Delta and other airlines are working with an AI startup that 'personalizes' prices

Artificial intelligence may soon play a bigger role in your air travel fares.

Airlines are reportedly working with AI companies to deliver "personalized" prices to customers by using AI tools to analyze their personal information and data.

Delta Air Lines is currently using AI technology from the Israeli startup Fetcherr for some domestic flights, said President Glen Hauenstein in an earnings call last month. Hauenstein said the technology is still being tested, but told shareholders that Delta intends to expand its use of AI by the end of this year. As of now, the airline uses AI for only 3 percent of its domestic flight fares, but wants to increase this to 20 percent, according to ABC News.

However, in a recent letter to members of Congress, the company denied using AI tools to price-gouge customers, as Reuters reported last week.

Fetcherr is one of the prominent suppliers of AI-powered dynamic pricing, and it already works with several airlines, including Delta, Azul, Virgin Atlantic, WestJet, and Royal Air Maroc, according to Aviation Week. Delta has said it doesn't share personal customer data with Fetcherr.

But the airline has come under scrutiny for its rhetoric around using AI to optimize some fare prices. US lawmakers, including Democratic Arizona Senator Ruben Gallego, have accused Delta of "telling their investors one thing, and then turning around and telling the public another," said Gallego, who also said he believes Delta is engaging in "predatory pricing."

In a letter to Delta CEO Ed Bastian, Senators Gallego, Mark Warner, and Richard Blumenthal cited a comment made during an investor conference last December by Hauenstein, who said the company's AI price-setting technology sets fares by predicting "the amount people are willing to pay for the premium products related to the base fares."

"Consumers have no way of knowing what data and personal information your company and Fetcherr plan to collect or how the AI algorithm will be trained," reads the lawmakers' letter. The senators asked Delta to explain what data it collects and uses for its fares. Delta hasn't specified what data it relies on to set these individualized prices.

In response, the airline assured US Democratic senators that their ticket pricing "never takes into account personal data" but also spoke of the merits of using AI to set prices.

"Given the tens of millions of fares and hundreds of thousands of routes for sale at any given time, the use of new technology like AI promises to streamline the process by which we analyze existing data and the speed and scale at which we can respond to changing market dynamics," read Delta's letter to lawmakers.

While Delta insisted to US lawmakers that it’s not fixing prices with AI, recent revelations about Fetcherr raise serious questions about its technology.

Bloomberg reported this week on an alarming white paper by Fetcherr co-founder and chief AI officer Uri Yerushalmi. In the paper, Yerushalmi describes working with an unnamed airline to use artificial intelligence to create a pricing structure so complicated that it would “go beyond human cognitive limits,” according to Bloomberg.

So, even if AI isn’t used to “fix prices” in the traditional sense, it could still be used to make fare pricing so complex that consumers inadvertently end up paying more.

Rival airlines have also expressed concern. American Airlines CEO Robert Isom said using AI to set individualized fares could have an impact on consumer trust. He also said the strategy is not something AA would do.

Dynamic pricing has long been a part of the airline industry's strategy, but the use of AI has the potential to drastically change travel bookings. As airlines look to maximize revenue by harnessing AI, many policy experts fear consumers could face much higher prices, as expressed to The Lever. Another looming concern is that AI-powered pricing schemes can lead to price collusion between companies. Some, like Scott Keyes of Scott’s Cheap Flights, believe prices could actually be lowered, as he wrote in Time.

Last week, Democratic lawmakers Greg Casar and Rashida Tlaib introduced the Stop AI Price Gouging and Wage Fixing Act, a piece of legislation that would ban companies from using AI to fix prices or wages based on Americans' personal data. The lawmakers cited Delta's plans to increase their use of AI to set prices.

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"Giant corporations should not be allowed to jack up your prices or lower your wages using data they got spying on you," said Congressman Casar in a statement. "Whether you know it or not, you may already be getting ripped off by corporations using your personal data to charge you more. This problem is only going to get worse, and Congress should act before this becomes a full blown crisis."