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Delta Airlines has reassured US lawmakers that it will not be setting personalised prices for its customers after announcing new AI revenue management innovations.
The airline has previously said it would be deploying a new AI-based revenue management system in partnership with AI pricing company Fetcherr. The company aims to have rolled out the technology on 20 per cent of its domestic network by the end of the year.
However, the technology has raised red flags for US lawmakers Ruben Gallego, Mark Warner and Richard Blumenthal, who believed that the airline would use the technology to personalise its airfares to customers, maximising profits.
“Imagine if you are a family member, your granddaughter has just been born, your grandson has just been born, and you start posting on Facebook,” said Gallego on CBS News.
“Delta is going to be able to use technology to actually skim that information. And when you go and try to buy a Delta ticket, they know that you’re going to actually want very much to go see that grandchild of yours, and they’re going to actually raise the price.
“So it’s not a market price, it’s a pressure price, one that is designed around the pressure points they think that you are willing to pay.”
However, Delta has denied that the technology will be used to tailor prices to specific customers, adding that it never uses personal data to set prices.
"There is no fare product Delta has ever used, is testing or plans to use that targets customers with individualised prices based on personal data," Delta told the lawmakers in a letter seen by Reuters.
"Our ticket pricing never takes into account personal data.
"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 analyse existing data and the speed and scale at which we can respond to changing market dynamics.
The senators said that while they were pleased to hear that personalised data was not being used to set prices, they were curious to know more about what data Delta was using to set airfare rates.
"Delta is telling their investors one thing, and then turning around and telling the public another," Gallego said.
"If Delta is in fact using aggregated instead of individualised data, that is welcome news."
According to Reuters, Delta has declined to comment on the latter statement.
Delta Airlines has used dynamic pricing for over 30 years, which causes prices to rise and fall based on fuel prices, competition and overall customer demand. However, if the lawmakers are correct, this would be the first time the airline has used the personal data of its customers to shape prices.
US democratic lawmakers Rashida Tlaib and Greg Casar introduced legislation prohibiting companies from setting wages or prices based on the personal data of Americans. It also barred airlines from raising prices after searching for a family obituary.
The lawmakers referred to a Federal Trade Commission (FTC) staff report from January that highlighted that retailers tailor their prices based on the projected demands of an individual.
“Initial staff findings show that retailers frequently use people’s personal information to set targeted, tailored prices for goods and services—from a person's location and demographics, down to their mouse movements on a webpage,” said FTC Chair Lina M. Khan.
The FTC also outlined a hypothetical example which demonstrated that “a consumer who is profiled as a new parent may intentionally be shown higher priced baby thermometers on the first page of their search results.”
American Airlines CEO Robert Isom has also said that consumer trust could be diminished if AI is used to set ticket prices.
"This is not about bait and switch. This is not about tricking," he said during an earnings call.
"Talk about using AI in that way, I don't think it's appropriate. And certainly from American [Airlines], it's not something we will do."
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