Delta Airlines Integrates AI into Ticket Pricing

The cost of a Delta ticket might not only change with time but could also hinge on what the algorithm believes you’re ready to pay.

Currently, around 3% of Delta’s domestic fares are influenced by AI, and President Glenn Hauenstein aims to boost that to 20% by the year’s end. During a recent earnings call, he highlighted the revenue potential this shift could bring.

At an Investor Day presentation in November, Hauenstein referred to the new AI pricing system as a “super analyst,” noting it represents a significant overhaul in how prices are set.

This excitement stems from a collaboration with Fetcherr, an Israeli technology firm that leverages AI to quickly analyze vast amounts of data and “determine the ideal price every time.”

The AI approach by Delta is a part of a larger trend of dynamic pricing, where businesses alter their prices based on factors like demand and individual customer behaviors. While this isn’t a novel concept, the technological advancements make it much more sophisticated.

According to Fetcherr’s website, their algorithm modifies prices considering elements like a customer’s lifetime value and previous purchase patterns, alongside the real-time context of each booking inquiry.

In theory, this kind of superpersonalization meets customers at their point of need, aiming to provide a tailored experience each time. Yet, some critics express concerns that these new pricing methods might be exploited rather than truly benefit travelers.

Senator Reuben Gallego (D-Ariz.) has criticized Delta’s practices as “Prestige Pricing,” arguing that airlines could use AI to pinpoint consumer vulnerabilities and “extract every cent.”

Last year, Wendy’s planned to trial an AI-driven surge pricing model, drawing comparisons to Uber’s pricing strategy. This move triggered a strong backlash online, leading the burger chain to clarify that prices wouldn’t increase during peak hours.

It remains to be seen if Delta will encounter similar resistance. With airlines already adjusting fares based on seasons and demand, travelers might be accustomed to variable pricing, regardless of AI involvement.

As for Delta’s AI pricing strategy, early feedback suggests it’s generating profit, but widespread adoption might take time.

“We’re in a rigorous testing phase. We like the results thus far,” Hauenstein shared with investors. “However, we’re committed to ensuring a successful implementation.”