The use of Delta's AI-supported pricing tools is quickly escalating into public relations issues, demonstrating the challenges airlines face when upgrading their retail capabilities.
“There's definitely a very grey area with countless shades of grey as to what the actual price should be,” said Henry Halteveld, a travel technology analyst with the Atmospheric Research Group. “And that's also a matter of perception. It's wrong to charge someone more, but it's okay to give someone a discount.”
Delta utilizes a pricing tool developed by Israeli technology startup Fetcherr. AI-supported tools include Delta analysts taking into account thousands of variables simultaneously, more accurately tailoring freight to market demand.
Ironically, Cory Garner, a distribution consultant for airlines, Delta, has yet to roll out new distribution capabilities (NDC), a digital technology that allows airlines to push personalized real-time fare offers through their travel agency channels, but Delta could push personalized offers on their websites and apps.
Still, Delta's scrutiny said in a July 10 call to earnings, President Glenn Hauenstein said Fetchel-supported fares will be rolled out to 3% of the airline's domestic network, with Delta's goal being to bring that number to 20% by the end of the year.
However, what critics focused mostly on was a comment made by Hauenstein last November by a Delta Investor's Day. By using the software, Delta “has a price available to individuals at that time on that flight.”
In a July 21 letter, Senate Democrats Mark Warner of Virginia, Richard Blumenthal of Connecticut, and Reuben Gallego of Arizona seized the language to grill the delta about whether they were mining personal data due to price discrimination.
In a response from July 31st, Delta's Foreign Officer Peter Carter wrote that Fetcherr Engine only uses aggregated data, including purchase and demand data for specific routes and flights.
“There are no freights Delta has used so far. There are no tests or usage plans to target customers at individual prices based on personal data,” he writes.
These comments did not calm the situation down. By August 5, DOT's Sean Duffy secretary also had a weight on his part, saying his division would crack down on airlines that use AI to charge individuals different prices based on their income.
But while Delta still takes a legacy technology-first approach to retail, the aviation warrant has spoken for many years about the need to turn its commercialization into a more personalized experience.
Such evolution is an important push point for IATA. For example, at the 2023 World Passenger Symposium for Trade Group, Director Willie Walsh spoke enthusiastically about how e-commerce sites like Amazon interact with shoppers.
“You log in, you use your email address, etc., that's it,” he said. “They know who you are, they know what you bought, they know what you're going to buy.”
Last year's estimates from consulting firm McKinsey in a partnership with IATA found that new offer features, including personalized features dynamically generated during flight queries, could generate up to $13.3 billion in value by 2030.
Airlines in United, the US and Singapore are one of the airlines that have already rolled out or intend to do personalized offers. The United For Business website boasts the airline's ability to offer “tailored deals” and “personalized shopping with loyalty status recognition.”
American CEO Robert Isom made the headline last month by calling for Delta to roll out AI pricing. However, at the 2023 IATA symposium, Anthony Radar, then head of American Airline Retail Technology, said he began coordinating offers for members of the loyalty program.
Analysts said pricing personalization doesn't need to mean price discrimination practices. The airline said it will use its personal purchasing history to develop a bundle offer that will appeal to the flyers being cited in that flyer.
For example, travelers with a history of flying first class may be offered front seats and lounge access. They say better retailers will bring value to flyers while increasing revenue.
Airlines consistently say they don't submit the same seat to flyers at different prices based on income levels and willingness to pay. In an industry that relies heavily on loyalty programs, doing so would simply be a bad business, Garner said.
“All the airlines I work with, and I've worked with a lot of people. I believe that the moment they use their personal identity to raise prices is the last time they give you your identity,” he said. “It works for the airline. Either way, we need to improve prices.”
Still, Harteveldt said it is important to see how airlines use personal data in retail. But the challenge to keep an eye on the industry is that there is already a fog surrounding airline prices, and it is blurring the true selling prices of airline flights at any time. Passengers spread out in similar seats on the same flight already pay a wide variety of fares.
The fog gets thicker as airlines increase their real-time pricing capabilities.
“Airlines need to remember just because they can do certain things with technology,” Harteveldt said.
