Three U.S. senators are demanding answers over Delta Air Lines’ planned expansion to use artificial intelligence to set individualized fares — insisting the strategy is fraught with privacy concerns.
Sens. Ruben Gallego, Richard Blumenthal and Mark Warner, all Democrats, sent a letter Monday to the Atlanta-based airline seeking additional details of plans to deploy AI-based revenue management technology across 20 percent of its domestic network in a matter of months.
“Individualized pricing, or surveillance-based price setting, eliminates a fixed or static price in favor of prices that are tailored to an individual consumer’s willingness to pay,” the senators wrote to Delta in a letter obtained by Newsweek.
“Delta’s current and planned individualized pricing practices not only present data privacy concerns, but will also likely mean fare price increases up to each individual consumer’s personal ‘pain point’ at a time when American families are already struggling with rising costs.”
Joe Raedle/Getty Images
Delta Air Lines President Glen William Hauenstein told reporters during a July 10 earnings call that roughly 3 percent of the airline’s domestic ticket prices are already set using AI, with hopes to reach 20 percent by the end of 2025.
“So, we’re in heavy testing phase,” Hauenstein said. “We like what we see. We like it a lot and we’re continuing to roll it out. But we’re going to take our time and make sure that the rollout is successful, as opposed to trying to rush it and risk that there are unwanted answers in there.”
Hauenstein also praised Delta’s partnership with Fetcherr, an Israel-based tech company that employs AI to process “millions of data points instantly,” according to its website.
“The convergence of AI, machine learning and real-time data processing completely transforms how airlines approach pricing strategy,” a post on dynamic pricing in aviation reads. “Gone are the days of rigid pricing rules and manual adjustments. Welcome to the era of true dynamic pricing, where artificial intelligence can process millions of data points instantly to set the perfect price every time. Welcome to the modern age of AI dynamic pricing.”
But the approach is problematic, according to Gallego and his Democratic colleagues.
Bill Clark/CQ Roll Call via AP Images
“The implications for individual consumer privacy are severe on their own,” they wrote Delta. “Surveillance pricing has been shown to utilize extensive personal information obtained through a variety of third-party channels, including data about a passenger’s purchase history, web browsing behavior, geolocation, social media activity, biometric data, and financial status.”
Customers also have no way of knowing what data and personal information will be collected by Delta and Fetcherr, or how the airfare algorithm will be trained, according to the senators.
“Prices could be dictated not by supply and demand, but by individual need,” the letter continued. “While Delta has stated that the airline will ‘maintain strict safeguards to ensure compliance with federal law,’ your company has not shared what those safeguards are or how you plan to protect American families against pricing discrimination in the evolving AI landscape.”
The senators want a response by August 4, including details about the data Delta uses to train its revenue management system algorithm for setting customized prices for fares or other products, as well as how many passengers per day are currently purchasing fares set or informed by the customized model.
Chelsea Wollerson, a Delta spokesperson, said the company had no immediate response to the letter early Tuesday.
“There is no fare product Delta has ever used, is testing, or plans to use that targets customers with individualized offers based on personal information or otherwise,” the airline told Newsweek in a statement late Monday. “A variety of market forces drive the dynamic pricing model that’s been used in the global industry for decades, with new tech simply streamlining this process. Delta always complies with regulations around pricing and disclosures.”
link