AI's integration in airline ticket pricing sparks debates
Delta Air Lines is set to revolutionize the pricing of up to 20% of its domestic flights by the end of the year, using artificial intelligence (AI) to dynamically adjust ticket prices based on individual customer behaviours. The move aims to offer more tailored (and sometimes higher) prices for consumers, prompting discussions about fairness, transparency, and potential price gouging.
The AI-powered pricing system, developed in partnership with Israeli startup Fetcherr and the Georgia Tech air transportation lab, is designed to optimize prices in real time, moving away from static pricing towards individualized offers. Critics label this approach as "surveillance pricing," a form of first-degree price discrimination where customers could pay based on perceived willingness or ability to pay.
According to Laurie Garrow, who leads the air transportation lab at Georgia Tech, the AI tool will analyse data such as booking advancement, destination market, weather, and past baggage handling. However, the airline has denied using individual personal data to directly set prices. Instead, they claim the AI is used to improve pricing efficiency based on aggregated demand data rather than targeting individuals with unique fares.
Notably, the U.S. senators have sent a letter to Delta seeking more details about the AI expansion, expressing concerns about the potential use of personal data like social media activity, financial status, and biometric data. Delta, in response, has stated that they never have nor plan to use an AI product that factors in personal information of their customers for individual offers.
Despite the concerns, Delta asserts that ticket pricing remains driven by market dynamics and competition, with the AI serving as a tool to assist analysts by forecasting demand and speeding up pricing decisions rather than setting unique prices per customer.
The pricing system might also consider premium customer status when setting prices, potentially leading to higher price increases for first- or business-class tickets. Areonna Sims, a student at the University of Kentucky, paid $450-$500 for a Delta flight during spring break and wonders if the airline could use AI to offer her a more suitable price.
Ian Brown, a 21-year-old student, expresses concern that the AI pricing tool might misinterpret his frequent flying with Delta as an indication to charge him more. He states that he wants to find the cheapest flight, and he doesn't want the AI tool to determine his price based on his perceived ability to pay more.
Laurie Garrow describes AI pricing technology as the wave of the future, with 20 airlines around the world already using or looking into similar AI pricing technology. The use of AI in the airline industry is an evolution of the dynamic pricing model airlines have been using for decades.
As the implementation of AI in the pricing of flights continues, it is essential for airlines to maintain transparency and ensure fairness in their pricing strategies. The U.S. senators have set a deadline of August 4 to receive answers to their questions about Delta's AI expansion, hoping to shed light on the future of airline pricing and its impact on consumers.
Artificial intelligence (AI) in the airline industry, such as the one Delta Air Lines is implementing, is not only utilizing technology for real-time price optimization but also exploring new frontiers in transportation news. Critics have termed this approach as "surveillance pricing," raising questions about the potential use of AI in analyzing personal data like social media activity, financial status, and biometric data, which could lead to artificial-intelligence-driven price discrimination.
