How “Disruptive innovation” can, well… disrupt.

One of the most influential business books of the 20th century is The Innovator’s Dilemma by Clayton Christensen. The thesis of this book is that companies which tend to grow by moving up the premium value chain often get beaten by newer, innovative companies with ultra-low-cost offerings. These “disruptive” upstarts start off replacing the incumbents with entry-level offerings and end up quickly evolving to compete in premium segments with a significant cost advantage. Prof Christensen describes several principles and practices that are essential for incumbents to adopt to succeed against their disruptive competitors. One key principle is that the incumbent, while investing in an innovative low-cost business model, must keep the new operation independent, and resist the temptation to merge any part of with the existing system, lest some of the inefficiencies and incompatibilities carry over. The book chronicles the history of computer memory to exemplify this principle. Low-cost solid state memory chips, which were initially considered to be low capacity, slow and error-prone went on to displace the prevalent magnetic memory technology by eventually providing high quality at a much lower cost.

The Airline industry is another classic example of this paradigm. Full-service airlines work to grow by adding premium services to attract wealthy and business travelers with increasingly luxurious business and first class cabins, five-star in-flight meals, limitless in-flight entertainment, rewarding mileage programs, plush lounges and chauffeur rides to & from the airport. Then come the disruptive low-cost, no-frills airlines which offer inexpensive economy seats that get budget travelers from point A to point B. These low-cost airlines, over time, start to offer just enough business-traveler features (on-time performance, pre-booked meals, optional paid extra leg-room seats) to win business travelers away from the full-service airlines. IndiGo Airlines in India has essentially taken Jet Airways out of business with this approach. Southwest Airlines and JetBlue have made similar dents in the US market.

Incumbent full-service airlines have tried to fight back. Jet came up with Jet Lite and Jet Konnect. United Airlines came up with Ted. They all failed because they did not adequately separate their low-cost operations from their existing business. Cost and time inefficiencies carried over, and they could simply not beat the low-cost carriers. On the other hand, the low-cost mentality ended up alienating the premium passengers who expected full service.

The latest in the series of trainwrecks-in-progress is the Qatar-IndiGo partnership. Qatar Airways spent many years building an outstanding offering to business and discerning travelers. Beating Emirates and Singapore Airlines to be named the World’s Best Business Class 2023 is no mean feat. Having traveled several times on all three airlines in both business and economy classes, I can certainly vouch that Qatar deserves the award. From this high pedestal, they have chosen to partner with the no-frills carrier IndiGo for their Doha-India sectors, presumably to offer a low-cost alternative for the last leg.

Unfortunately, the difference in passenger experience between the QR and 6E sectors is jarring. Bleary-eyed and jetlagged passengers, having flown 10+ hours from the west, are abruptly hustled into the predictably sterile and curt environs of Hello6E with limited food and water service, no IFE, and no blankets or pillows even. I have now spoken with many Qatar Airways loyalists who are rather upset with the airline for subjecting them to this treatment. In addition, if one looks closely under the belly (literally) one would quickly realize that IndiGo’s A320s may not have the capacity to carry all the luggage brought on-board by the long distance passengers arriving on the QR connection, leading to left luggage situations. (This was what was told to me by the IndiGo staffmember at the Hyderabad airport). In short, IndiGo's disruptively innovative service disrupts Qatar's premium experience.

On the other hand, if one analyzes IndiGo's success more closely, one would find that IndiGo’s popularity grew due to their reliable and on-time performance during a period (~2010-2013) when Jet Airways, Air India, Spicejet and Kingfisher struggled with frequent delays and cancellations.? This reliability, was driven by their simple point-to-point schedules and rock-solid on-ground operations across Indian airports. Passengers accepted their rigid check-in closing times, pre-time early morning take-offs, tight baggage restrictions and bare minimum in-flight service, all because they were sure of getting to their destinations reliably. Also, IndiGo never needed to invest in customer call center capacity because very few passengers had problems to report.

As IndiGo expanded internationally, they do not seem to have set up the same level of ground operations at their overseas airports. In addition, they have ventured into connecting flights with Turkish Airlines and Qatar Airways. Operating connecting flights requires different capabilities in passenger and baggage handling. Delayed flights, missed connections, mishandled luggage, etc are common issues which require well-defined processes, experience, trained staff to manage. Even the best of the international airlines struggle with these till date.

My best experience with missed luggage transfer was with Singapore Airlines, who sent a representative to the baggage claim at Beijing Airport to come meet me and take me to their office to apologize and hand me about $100 in cash to cover my costs until they delivered the luggage on the next day's flight. Even today, Qatar Airways, unlike IndiGo, is prompt in responding to my emails and calls, which is reflective of their premium positioning, but of course are unable to help.

Unless both airlines learn very quickly how to make this codeshare work, they are running towards a situation where Qatar risks losing its loyal premium passengers, IndiGo risks losing its loyal budget passengers and travelers like me risk losing their baggage.