Photo by American Airlines Group Inc.’s top executives have blasted using artificial intelligence (AI) to set air fares. They have called the practice inappropriate because it could trick travelers.
Chief Executive Robert Isom said, “Consumers need to know that they can trust American Airlines’ […] This is not about bait and switch. This is not about tricking.”
This follows the announcement by Delta Air Lines to move away from fixed prices to prices set for each customer by AI.
AI limitations come into play at the implementation stage
The issue is not only the limitations of AI, like data privacy concerns, but also the fact that the new program will be unfair to consumers and raise ticket prices.
For instance, Delta Airlines said that it plans to do away with static pricing altogether and instead charge customers based on the particular flight they want to take at a particular time. Delta President Glen Hauenstein said that by the end of the year, the company plans to have 20% of all ticket prices individually determined by AI. The airline is currently pricing about 3% of tickets with AI.
Haustein said the company wants ticket costs to be informed by an AI “super analyst” who can work 24/7 to determine what an individual passenger should pay at any given time. However, the program is expected to take years to implement fully.
The lawmakers had already raised flags, especially the Dems. Senator Ruben Gallego, a member of the Senate Subcommittee, said he “won’t let [Delta] get away with this.”
“Delta’s CEO just got caught bragging about using AI to find your pain point — meaning they’ll squeeze you for every penny,” the Democrat said. “This isn’t fair pricing or competitive pricing. It’s predatory pricing.”
In its defense, Delta said AI technology for dynamic pricing is being tested to eliminate manual processes while accelerating analysis and adjustments. It also emphasized that all customers see the same fares and offers in all retail channels.
American Airlines’ full-year financial outlook
Today, American Airlines updated its full-year financial outlook. American produced record quarterly revenue of $14.4 billion. The company continued the restoration of revenue from indirect channels.
However, it is said that general economic insecurity is making consumers less likely to spend money on travel in the US.
Still, if the demand for domestic travel keeps going up, American Airlines, which gets more than two-thirds of its passenger income from the US market, expects to hit the high end of its outlook. But if the economy worsens, it will only think it will be at the bottom of the estimate.
CEO Robert Isom told investors on an earnings call, “The domestic network has been under stress because the uncertainty in the economy and the reluctance of domestic passengers to get in the game.”
Americans’ unit sales fell 6.4% from a year ago in the second quarter, which was the worst for the local market. The company made more money per unit in foreign markets, with the transatlantic market seeing the biggest increase of 5% year over year. Meanwhile, shares fell more than 9% in morning trade.
American Airlines said that its bookings in July were affected by low demand for local travel. However, the business thinks that its domestic unit income, or its earnings from each seat, will stay lower year-over-year in the third quarter.
According to estimates, its running costs for things other than fuel increased by as much as 4.5% in the September quarter.
