Delta Airlines shifts to AI-driven pricing strategy
Delta Airlines is letting AI take the controls — for pricing, that is. America's second-largest US airline by daily flights says it's expanding a pilot program that uses generative AI to help set fares. So far, just 3 percent of tickets have been priced with help from the bots.
But consumer advocates are warning that the program could be 'predatory' for consumers and could spell the end of 'fair' pricing. The AI fare model has a projected runway of 18 to 24 months before a full-scale launch. If the tech lands smoothly , Delta says it could eventually hand over nearly all pricing decisions to its new digital co-pilot.
Hauenstein said the AI is still in a 'heavy testing phase,' and reiterated the company will not rush the program out to its customers if issues arise. But, if successfully rolled out, the pricing model could represent a major departure from the traditional model used by the company for years. Delta previously relied on fixed and fair pricing models, where customers in similar seats largely paid the same price.
Tickets were mostly determined by shared flight metrics like time, fuel prices, route, and demand. Executives believe the new system will strike a smoother balance between customer budgets and airline profitability. But it might also make passengers in the same aisle pay wildly different prices.
'It's all about giving people more choice, more pricing options, and more products and services in every cabin,' Hauenstein said. But others are warning that this pricing model could be harmful for consumers. Arizona Democratic Senator Ruben Gallego called the practice 'predatory pricing,' adding, 'I won't let them get away with this.'
'For consumers, this means the era of "fair" pricing is over. The price you see is the price the algorithm thinks you'll accept, not a universal rate.' Delta declined to comment on this article. The AI announcement comes as Delta made some major news about its profits forecast.
In April, the company pulled its financial guidance, saying the American economy was going through too much turmoil to determine how much money the company would make. At the time, Congress hadn't passed President Donald Trump's tax and spending bill, tariffs were still up in the air, and markets were balking at uncertainty. Ed Bastian, the company's CEO, said consumer confidence 'certainly took a big dip in the early part of the year and then again in April, after the Liberation Day announcements were made.'
But now the company has reinstated its profit guidance after it beat Wall Street's expectations for the second quarter of the year. Still, the company is facing some customer headwinds. Delta said that domestic economy seat sales fell 5 percent in the previous quarter. It will cut some domestic flights from the schedule in August.
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