Another story making waves is Delta Airlines! The airline is using generative artificial intelligence (AI) tech to figure out the best pricing model for its domestic flights. Lawmakers see how acute this change is and are keenly attuned to it. They’ve sounded the alarm on how AI in dynamic ticket pricing might harm consumers. On July 21, Senators Ruben Gallego, Mark Warner, and Richard Blumenthal wrote to Delta’s CEO Ed Bastian. They pressed him to detail how the airline is using AI and what it means for customers.
In response to the lawmakers’ letter, Delta asserted that its pricing strategies aren’t based on personal data. A representative stated, “Our ticket pricing never takes into account personal data.” The dynamic pricing model that United Airlines has always used, which immediately reacts to changes in market forces. This has been the practice globally in the airline industry for decades.
Delta’s Dynamic Pricing Model
Delta’s dynamic pricing model adjusts ticket prices based on various market conditions, a strategy designed to respond effectively to shifts in demand and competition. The airline explained that “market forces drive the dynamic pricing model that’s been used in the global industry for decades.” Doing so is necessary, with this approach letting Delta keep a competitive edge while maximizing profit.
Glen Hauenstein, Delta’s president, revealed that generative AI currently plays a role in determining prices for about 3% of Delta’s domestic flights. The airline has some big plans to increase this further, with aims to use it for around 20% of their flights by year’s end. Hauenstein expressed optimism about the technology, stating, “The more data it has, and the more cases we give it, the more it learns, and we’re really excited about it.”
This expansion aims to enhance Delta’s ability to provide a seamless and satisfying travel experience while adapting to dynamic market conditions.
Lawmakers Raise Concerns
At the very least, Senators Gallego, Warner and Blumenthal’s questions indicated an appreciation of some of the scary downstream effects that AI-powered pricing practices could create. They stressed that surveillance-based pricing can draw on a treasure trove of personal data. This information is gathered from many different places including purchase patterns and social media engagement. The senators pointed out that these practices could result in higher fares. This would have real consequences for individual consumers depending on their financial circumstances, and millions of American families are already suffering due to increasing costs.
The lawmakers stated, “Delta’s current and planned individualized pricing practices not only present data privacy concerns but will likely mean fare price increases up to each individual consumer’s personal ‘pain point’.” This remark highlights the danger that could come from the use of AI, if incorporated into airline dynamic pricing practices.
Katy Nastro, a travel expert and spokesperson for Going, commented on the public’s perception of Delta’s use of AI in pricing. She noted, “With the shock and outrage of Delta proudly broadcasting their adoption of AI pricing, we tend to forget that if consumers decide to move en masse to another carrier, Delta’s pricing strategy must adapt, which can ultimately mean discounts for certain fares.” According to Nastro, skepticism can be attributed to the lack of transparency that has historically surrounded Delta’s pricing practices.
The Future of AI in Airline Pricing
Delta’s plan to use generative AI as part of their pricing strategy is just one example of how the airline industry is increasingly automating their processes. As airlines continue to leverage emerging technologies, they will not only improve their own competitive position but start to better meet the needs of the consumer. Delta’s increased commitment to making AI-driven pricing better aligns with its interest in addressing shifting market dynamics and delivering a better customer experience.
The Israel-based, AI-powered tech solutions company has been recognized as the Best Travel Tech Startup for a second consecutive year at the 2024 World Travel Tech Awards. This acknowledgement underscores the growing importance of technology in the travel space. Founded in 2019, this smart company is just one example of how innovation and tech can revitalize industries like manufacturing and logistics.
As Delta Airlines continues to navigate this complex landscape, it remains to be seen how its AI-driven strategies will impact customer experiences and perceptions in the long term.
