The customer backlash was quick when Delta said it was bolstering its use of AI to set fares last month.
It demonstrated the common problems facing businesses in the age of AI. It's a way to adopt new technology (and boast to please shareholders) without surpriseing consumers.
Delta says it does not use AI to set different prices for different individuals based on personal data. Instead, airlines say AI is being used to improve existing dynamic pricing practices already in use across the industry.
“We have no plans to target customers with individual offers based on what Delta has used, tested, or personal information, etc.” the company said in a statement provided to Business Insider.
The travelers were still scared. Online, they complained about the possibility of price gouging, and lawmakers sent a demanding answer from Delta, citing concerns about data privacy and potential price discrimination.
“That sounds very dystopian to me,” Brent McDonald, a Salt Lake City-based lawyer and frequent delta flyer, told Business Insider. McDonald said there are not many direct flight options in cities like Salt Lake, the Delta's main hub.
“It could be very abusive to use AI to maximize the amount you get from each customer through that exclusivity,” he said.
“When you say you have artificial intelligence in your consumer products, you'll raise a red flag with consumers,” Tim Sanders, vice president of research insights at G2, told Business Insider.
On the other hand, investors tend to love it as it can lead to increased efficiency.
“Delta has stepped into a PR bounce to impress investors,” he said.
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Messaging is important because consumers don't trust AI
An industry expert who spoke with Business Insider said the lack of details on the delta in the first public discussion using AI has led some consumers to worry about potential worst-case scenarios.
On Investor's Day in November, Delta said about 1% of the network used AI to set fares. Delta President Glenn Hauenstein said “the initial results show the revenue of a surprisingly lucrative unit,” and ultimately said, “On that flight, you have a personal price at that point.”
In Delta's second quarter revenue call in July, Hauenstein said AI is currently being used to price around 3% of its domestic network, with the target being to reach 20% by the end of the year.
“We're in a fierce testing phase,” he said. “We like what we see.”
After Sen. Reuben Gallego sent a letter to Delta and requested an answer about AI prices, the airline responded, stating that much of what is said about their process was false.
“Your letter assumes you are using AI for “individual” or “monitor” pricing. Use consumer-specific personal data, such as sensitive personal circumstances and advance purchasing activities to set individual prices.”
Delta also shared details on how to use AI. The airline said AI is helping human analysts by predicting demand for a particular route, aggregating purchase data and factoring thousands of variables at once.
Sanders said being transparent about how AI is being used could help address consumer trust issues.
He said companies should look to the transparency practices of AI industry leaders like Openai.
One way an airline can do is to show the fare factors in the ticket price and provide an explanation of how the price is set. He also said that airlines can make it clear that users will opt out of AI-price seats and that this could mean that some seats will not be offered.
Companies need to talk about how to improve their services using AI
Clint Henderson, editor-in-chief of the Travel website The Points Guy, said he is worried that the AI used in pricing can actually punish the airline's customers and punish the most loyal customers by sticking to the airline and paying to earn points.
However, he said that AI pricing could also be used for good, by offering discounts to new customers, finding the right price for someone to splurge and offering cheaper upgrades, or providing cheaper upgrades to business class.
Rather than vaguely discussing how AI can boost profits, Zack Kass, an AI advisor and former market head at Openai, said they need to talk about how they use AI to improve the customer experience.
“Talking about how customer support wait times are slowing. Talk about how to improve on time. Talk about how to use AI to reduce bags,” Kass told Business Insider.
Kass said many consumers may approve airlines that charge wealthy passengers, like those who always choose first-class, to offer lower prices. However, he said that AI is being used to improve real products and provide products and services at low cost, and that it is mandatory for businesses to talk about it.
Sanders said the way individual companies talk about AI not only impacts businesses, but also creates wider distrust among consumers, which could delay full adoption.
“The trust in AI arrives at the mule,” he said. “It leaves to Maserati.”
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