Delta Air Lines has begun using generative AI in ticket pricing. The announcement has been controversial, but generative AI does not always translate into dramatically increased prices.
Delta Air Lines has used artificial intelligence (AI) to determine ticket pricing, a practice which has generated controversy and sparked some pushback. There’s still uncertainty about how Delta Air Lines plans to use this technology and what the actual impact will be on passengers.
Delta In a recent earnings call, the company revealed its plans to use generative AI. Good Morning America. The airline is currently using the technology to set the price of some domestic flights. It hopes to extend it to approximately 20 percent by the year’s end.
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 Delta CEO Ed Bastian expressed concerns that the pricing model could lead to privacy problems, “diminishing incentives to improve service,” as well as higher prices at a time “when American families are already facing rising costs.”
Delta responded by an open letter Delta stated that it “has never used, tested or intends to use any fare product that targets customers with personalized prices based upon personal data,” and the company has “zero-tolerance for discriminatory or predatory pricing.”
Katy Nastro is a travel expert at Forever. GoingTell me if you can Travel + Leisure. Nastro explained that this is the point where things get murky. “This has caused the greatest concern for both consumers and lawmakers,” he said.
What travelers should know about AI’s pricing model and Delta’s new pricing structure.
Delta’s changes in pricing won’t take place immediately
Nastro stated that it could take some time for Delta to create its new pricing. This new technology may not result in a significant price increase even when adjusted prices.
Delta and Fetcherr said that AI technology for pricing will act more like an expert analyst, taking into account market demand as well as revenue management. “Instead, it is external forces like economic conditions, weather, availability of seats, schedule changes and more that can influence demand in real-time and extremely fast,” said Ms. Fetcherr.
This may not translate to dramatically higher prices. Delta cannot raise its prices much higher than the other airlines, as even loyal Delta customers will look elsewhere at some point.
Nastro explained that airlines should follow the same logic as fast food chains. They shouldn’t be able to charge more than 50% for a hamburger compared to their neighbors because they will lose customers.
AI pricing models may result in charges down the road
Booking a flight can be a frustrating experience. We are often lured by the low price, only to find that additional fees were added during the process. Nastro believes AI will make airlines better at this.
She said that at a certain point in time, customers will go elsewhere to buy. Delta believes that AI will help them to become better at keeping customers within their purchasing ecosystem, even when it means offering them a lower base fare. Consider that even if you are paying a lower fare at the beginning, there will be more chances to upsell later.
Travelers can now book flights on any airline in the United States. pay for extras The fare that they select will determine if they get perks like free luggage, a choice of seat, and more. Delta’s basic-economy passengers do not receive a seat assignment until after checking in. They are, however, allowed to check in with a carry-on included in the ticket price.
Will more airlines adopt AI pricing models in the future?
Delta is not the only company that has partnered with Fetcherr. Nastro confirmed that several major airlines, including Virgin Atlantic, and Mexico’s Viva Aerobus, have partnered up with Fetcherr. She added that “when it comes to AI in general, airlines are in a AI arms race, trying to figure out which adaptation will give them a small edge over the competition.”
Nastro continued, “Airlines have tried to achieve price personalization since decades.” “Charge those willing to or able pay more, and less for those who are price sensitive. The basic economy offers a pared-down deal that targets those who are looking to save money. Imagine this, but all the other factors are taken into account at once each time a traveler makes a purchase.
Can this new technology make it more difficult to find cheap flights?
Not necessarily. Nastro stated that the industry was in a “wait-and see” period. He added, however, that AI pricing is not impacting most fares. She said that consumers have the right to choose their airline, but not all do.American Airlines, for example, publicly highlighted concerns about using AI to dynamically price fares citing it will ‘erode trust.'”
There’s little that travelers can do, however, to prevent themselves from being price-gauged online. We don’t know yet which behaviors will affect AI pricing. Nasto explained that because AI is still a very new technology and only a fraction of the airfares are listed, it’s difficult to tell if AI was dynamically pricing fares. Some may choose to purchase more through online travel agencies, or use a VPN. We haven’t heard about this change. But for now it’s just business as usual.
