing highly iconic football institutions, but are perhaps more outward looking than their neighbors in geographical location.
Facing Forward: The Future of Soft Power Sponsorship?
The potential implications for sport are therefore manifest. IEG (2020) forecasts that $10 billion worth of sponsorships will be cancelled during 2020; airlines such as Britain’s Flybe have succumbed to the pandemic and were forced to cancel existing sponsorship agreements and declare bankruptcy.
Furthermore, British Airways are facing a major political and public backlash in the UK for their treatment of staff, whilst U.S President Donald Trump has signed off on a $60 billion bailout for airlines as part the $2 trillion coronavirus stimulus bill (Slotnick, 2020). The risk of similar fates for Emirates, Etihad and Qatar Airways, looms large. The impact on the sponsorships illustrated in Figure 1.0 will therefore be important to monitor.
Undoubtedly, there will be some sponsorship agreements that may not be renewed, whilst others may be cancelled. Those that remain will be adversely affected beyond their specific individual connection in the network, especially in terms of the consequences for soft power between the nations involved and perceptions of the airlines (and their host nations) across the globe.
The dyadic relationship between sport and sponsorship is laden with notions of attractiveness, to which countries and their airlines add a further, triadic, dimension. In these terms, the sponsorship of, for example, Italian soccer club Roma by Qatar Airways represents an important node in an embedded network of economic and political relationships.
For clubs, these sponsorships are a lucrative source of revenue; for airlines, they contribute to the pursuit of commercial objectives; and for the countries involved, the channel from, say, Doha (the capital of Qatar) to enhanced attractiveness runs via sponsorship deals with properties such as FIFA’s World Cup.
The cancellation of sporting events as seen to date jeopardizes sponsors’ access to target audiences, both commercial and political, and will undermine the return on investment that sponsors can derive from deals in which they are engaged. The cancellation of global travel and restrictions faced by the aviation industry further imperils airline sponsors’ investments and potential roles in nations’ soft power strategies.
For the politicized sponsorship deals of Qatar, Dubai and Abu Dhabi, therefore, the absence of glitzy associations with a summer of sport is likely to erode the soft power effects of their sponsorship deals and further threaten global sponsorship’s eastern expansion. The region’s airlines and the sport sponsorships in which they have engaged have helped build perceptions of prestige, premium quality and luxury.
However, route reductions and cost saving measures now being implemented will undermine the countries’ soft power goals, a problem that sport sponsorships alone will be unable to successfully address. As such, Covid-19 may render these airline sponsorships impotent; that is, they may no longer be able to fulfil their soft power role, which may result in a cascade impact upon other cultural soft power industries.
If a similar view is taken inside these state-owned institutions, then budgets may be cut and the days of extravagant spending on sport will be over. Moreover, the potential fragility of soft power may be exposed by Covid-19’s spread; if sponsorship networks fracture under pandemic-imposed austerity measures, the reputational gains sought by sport sponsorship agreements may be reversed, casting negative attention on the brands and their parent nations.
Looking ahead, we thus anticipate significant challenges facing the Gulf region in its soft power sponsorship engagements. There will be pressure to cut costs to ensure their financial stability, while at the same time imposing fiscally stringent measures at home. For such nations to continue spending big money on soccer, motorsport, horse racing and the like may thus be domestically unpalatable.
Moreover, the mimetic isomorphism evidenced to date between the three nations in their sponsorship dealings suggests that should one airline succumb to financial pressures, then its neighbors could follow-suit in close succession.
What was once soft could now become completely flacid, although the possibility of doubling down on sponsorship spending in the future should not be discounted. For a start, predicting policy and strategy in the Gulf region is always tricky, as governments are prone to opportunism and sometimes very rapid decision making.
Having committed to building soft power through sports sponsorship, Abu Dhabi, Dubai and Qatar may decide that they need to see their projects through. Each of them are pursuing ambitious national development strategies, with the development of sport and transport (notably the airline sector) serving as supporting pillars.
Post-pandemic the quest to establish global prominence, legitimacy and influence will likely remain, and sponsorship is likely to remain as a channel through which soft power can be exerted.
However, the extent to which nations are able to exert such influence – and the role played by traditional sponsorship sectors such as airlines exploited by the Gulf nations – remains to be seen. It will therefore be interesting to observe in the coming months whether soft power sports sponsorships assume new relevance or simply fade away into irrelevance.
ADMAP. (2017). Adstats: Global Sponsorship. World Advertising Research Centre. Accessed February 15, 2017. https://www.warc.com/content/paywall/article/admap/
Alkhalisi, Z. (2019, March 22). Etihad is still bleeding money. Is it time to merge with Emirates? CNN Business. https://www.cnn.com/2019/03/21/business/etihad-emirates-merger/index.html.
Brannagan, P. M., & Giulianotti, R. (2015). Soft power and soft disempowerment: Qatar, global sport and football’s 2022 World Cup Finals. Leisure Studies, 34(6), 703-719.
Brand Finance. (2020). Top football brands flying high with Middle Eastern sponsors. Brand Finance. https://brandfinance.com/news/press-releases/top-football-brands-flying-high-with-middle-eastern-sponsors/.
Chadwick, S., Widdop, P., & Burton, N. (2020). Soft power sports sponsorship – A social network analysis of a new sponsorship form. Journal of Political Marketing. DOI: https://doi.org/10.1080/15377857.2020.1723781.
Crossley, N. (2014). Towards a Relational Sociology. London, UK: Routledge.
Crossley, N, Belotti, E., Edwards, G. Everett, M.G., Koskinen, J. & Trammer, M. (2015). Social Network Analysis for Ego-Nets. Sage.
Cutler, M. (2020, May 18). Sponsorship spend to fall $17.2bn; Financial Services by $5.7bn. Two Circles. https://twocircles.com/us-en/articles/projections-sponsorship-spend-to-fall-17-2bn/.
Ellwood, M. (2020, April 13). Coronavirus air travel: These numbers show the massive impact of the pandemic. Condé Nest Traveler. https://www.cntraveler.com/story/coronavirus-air-travel-these-numbers-show-the-massive-impact-of-the-pandemic.
European Sponsorship Association. (2017, August 3). ESA releases industry figures. European Sponsorship Association. https://sponsorship.org/esa-releases-industry-figures/.
Gerrard, B. (1999). The dynamics of sport sponsorship: the case of English professional football. International Journal of Sports Marketing & Sponsorship, 1(1), 40-55.
Grix, J., & Lee, D. (2013). Soft Power, sports mega-events and emerging states: The lure of the politics of attraction. Global Society, 27(4), 521-536. https://doi.org/10.1080/13600826.2013.827632.
IATA. (2020, April l4). COVID-19 puts over half of 2020 passenger revenues at risk. International Air Transport Association. https://www.iata.org/en/pressroom/pr/2020-04-14-01/.
IEG. (2017, January 4). Sponsorship spending forecast: Continued growth around the world. International Events Group. http://www.sponsorship.com/IEGSR/2017/01/04/Sponsorship-Spending-Forecast–Continued-Growth-Ar.aspx.
IEG. (2020). $10 billion in sports and entertainment sponsorship value gap will need to be made up. International Events Group. http://www.sponsorship.com/IEG/files/5a/5ab67489-c528-4ed9-b128-c8550f4a0121.pdf.
Meuse, A. T. (2020, May 19). Emirates, Qatar Airways to cull up to 40,000 jobs. Asia Times. https://asiatimes.com/2020/05/emirates-qatar-airways-to-cull-up-to-40000-jobs/.
Miller, P. (2019, June 18). Qatar Airways is voted the World’s Best Airline for the fifth time at the 2019 World Airline Awards. SKYTRAX World Airline Awards. https://www.worldairlineawards.com/qatar-airways-is-voted-the-worlds-best-airline-at-2019-world-airline-awards/.
Nye, J. S. (1990). Soft power. Foreign Policy, 80, 153-171. https://www.jstor.org/stable/1148580.
Nye, J. S. (2004). Soft power: The means to success in world politics. Public Affairs.
Nygård, H. M., & Gates, S. (2013). Soft power at home and abroad: Sport diplomacy, politics and peace-building. International Area Studies Review, 16(3), 235-243.
Plavsak, K. (2008). Communicative diplomacy for the 3rd millennium: Soft power of small countries like Slovenia?. Journal of Political Marketing, 1(2-3), 109-122. https://doi.org/10.1300/J199v01n02_08.
Simons, G. (2018). The Role of Russian NGOs in New Public Diplomacy. Journal of Political Marketing, 17(2), 137-160. https://doi.org/10.1080/15377857.2018.1447755.
Slack, T., & Thwaites, D. (1997, May 28-31). Sport sponsorship and the influence of mimetic pressures [Paper presentation]. North American Society for Sport Management Conference, San Antonio, USA.
Slotnick, D. (2020, May 27). Airlines will get the $60 billion bailout they asked for in the $2 trillion coronavirus stimulus bill that Trump signed into law. It also prohibits layoffs, stock buybacks, and dividends. Business Insider https://www.businessinsider.com/airlines-coronavirus-bailout-senate-stock-buybacks-2020-3?r=US&IR=T