Delta’s AI Play: Higher Fares on the Horizon

As airlines continue to explore the options available to them in the AI world Delta Air Lines believes it has found a competitive advantage thanks to the technology. The carrier, in partnership with Fetcherr, is working to automate many of the pricing decisions it includes in its operations, building a “super analyst” that can always be working, optimizing revenue.

What we have today with AI is a super analyst. We have an analyst that’s working 24 hours a day, seven days a week, and trying to simulate in real time – given the same inputs that an analyst sees today – what should the price points be? – Glen Hauenstein, President, Delta Air Lines

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Speaking at the airlines Investor Day earlier this year President Glen Hauenstein described the effort:

What we’re really trying to do is to get inside the mind of our consumer and present them something that’s relevant to them at the right time, with the right price. We’ve partnered with a company called Fetcherr out of Israel, and we’ve now been working with them for the better part of a year. We’ve got about 1% of our network currently being priced by the Fetcherr team. And this is again, a full re engineering of how we price and how we will be pricing in the future.

Delta’s goal with the Fetcherr platform is multi-faceted. The carrier aims to blend the black magic art of pricing and revenue management into a single concept: offer management. Rather than fare buckets and inventory controls a flight search will simply return the optimized price – potentially tuned to the specific customer making the purchase. And, ultimately, Hauenstein expects those offers to be at a higher price point than what customers see today.

Read more: AI Hot Takes: Checking in from APEX EXPO

He explained:

We don’t really know where our brand strength in any individual market is maximized, so generally we match our competitors fares. 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 real time now.

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Hauenstein also acknowledged the risk in allowing the system to manage pricing, especially around ensuring the data input is clean, “It could also backfire on you, and can be very dangerous, garbage in, garbage out kind of thing.” As a result, he expects the conversion to this pricing approach will be a “multi-year, multi-step” effort, though early results are promising with “amazingly favorable unit revenues” to the airline. “We’ve been really, really encouraged,” Hauenstein shared, “so we’re continuing to try and accelerate [deployment], but not do it in a way where we put too much revenue at risk in any individual time.”

And, yes, that translates to higher fares for passengers, though Delta remains confident the seats will still sell even with the increased price point.

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While Delta sees itself as a first mover in the space it is not Fetcherr’s only customer. The company boasts Azul, Virgin Atlantic, Royal Air Maroc, Viva Aerobus, and Westjet on its website, but not Delta.

Additionally, I’d argue this is not Generative AI but more of a machine learning/data approach, something that existed well before the ChatGPT/OpenAI hype cycle picked up speed. But I can also forgive Hauenstein for making that claim since Fetcherr positions itself that way.

More bits about AI in Aviation:

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• Shakeup in ancillaries, AI on tap for flyadeal
• AI Hot Takes: Checking in from APEX EXPO
• Delta’s AI Play: Higher Fares on the Horizon
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