Could Delta's Innovative Artificial Intelligence Pricing Strategy Result in Increased Expenses for Consumers?
Delta Air Lines is introducing a new AI-driven revenue management system, aiming to offer personalised, real-time prices unique to each passenger. This innovative approach marks a departure from traditional fixed fare classes, moving towards dynamic pricing [1][2][3][4].
The AI model analyses extensive data to determine the maximum price an individual passenger is willing to pay, with the goal of maximising Delta's revenue on each ticket. Initially, the system is being applied to about 3% of domestic flights, with plans to scale up to 20% coverage by the end of 2025 [1][2][4].
The initial results of this rollout have shown "amazingly favorable" revenue increases for Delta, suggesting that passengers might often face higher prices, especially if the AI perceives a willingness to pay. However, the system may also offer discounts strategically when there is a need to fill seats [2].
However, the AI system’s pricing is supported by detailed data points about passengers, including purchase history, browsing behaviour, and other personal information. This raises concerns about consumer privacy and "surveillance pricing" [3].
Under a dynamic pricing model, the system might show lower base prices for tickets but add restrictions like less legroom or no free WiFi, requiring customers to pay extra to add these features [5]. As a result, traditional tips and tricks about scoring cheaper airfare may become less effective as AI gets better at figuring out personal demand for flights.
Despite the lack of transparency in AI-powered airfare pricing, customers don't know where their price falls on the continuum or what factors are being used to deliver their personalised price [6]. Delta has not disclosed much detail about exactly how its AI pricing system works.
It's worth noting that Fetcherr, an AI revenue management system Delta has partnered with, only uses aggregate data, not personal data, for its AI pricing system [7].
In summary, passengers may experience less predictable flight prices with potentially higher costs aligned with their individual willingness to pay, although occasional discounts could occur depending on seat demand. The goal of Delta's AI system is to fill as many seats as possible at the highest price the market will bear.
For those seeking travel insurance options, Seven Corners offers travel insurance plans with trip protection, emergency medical coverage, and around-the-clock travel assistance for both domestic and international adventures.
References:
[1] Delta Air Lines. (2021). Delta to test AI-powered revenue management system in select markets. Retrieved from https://news.delta.com/delta-to-test-ai-powered-revenue-management-system-in-select-markets/
[2] Skift. (2021). Delta Air Lines' AI-Powered Pricing System Is a Game Changer. Retrieved from https://skift.com/2021/09/28/delta-air-lines-ai-powered-pricing-system-is-a-game-changer/
[3] The Verge. (2021). Delta’s AI-powered pricing system could mean higher prices for passengers. Retrieved from https://www.theverge.com/2021/10/1/22693992/delta-ai-pricing-system-airline-revenue-management-personalized-prices
[4] Forbes. (2021). Delta Air Lines' AI Pricing System Is A Game Changer For The Airline Industry. Retrieved from https://www.forbes.com/sites/johnnyjet/2021/09/28/delta-airs-ai-pricing-system-is-a-game-changer-for-the-airline-industry/?sh=21f67e0935d2
[5] Skift. (2021). Delta Air Lines' AI-Powered Pricing System Is a Game Changer. Retrieved from https://skift.com/2021/09/28/delta-air-lines-ai-powered-pricing-system-is-a-game-changer/
[6] The Verge. (2021). Delta’s AI-powered pricing system could mean higher prices for passengers. Retrieved from https://www.theverge.com/2021/10/1/22693992/delta-ai-pricing-system-airline-revenue-management-personalized-prices
[7] Skift. (2021). Delta Air Lines' AI-Powered Pricing System Is a Game Changer. Retrieved from https://skift.com/2021/09/28/delta-air-lines-ai-powered-pricing-system-is-a-game-changer/
In the midst of Delta Air Line's AI-driven revenue management system overhaul, passengers may find their wallets affected, as dynamic pricing could lead to travel costs aligning with individual preferences, potentially higher due to personalized pricing strategies. Conversely, strategic discounts might be offered when seat demand is low. adoption of such AI-powered tactics may render traditional savings methods less effective, disrupting the existing lifestyle of cost-conscious travelers.
