What to know about Delta’s use of AI to adjust ticket prices in real time

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• Ali Rogin:

  The next time you go online to purchase an airline ticket, there's a chance that the price you see was influenced by artificial intelligence. Delta Air Lines is the first major carrier to begin to use AI technology to set ticket fares. It's the latest development in an industry that's been experimenting with different ways to adjust ticket prices in real time. Earlier, I spoke with David Sheperdson, who covers transportation for Reuters.

  David Shepardson covers transportation for Reuters. David, thank you so much for being here. So how is Delta using this predictive AI and what sort of data are they incorporating into these price models?

• David Shepardson, Reuters:

  They're basically viewing AI as a super analyst, right? So if you back up 30 years ago, the airline started doing this dynamic pricing, right? So trying to adjust pricing based on fuel costs, demand, seasonal factors and so on.

  And so you're talking about tens of millions of airline prices in real time, that they want to basically absorb enormous amount of data to make those changes, whereas maybe in the old days analyst with a pen and pencil and calculate trying to figure this out. So it's about trying to move faster in the market versus maybe a little lag.

• Ali Rogin:

  And how individualized does this system allow the airline to get? In other words, are they in a position where they can start setting different prices person to person?

• David Shepardson:

  So Delta says no, Delta says flatly, we do not use any sort of pricing by individuals. And then one of the main arguments they make is you can go to delta.com. You don't have to log in, put your frequent flyer number in to get the price, and so you can get the same price whether you're logged in or not.

  Now, that said, certainly the ability exists for all sorts of retailers to use, you know, data, you know, the digital footprints we all leave behind to target pricing example that a couple of members of Congress made last week was if someone went, looked at an obituary, right, and then went to an airline pricing website, would they be more likely to pay more money? Because presumably they were looking at our obituary of a family friend or so on?

  So, I definitely think the concern is real. And within the lack of any sort of legislation from Congress or real safeguards, we have to go on the word of airlines and others that they're not going to take that step.

• Ali Rogin:

  Right. So speaking of guardrails, I mean, are there any?

• David Shepardson:

  There's the broad sort of FTC, no deceptive practices, right? And so now the Delta's out there saying, we're not doing it. You know, you could make the argument, but in terms of specific rules, sort of across the internet, across retail, there aren't. And we certainly know there are examples in the past of other big companies using AI or trying to find ways to target specific consumers to set different prices.

• Ali Rogin:

  What is in it for these airlines? What do they get out of this? And is this becoming the new industry norm? Are other major carriers following suit?

• David Shepardson:

  So right now, the answer is no. So American Airlines CEO Robert Eisen last week was very strong in saying, you know, not referring to Delta specifically, but the idea of AI is bait and switch and that American will never do that. This would cause consumers to lose trust.

  But the reality is that's certainly a possibility. Airlines are always trying to find ways to get more revenue out of consumers by requiring you to pay for your seat or for upgrades or try to pitch you on more perks. And that is a real question, right?

  Can airlines, maybe beyond just the base ticket price, use your willingness to pay for some of these, you know, ancillary fees? Could they use AI, do that? And so that kind of goes back to this idea of how much regulations, how many guardrails there are.

  But I do think just the idea has caused a firestorm of concern. And I do think that's going to give the industry some level of trepidation before, do we want to go down that road, you know, given, you know, how much anger there might be, especially if you or I really get the same ticket and we're shown different prices. For the average consumer who's not a travel nerd, it's hard to know what should I pay? You know, what's the right price? How much is going to change tomorrow, the next day?

• Ali Rogin:

  And is it your understanding that if a consumer is going on and their price has been set by AI, are they going to know that? Are they going to know that it's different than dynamic pricing or something else?

• David Shepardson:

  No. No, I don't think so. And so it's more about the fact that, hey, there's a crisis in the Middle East, right? Oil prices just went up. And so can I maybe more quickly react in real time and absorb all this data faster, or can they see that, hey, there's a big spike in travel demand, let's change the prices now. And maybe in the past it might take them a little longer. Delta says it's going to help both ways. Maybe it reduces prices in some circumstances as well if demand's slower than they thought.

• Ali Rogin:

  David Shepardson with Reuters, thanks so much.

• David Shepardson:

  Thank you.

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