Fury over Delta's new AI ticket-pricing plan

Delta Air Lines is under fire from lawmakers who say the carrier's new AI ticket-pricing plans could mean higher fares for ordinary Americans already buckling under rising costs. America's second-largest US airline by daily flights says it's expanding a pilot program that uses computers to help set fares.

By the end of the year, 20 percent of all fares will be set AI in partnership with Fetcherr, a pricing company. Democratic senators Ruben Gallego, Mark Warner and Richard Blumenthal fired off a letter to Delta CEO Ed Bastian (pictured) demanding to know if its AI tools are designed to hike fares up to each passenger's personal 'pain point.'

A Delta exec previously boasted the system can predict 'the amount people are willing to pay for the premium products related to the base fares,' sparking fears of a digital price squeeze. Delta insists it isn’t using personal data to target individual passengers, saying dynamic pricing has been standard for decades and that “all customers see the same fares and offers in all retail channels.”

The airline says AI is only being tested to forecast demand, factor in thousands of market variables in real time, and speed up manual pricing adjustments. It’s not the first AI pricing storm to hit the airline industry. Back in January, Blumenthal and other lawmakers grilled Frontier and Spirit over alleged seat fee manipulation, but the low-cost carriers never answered.

'This is a full reengineering of how we price and how we will be pricing in the future,' Glen Hauenstein, Delta's president, said during a June 10 earnings call. 'We like it a lot, and we're continuing to roll it out.' Consumer advocates are warning that the program could be 'predatory' for consumers and could spell the end of 'fair' pricing.

If the tech lands smoothly , Delta says it could eventually hand over nearly all pricing decisions to its new digital co-pilot. Hauenstein said the AI is still in a 'heavy testing phase,' and reiterated the company will not rush the program out to its customers if issues arise.

Airlines have long offered different prices for consumers, even for the same journey, based off factors including how far in advance they buy the ticket and whether they shop directly or with a comparison-shopping site. But AI is now supercharging changes to pricing models. 'AI isn't just optimizing business operations, but fundamentally rewriting the rules of commerce and consumer experience,' Matt Britton, author of Generation AI, told Fortune.

'For consumers, this means the era of 'fair' pricing is over. The price you see is the price the algorithm thinks you'll accept, not a universal rate.' The AI announcement comes as Delta made some major news about its profits forecast.

In April, the company pulled its financial guidance, saying the American economy was going through too much turmoil to determine how much money the company would make. Ed Bastian, the company's CEO, said consumer confidence 'certainly took a big dip in the early part of the year and then again in April, after the Liberation Day announcements were made.'

But now the company has reinstated its profit guidance after it beat Wall Street's expectations for the second quarter of the year. Still, the company is facing some customer headwinds. Delta said that domestic economy seat sales fell 5 percent in the previous quarter. It will cut some domestic flights from the schedule in August.