Delta Air Lines is rolling out generative AI for ticket pricing. The announcement has been controversial but generative AI may not automatically translate into dramatically higher prices.
Delta Air Lines is using artificial intelligence to determine ticket prices, a practice that has garnered its share of controversy and pushback. But there’s still a lot of uncertainty surrounding how the carrier plans to use the technology and what it actually means for passengers.
Delta shared its plans to use generative AI in an earnings call last month, according to Good Morning America. The airline currently uses the technology to price some domestic flights and hopes to increase it to about 20 percent of its network by the end of the year.
Following the announcement, a trio of senators—Sen. Ruben Gallego, D-Ariz., Sen. Richard Blumenthal, D-Conn., and Sen. Mark Warner, D-Va.—sent a letter to Delta’s CEO Ed Bastian voicing concerns the pricing model would lead to privacy issues, “diminish incentives to improve service,” and result in higher prices “at a time when American families are already struggling with rising costs.”
Delta responded with an open letter saying there was “no fare product Delta has ever used, is testing or plans to use that targets customers with individualized prices based on personal data” and said the company had “zero tolerance for discriminatory or predatory pricing.”
However, there are still a lot of questions around what generative AI will actually mean for customers, Katy Nastro, a travel expert for Going, told Travel + Leisure. “This is where the waters get murky and have raised the biggest concern from both lawmakers and consumers alike,” Nastro said.
This is what travelers need to know about AI and Delta’s new pricing model.
Delta’s price changes won’t happen immediately
Delta is working with AI pricing company Fetcherr to develop its new pricing, but Nastro said it may take time. Even when prices are adjusted using this new tech, it might not cause too much of a price fluctuation.
“What both Delta and Fetcherr have expressed is that the AI pricing technology will be more like a super analyst taking into account not just market demand and revenue management. but rather outside forces that can impact demand like the economic climate, weather, seat availability, schedule changes, and more, in real time and exceptionally fast,” she said.
But this may not automatically translate into dramatically higher prices. That’s because Delta can’t raise prices too much higher than other airlines since, at a certain point, even the most loyal Delta customers would look elsewhere.
“The same way your favorite fast-food chain can’t charge 50% more than their neighbor with a similar hamburger because hungry customers will go elsewhere, the same thinking applies to airlines,” Nastro said.
The AI pricing model might mean charges later on
We’ve all been lured in by low prices when trying to book a flight only to discover upcharges during the booking process. Nastro said AI might make carriers even better at it.
“At a certain price point, flyers will buy elsewhere,” she said. “But with AI, Delta is betting they can get really good at … keeping people within their buying ecosystem, even if that means potentially drawing them in with a lower fare to begin with. Think about it, even if they are getting a lower base fare, they have more opportunities to upsell you afterward in a variety of ways.”
Airlines across the United States have adopted models where travelers pay for extras like luggage, seat selection, and other perks depending on the fare they choose. Currently, travelers who fly with Delta’s basic economy are not assigned a seat until after they check in for their flight, but are allowed to bring a carry-on bag included in the cost of their ticket.
Are more airlines going to adopt AI pricing models?
Delta isn’t alone in working with Fetcherr. In fact, Nastro said several major airlines have partnered with the company, including Virgin Atlantic and Mexico’s Viva Aerobus. “When it comes to general AI, airlines are in an AI arms race trying to figure out the best adaptation to give them a slight edge over the competition,” she said, adding AI was “the next generation in pricing.”
“Price personalization is something airlines have been trying to accomplish for decades,” Nastro added. “Charge consumers willing or able to pay more, more, while charging those who are sensitive to price, less. Basic economy is a great example of this, by providing a very pared-down offer that will target those looking to pay the least. Imagine that, but with other outside factors all being taken into consideration all at once, every time a traveler goes to buy.”
Will this new tech make it harder to find flight deals?
Not necessarily. Nastro said the industry is currently in a wait-and-see period, but added most fares aren’t being impacted by AI pricing models. “Consumers have free will to choose which carrier to fly with, and not all airlines are coming forward and adopting this practice,” she said. “American Airlines, for example, publicly highlighted concerns about using AI to dynamically price fares citing it will ‘erode trust.’”
However, there’s not much travelers can do to change their online behavior to protect themselves from getting price gauged because we don’t yet know which behavior will impact AI pricing. “Because this is still very new and a small fraction of the fares listed, it would be extremely difficult to know for certain if there was AI dynamically pricing the flight you were thinking of buying,” Nasto said. “Some may opt to buy more from online travel agencies or utilize a VPN (though we haven’t heard of this shift to either), but for now, it’s business as usual until we see this more widely adopted.”
