MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Boeing: Please don't anger the Vikings

C. HUYGENS - Monday, September 30, 2013
After a series of issues with the 787 Dreamliner left the Japanese air carriers bruised, Boeing's (BA) travails are making an impact in Viking country, and they're mad. According to Bloomberg, "The Norwegian company said Sept. 23 it planned to confront Boeing Co. about the technical difficulties and that 'something must happen, fast.'"

The pithy Bloomberg summary notes that Norwegian Air, which has only two Dreamliners in service, is dealing with technical glitches from cockpit oxygen supply issues that delayed a flight to New York from Oslo on Sept. 22, to brake difficulties that affected the second 787 in Sweden this month. The Japanese carriers faced battery fires earlier this year that ended up grounding the global fleet. There were a couple of other fires involving a diversity of plane components in July. And over this past weekend, a Boeing 787 operated by LOT Polish Airlines SA had an unscheduled landing in Iceland after the failure of a system that identifies planes to air-traffic controllers.

Boeing patiently explained that glitches are typical of a new product roll out. That narrative mollified critics this past spring. Its now the fall, and the Norwegians are hardly sanguine. The Japanese expressed their displeasure more subtly referencing "delay risk." But aside from the PR issues, are these delays impacting Boeing's reputation, or are these issues, typically "expected?"

Turning to the Steel City Re reputational value metrics, Boeing Co. is a $90 billion aerospace and defense sector company numbering 83 peers. The company continues to exhibit high reputational value quality that is largely independent of short-term equity market volatility. Its CRR ranking, or Reputation Premium, is a the 95th percentile of this peer group, its current RVM volatility, or Consensus Trend, are at the 50th percentile, and return on equity is at the 81st percentile. Such metrics suggest that the company's stakeholders are generally comfortable with the story -- it's business as usual. In fact, the only indicator that would suggest otherwise is the fact that the RVM volatility,  now at the 51st percentile, is markedly higher than in the past (11th percentile), and that the current spike of that metric is on a four-week streak that is not apparently linked to the VIX.

Contrary to lore, reputation is rarely created or lost in an instant. But when customers turn to the competitor to provide backup aircraft -- as every baseball pitcher who has been relieved knows -- there is a risk that the "understudy" may be rewarded with the starring role. Huygens believes the movement in current RVM volatility upwards indicates others may be thinking the same thing about Boeing and EADS.


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