Air prices are historically dynamic because of the range of different external factors, from seasonal demand and jet fuel costs to weather and competitor pricing. As businesses like Delta Air Lines look to artificial intelligence to help with revenue management, customers are looking for a new factor for the future of travel booking. Let’s understand what is new about Delta’s dynamic AI pricing plan.
AI Technology Used by Delta Air Lines
Delta President, Glen Hauenstein, stated that Atlanta-based carrier presently utilizes AI technology to determine some costs of domestic flights with the aim to increase that use from 3% to 20% by the end of this year.
The AI technology is still in its testing phase, and Hauenstein stated, assuring investors that even though they like it a lot, we are going to take our time and ensure that the launch is successful rather than rushing it and facing risks.
The model Delta is utilizing Fetcherr, which is an AI pricing firm. Like any other generative AI, this feeds on data. The more data it consumes and scenarios it understands, the more it learns. The Israel-based AI tech solutions firm, established in 2019, was recognized as the Best Travel Tech Startup for the second consecutive time at the 2024 World Travel Tech Awards.
Delta states that the technology equips the airlines to cope with the dynamic market situations, personalize offers, and improve profitability while offering a smooth and satisfying travel experience. Apart from this, Fetcherr also enlists other global airline clients on the website, like Virgin Atlantic, Azul, WestJet, and Aerobus.
Fairness and Transparency Concerns
Even after Delta’s optimism, the shift has sparked concern among the lawmakers and customer advocates. Senators sent a letter to the airline questioning whether AI-driven cost decisions may lead to surveillance pricing—the fears regarding whether AI uses personal data to charge people based on their perceived willingness to pay.
Delta’s Response to Critics of AI Pricing Technology
Following last month’s Delta investor call, Democratic Sens. Ruben Gallego, Mark Warner, and Richard Blumenthal sent a letter to Delta CEO Ed Bastian on July 21, showing concern regarding the usage of AI and its potential effect on Delta customers.
Delta’s present and planned pricing strategies not only pose data privacy concerns, but will also likely mean an increase in the fare price to every customer’s personal ‘pain-point’ when USA families are already facing issues with rising costs.
The senators expect the AI technology implementation to a price hike on the ride-sharing apps like Uber or Lyft.
Surveillance pricing has been found to use extensive personal information gathered through different third-party channels, including data regarding the past purchase history of the passengers, web browsing behaviour, geolocation, social media activity, biometric data, and financial status.
Previous FTC Chair Lina Khan has cautioned against a specific egregious but conceivable example of an airline using AI to charge a higher fare to passengers since the firm knows that they have a death in the family and should fly across the nation. The opacity around the newly customized pricing model of Delta could increase these concerns.
A Delta representative reported that Delta is in compliance with the regulations about pricing and disclosures in its AI technology experimentation. There is no such fare product being tested by Delta, which is based on individual information. Market forces influence the dynamic pricing mode,l which has been utilized in the global industry for years.
Delta responded in the same way that their ticket pricing never considers personal data. The travel expert, Katy Nastro, talked about Delta’s announcement of their adoption of AI pricing. They tend to forget that whether customers decide to move en masse to another carrier. Delta’s Dynamic pricing strategy must adapt, which can ultimately mean discounts for some fares.
People may find it biased against such a type of pricing since the transparency is only based on what is being shared by Delta. This can definitely raise some concerns about the most premium airline in America.
FAQs
What is Delta’s Dynamic AI Pricing System?
Delta leverages Artificial Intelligence to set the prices of the airfare tickets based on real-time market data. The system is created to optimize the rates based on the competition, demand and booking patterns.
How could AI-based Pricing may Impact Users?
The users may find frequent changes in fares on the basis of the demand and timing. It may become difficult to understand when you are getting the best deal.
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