Delta Air Lines and other carriers are using artificial intelligence to set airfare at the highest possible limit that it thinks you’d pay.
December 6, 2024
If you have seen airfares rising at your home airport on certain airlines, it’s not your imagination.
Airlines are now using artificial intelligence to see how high they can hike prices before their seats go unsold.
Unknown to most passengers, Atlanta-based Delta Air Lines has contracted with an Israel-based company, Fetcherr, which is working with the airline to automate and test the limit of airfare hikes using artificial intelligence.
Earlier this year, Delta president Glen Hauenstein addressed an investor conference to explain how the AI partnership works—and how it’s allowing Delta to override traditional market forces.
Traditionally, most airlines charge more or less what its competitors are charging. That’s how market forces usually dictate pricing levels that will be accepted by customers.
Instead, Delta is floating localized, individual tests of ever-higher airfare to collect information on what its passengers are willing to spend.
Giving AI control of pricing may wind up pushing Delta into a higher-priced category of airlines that future consumers will perceive as a luxury brand.
“We don’t really know where our brand strength in any individual market is maximized, so generally we match our competitors fares,” Hauenstein told investors. “But if we take small increments and say, to Tokyo, could we take a $20 increase in our fares and not see a decline in market share? Could we make it $40? [Fetcherr’s AI platform] is doing that [in] real time now.”
On the surface, Delta’s automated airfare experiments are resulting in higher income for the airlines, which Hauenstein called “amazingly favorable unit revenues.”
But in practice, it’s making prices higher for flyers. AI is learning to predict the absolute maximum dollar amount it can extract from you.
AI can even figure out how to set a ticket price at a level that is catered to you specifically, using your personal spending habits. It can learn how to withhold discounts because it knows you’ll eventually cave on the higher price.
If you have been watching closely, you’ll have noticed Delta is already making a play to reposition its reputation to favor luxury spenders.
You see it in Delta’s investment on private security lanes at some airports, and on its construction of new, exclusive Delta One lounges that are only available to high-spending business-class passengers, plus more than two dozen other lounges.
You see it in Delta’s push to introduce even more top-tier premium credit cards, and in its expansion of leisure “experiences” that can be obtained by redeeming loyalty points.
And you see it in Delta’s cabins. As The Wall Street Journal reports, “the strategy is working,” and more than half of Delta’s revenue now comes from “overall premium experiences.”
Premium sections now comprise 30% of the available seats on Delta. Twenty years ago, the high-priced seats made up only 10% of the flight.
In that WSJ article, Delta’s CFO, Dan Janki, said that once customers fly Delta’s higher-priced, premium products, then Delta’s economy-class seats feels unacceptable. “You don’t want to go back, so to speak,” Janki is quoted as saying.
All of this paints a portrait of an airline that is doing everything it can to squeeze out the traveler on a budget.
If you don’t have much money, Delta doesn’t really want you. You’re no longer at the heart of its business plan—and it’s using AI to find new ways to stretch the maximum of your budget.
Delta is now structurally disincentivized to offer a comfortable economy-class product because the ultimate goal of its C-suite management is to force customers to be dissatisfied enough to spend more for seats at the front of the plane.
In the back of the plane, it may be increasingly less likely to find a truly price-competitive airfare on Delta once AI breaks the airline away from the pack and pushes its prices to limit to favor wealthy outliers. After AI gathers its intel, the airfare from your airport may soon be priced at a level that only your community’s better-heeled customers are willing to spend.
Delta isn’t the only airline trying this. Fetcherr’s website also lists Virgin Atlantic, Westjet, Royal Air Maroc, Azul, and Viva Aerobus as clients.
If every airline uses similar technology to stretch airfare to the highest possible limit, ticket prices will go up across the board and flying will become something that’s more comfortably done by the rich than by those of modest means.
Will the future Delta Air Lines be an airline when travelers on a budget need not apply?
Keep your eye on its airfare.