It can use personal data to identify pain points of each customer.
Booking a cheap flight takes effort. You compare, use alerts, consider your options, and then the price changes. In the world of complex and volatile ticket pricing, airlines are adding another layer to the process. The use of artificial intelligence to set prices has raised concerns about personal data usage: Will you pay more because the airline can see that you’re capable or willing to pay more? Lawmakers are worried that AI will lead to surveillance pricing and that customers will be exploited by companies. Delta—which is trying to expand its AI-driven model—is at the center of it.
There is reason for caution. Airlines are hardly transparent about pricing models. Since the 1980s, airlines have used dynamic pricing. The price of a ticket is determined by a variety of factors, including demand, oil prices, seasonal factors, and travel dates. Airlines adjust prices based on real-time data, so the cost can fluctuate day to day. Scott Keyes, founder of Going, writes in Time that in a flight full of 200 people, passengers may have paid 150 different prices.
Delta has partnered with the Israel-based startup Fetcherr to analyze data in real-time and set prices according to market fluctuations and demand. In a series of comments, the airline has expressed excitement over AI-driven pricing.
On an investor call last month, Delta’s president, Glen Hauenstein, said the airline is using AI to set prices for 3% of domestic flights in its network, with a goal to expand to 20% by the end of the year.
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In December, Hauenstein explained that the AI-powered technology is capable of predicting how much people are willing to pay for premium products related to base fares. He also said that generative AI benefits from training and “the more data it has, and the more cases we give it, the more it learns.” The airline is excited about the initial testing phase, and he also said in November, “we will have a price that’s available on that flight, on that time to you, the individual.”
But this new way of setting fares was met with concern by three senators, who raised red flags about these practices and possible privacy invasions. In July, Sens. Ruben Gallego, Mark Warner, and Richard Blumenthal wrote a letter to Delta CEO Ed Bastian, demanding answers about data inputs, sources, and the operationalization of the technology. The lawmakers expressed concerns that individualized, or surveillance, pricing may increase costs up to customers’ personal “pain points.”
Surveillance pricing uses personal data, browsing history, geolocation, and financial status. The letter quoted former Federal Trade Commission Chair Lina Khan to offer an example of whether an airline would charge a passenger extra knowing that they need to fly after a death in the family. “Consumers have no way of knowing what data and personal information your company and Fetcherr plan to collect or how the AI algorithm will be trained. Prices could be dictated not by supply and demand, but by individual need.”
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Delta, however, replied to the senators saying that it does not use personal data to price tickets. “There is no fare product Delta has ever used, is testing, or plans to use that targets customers with individualized prices based on personal data,” the airline said in a letter.
U.S. Transportation Secretary Sean Duffy noted Delta’s clarification but also promised to investigate if airlines start pricing their seats according to an individual’s capacity or needs. “To try to individualize pricing on seats based on how much you make or don’t make or who you are, I can guarantee you that we will investigate if anyone does that.”
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Meanwhile, Delta’s competitor American Airlines chimed in to say it won’t be following suit. Chief Executive Robert Isom said on an earnings call that using AI for fares is inappropriate and it could trick consumers. “This is not about bait and switch. This is not about tricking. And certainly, from American, it’s not something we will do.”
For consumers, this is an important development because they could see different prices when they look up flights at the same time. Data collected through cookies, browsing history, social media activity, or shopping behavior can be used to manipulate pricing. If you can pay more, or if you need it more, you may be asked to pay more. Dynamic pricing is adjusted based on demand and the market, but individual pricing could depend on your behavior and needs—and this is the problem. It has the potential to exploit customers without them realizing they are being charged differently for exactly the same service.