Additional Coverage:
- Delta moves toward eliminating set prices in favor of AI that determines how much you personally will pay for a ticket (fortune.com)
Delta Air Lines is betting big on artificial intelligence to increase profits, potentially revolutionizing how we buy airline tickets. Following a strong earnings report, the airline revealed plans to expand its AI-powered pricing model significantly.
Currently, AI determines roughly 3% of Delta’s ticket prices, a figure that has tripled in just nine months. Delta president Glen Hauenstein told investors that the airline aims to increase this to 20% by year’s end, with the ultimate goal of eliminating fixed fares entirely.
This new system would calculate individual fares in real-time, taking into account various factors. Hauenstein likened the AI to a “super analyst” constantly evaluating optimal price points.
While this transition will take several years, early results have been “amazingly favorable” in terms of revenue, according to Hauenstein. Delta is partnering with Fetcherr, an Israeli AI company, to implement this technology. Fetcherr has ambitions beyond airlines, eyeing expansion into other travel sectors like hotels, car rentals, and cruises.
Though Delta is unusually transparent about its use of AI, other airlines are likely employing similar technologies. United Airlines, for example, uses AI to communicate with passengers about cancellations, while American Airlines uses it to predict missed flights. Travel industry expert Gary Leff points out that while personalized pricing has been a long-standing goal in the industry, Delta is the first major airline to be so open about its AI-driven approach.
However, this move has sparked concerns among privacy advocates. Critics argue that this technology could lead to discriminatory pricing practices by analyzing individual purchasing patterns and willingness to pay. Consumer Watchdog analyst Justin Kloczko described it as “hacking our brains,” while Senator Ruben Gallego (D-Ariz.) labeled it “predatory pricing.”
Delta insists its pricing practices are compliant with federal law, stating that fares are based solely on trip-related factors and that safeguards are in place to prevent discrimination. However, the airline has not elaborated on the nature of these safeguards.
Airlines have long employed variable pricing strategies, but AI takes this to a new level. While factors like booking method and purchase date have always played a role, AI-powered systems can analyze vast amounts of data to determine individualized prices.
This raises concerns about fairness and transparency. Author Matt Britton, who wrote Generation AI, believes this marks the end of “fair” pricing, where algorithms dictate prices based on perceived willingness to pay.
While the long-term impact on consumers remains uncertain, some experts predict both potential short-term benefits and drawbacks. Travelers might initially see more discounts as AI helps airlines fill seats, but ultimately, they may face higher prices as airlines gain more control over individual pricing.
The use of VPNs and clearing cookies might offer temporary reprieves, but in the long run, personalized pricing could become unavoidable. Early research suggests that wealthier customers may receive the best deals, while those with fewer options may face the highest prices.