Delta Air Lines is in the hot seat with U.S. senators regarding its plan to use artificial intelligence to set ticket prices, with legislators worried the technology could lead to so-called personalized pricing that charges some passengers more than others.
It has been quietly developing an AI-based pricing system that it will deploy in large numbers later in the year. The company now uses it on just 3% of Delta’s US domestic routes and plans to put it on 20% of its network by December 2025.
Senators Demand Answers on Delta’s “Surveillance-Based” AI Pricing
Three senators Arizona’s Ruben Gallego, Virginia’s Mark Warner, and Connecticut’s Richard Blumenthal wrote a scathing letter to Delta CEO Ed Bastian demanding an explanation of how this technology operates and what data it is basing its conclusions on.
Their biggest concern? That Delta’s AI may generate what they describe as “surveillance-based” pricing, in which the program examines your individual information to determine exactly how much you’ll pay for a flight – and then bills you that price.
“This can lead to more expensive fares based on one’s so-called ‘pain point,’ ” the senators said, referring to the highest fare that individual traveler would pay.
The timing is particularly bad for consumers who are already dealing with inflation and increasing travel expenses. The senators contend that personalized pricing would further drive flying costs up for American families who are already living on the edge.
Delta is building this system in collaboration with Fetcherr, an AI pricing technology company. The AI system is able to analyze massive amounts of data in real time in a bid to make decisions on optimal ticket price points based on what it sees.
Whereas airlines have been using dynamic pricing for decades varying prices according to factors such as seat availability and demand this new system is a quantum leap more advanced in sophistication and speed.
Delta Faces Questions on AI Data, Discrimination, and Expansion
The legislators are not posing general questions. They are looking for specific information about:
- What kinds of data Delta and Fetcherr collect to supply the AI model
- How many flights and passengers are affected now
- Which roads will be part of the expansion
- What are the safeguards against discriminatory pricing
- How Delta maintains compliance with consumer protection and privacy legislation
They have requested Delta to reply in depth by early August.
Delta emphatically denies the accumulation of personal data to create tailored fares. Authorized company spokesmen assert that all passengers view the same fares in the same booking channels and that no promotions are founded on individual data.
The firm contends that its AI technology is nothing more than an advanced form of dynamic pricing that has been the hot topic of the trade for over 30 years. The technology, Delta says, is designed to speed up and simplify analysis of market factors like demand and supply. It is not designed to target individual customers.
“We’re still in pilot mode,” Delta officials said, citing that they are holding back to observe results before any broader implementation.
Delta’s AI Pricing Probe Ignites Industry-Wide Concerns Over Fairness and Regulation
The senators revealed that Delta is not singled out in being probed. They’ve also requested similar questions from other carriers concerning potential surcharge and fee manipulation with individual information.
Consumer activists are sounding an alarm on what they perceive as a fresh wave of economic discrimination. They are warning that marginal consumers may be paying extra without knowing that they are being charged differently from the rest of the tourists.
Everyone is waiting with bated breath for Delta’s response, to be submitted by early August. Delta’s response will not only determine its own pricing strategy, but potentially impact the way the entire industry is going to approach pricing with AI.
This backlash is guaranteed to fuel wider regulatory debate on the use of AI in consumer markets, specifically on issues of privacy, fairness, and transparency. Because Delta is already reporting record revenues and healthy profits well before adopting this technology, the onus is on to demonstrate that innovation is not at the expense of consumers.
The ruling would have major consequences for the methods businesses are allowed to use AI to set their products and services in all industries.
