Six trillion dollar men

Jun 20 2005 by Max McKeown Print This Article

Wow. An Indian Airline, that is still nine months away from launch, has just ordered 100 (that's one hundred) new jet airplanes (from Airbus as it happens).

Apart from being pretty cool to write the cheque for $6billion, it's worth noting that India will have to buy another 10,500 (or so) to catch up with the combined passenger air fleets of Europe and North America and give us approximately the same number of jets per person (730 million + 328 million = 1.58 billion versus 1.09 billion).

A quick calculation shows that the cost of bringing India to the same level of Jet Set parity would be about $6 trillion just for the aircraft - twice its $3 trillion annual GDP.

In other words, India would have to save up for two years (spending nothing and eating nothing) just to be able to afford to have the same number of salty pretzels and mile-high opportunities per person as we do in the west.

Or, more likely, they will depend on their 8 per cent growth rates (compared to our 2 or 3 per cent) to attract the investment.

Since the combined annual revenues of Boeing and Airbus were only about $80 billion in 2004 with 605 aircraft delivered, this is good news for the future of both and even, perhaps, for their 209,000 employees.

But when one compares the aircraft delivered numbers for the two companies it raises questions about efficiency. How will Boeing survive when generating $32,000 per person compared to $48,000 per person chez Airbus? In other words it took 557 people at Boeing to produce (and sell and service) 1 aircraft compared to only 156 people per aircraft at Airbus. And the TV on the European plane lets you choose from 20 in-flight films and pause, forward, or rewind as desired...

The Air (production) Wars (Airbus are now ahead – 10 years ago they only had 20 per cent of the market) are very likely to be followed by multiple sequels of Air (passenger) Wars with the competitors to the old state owned airlines proving both numerous and adaptable.

There are the point-to-point guys (SouthWest), the no frills (Ryan Air), the service brand-driven (Virgin) and the timeshare (NetJet) who all do something valuable better than the old incumbents.

Even in the Indian example it's not just the numbers that are impressive. It's also the business sophistication. Consider the name of the acquirer of the aforementioned 100 planes – IndiGo - and the way that it's parent company, InterGlobe Entreprises, has explained how it has used the "best brains in the global airline business" to put together it's operating plan and strategy.

This is just one example of what it is that is leading so many entrepreneurial Indians to leave the USA and returning to the mother land – and the reason is 'opportunity'. According to one commentator, "The reverse migration that began as a trickle in the late 1990s is now large enough to suggest a "brain gain" for India as emigrants return home to pursue business ventures and highly paid jobs in IT."

One of those who returned, Santanu Paul, a doctorate-holding, ex-IBM man, explained his rationale: "Right now, India feels like an exciting start-up company, while the West feels like a plodding large company,"

Of course there are problems, especially when one compares an Indian lifestyle with the gated communities of the USA, but those who come back feel that these problems can be overcome.

But it is good news for the rest of the Indian population, who generate only a per capita income of only $3,100 per annum (144th worst) compared to $26,900 across the European Union or $40,100 in the United States. Similar return immigration accompanied and contributed to Ireland's stunning growth of 7 per cent per annum throughout the 1990s and may yet yield similar benefits for India, China, and other nations whose industrious immigrant communities have played a significant part in wealth generation in the west.

Knowing that you are near the bottom rung has the benefit of making future choices clear (although not always accessible) and this current Indian generation seem to have clarity of vision about what needs to be done, connections with the world economy, and education sufficient to allow them to get on with it.

It made me think of Jim Braddock, immortalised by Russell Crowe in the movie, a boxer in depression ridden 1930s America, who appears to be washed up, surviving on hand-outs, but goes onto win the heavyweight world championship against the reputedly invincible Baer.

He became "the Cinderella man" rescued from the soup kitchens of life to the castle of plenty. Stuff changes and India might yet have its (economic) fairy tale happy ending leaving any ugly competitors sobbing.

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About The Author

Max McKeown
Max McKeown

Max McKeown works as a strategic adviser for four of the five most admired companies in the world. He is a well-known speaker on subjects including innovation and competitive advantage. His latest book, #NOW: The Surprising Truth About the Power of Now, was published in July 2016.