The US Department of Transportation will investigate airlines if they use AI to set personalized ticket prices, said Secretary Sean Duffy.

Duffy’s comments follow concerns from lawmakers about the potential use of AI for individualized pricing by Delta Air Lines.

Delta Air Lines, based in Atlanta, told lawmakers it does not and will not use AI to price tickets for individual consumers.

Duffy said the department would act if any airline tries to set prices based on personal data.

However, Delta plans to use AI-powered revenue management on 20% of its domestic network by the end of 2025 through a partnership with pricing firm Fetcherr.

Delta said airlines have used dynamic pricing for decades, which adjusts fares according to demand and other factors, but not based on individual customer information.

Lawmakers have proposed legislation to ban companies from using AI to set prices or wages based on personal data.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Airlines pioneered dynamic pricing decades ago, but AI personalization crosses new boundaries

The current controversy highlights a crucial distinction between traditional airline pricing and emerging AI capabilities.

Airlines introduced dynamic pricing in the 1980s and 1990s, adjusting fares based on factors like overall demand, fuel costs, and competition 1. This established system changes prices for everyone based on market conditions, not individual customer profiles.

The new concern centers on AI systems that could analyze personal data to determine each customer’s maximum willingness to pay, which lawmakers referred to as pricing to individual “pain points.”

Traditional dynamic pricing relied on retrospective sales data that often lagged behind actual market demand. Modern systems, however, now use real-time data and advanced algorithms to adjust prices instantly 1. This technical evolution makes personalized pricing technically feasible in ways that weren’t possible during the original dynamic pricing era.

A 2016 study found that 59% of the time, flight prices were actually higher on browsers without search history, contradicting popular beliefs about airlines tracking individual searches 2. However, the technical capabilities for true personalization have advanced significantly since then.

2️⃣ Retail AI pricing boom raises broader trust questions beyond airlines