Delta and other airlines collaborate with an AI startup to tailor pricing.

Artificial intelligence may soon play a larger role in shaping your air travel fares. Airlines are reportedly collaborating with AI companies to offer “personalized” prices, utilizing AI tools to analyze individual data and preferences. Delta Air Lines is currently exploring AI technology from the Israeli startup Fetcherr for some domestic flights, as shared by President Glen Hauenstein in a recent earnings call. Hauenstein noted that while the technology is still in the testing phase, Delta aims to broaden its AI application by the end of this year. Presently, AI is used for just 3 percent of its domestic flight fares, but the airline seeks to elevate this to 20 percent.

In a recent communication with Congress, Delta emphasized that it does not employ AI tools for price-gouging customers, reassuring that their approach is meant to enhance transparency. Fetcherr stands out as a key provider of AI-driven dynamic pricing and works with several airlines, including Delta, Azul, and Virgin Atlantic. Delta clarified that it does not share personal customer data with Fetcherr.

However, some concerns have arisen surrounding the company’s messaging regarding AI’s role in pricing. US lawmakers, including Senator Ruben Gallego from Arizona, have expressed apprehensions over the discrepancy between Delta’s communication to shareholders and the public. Gallego voiced concerns about potential “predatory pricing,” referencing Hauenstein’s comments on predicting consumer willingness to pay for premium products.

“Consumers may find it challenging to discern what personal information companies like Delta and Fetcherr collect or how the AI algorithm is developed,” noted the lawmakers in their letter. They requested clarification from Delta about the data it utilizes for fare pricing. Delta has stated that its ticket pricing does not incorporate personal data, but highlighted the advantages of AI in refining pricing processes. “Given the vast number of fares and routes available, integrating technology like AI enables us to analyze existing data efficiently and adapt to market dynamics swiftly,” Delta expressed in its correspondence with lawmakers.

While Delta assured lawmakers that it is not manipulating prices through AI, emerging details about Fetcherr raise important questions. A recent report highlighted a white paper by Fetcherr’s chief AI officer, Uri Yerushalmi, discussing the use of artificial intelligence to construct a pricing model that could be overly complex for human comprehension. This suggests that, even if AI is not used to “fix prices” in the conventional sense, it may create pricing structures that unintentionally result in higher costs for consumers.

Competitors in the airline industry have voiced their concerns as well. American Airlines CEO Robert Isom remarked that adopting AI for individualized fares could impact consumer trust, noting that his company would not pursue such a strategy. Dynamic pricing has been part of the airline industry’s landscape, but the integration of AI holds the promise of transforming travel bookings significantly. While airlines strive to maximize revenue through AI, some experts are concerned about potential price increases for consumers.

Amid these discussions, Democratic lawmakers Greg Casar and Rashida Tlaib introduced the Stop AI Price Gouging and Wage Fixing Act, which aims to prohibit companies from using AI to set prices or wages based on personal data. They cited Delta’s intentions to expand its use of AI for pricing as a motivating factor.

“Companies should not be allowed to raise your prices or decrease your wages using data they’ve collected without consent,” stated Congressman Casar, emphasizing the importance of consumer protection. “The risks posed by corporations utilizing personal data for higher charges may escalate, and it is crucial for Congress to act proactively to address this issue.”