Airlines are increasingly using artificial intelligence to set ticket prices, making it harder for passengers to find unusually cheap seats on popular flights.
Traditional airline pricing often relied on analysts and fixed rules, such as increasing fares after a flight reached a certain level of bookings. New AI systems can instead examine large numbers of variables and adjust prices continuously as demand changes, Bloomberg reported.
The shift allows airlines to sell fewer seats below the amount they believe travellers are willing to pay. It can also help them fill more seats and increase revenue per flight.
The change will not necessarily make every ticket more expensive.
AI systems can reduce fares on quieter routes or less popular departure times when airlines need to attract more passengers. This means off-peak flights could become cheaper, even as prices rise more quickly on busy routes.
Aviation consultant Bryan Terry said airlines would use the technology both to raise prices where demand is strong and cut them where cheaper fares could stimulate bookings.
Israeli technology company Fetcherr is one of the firms providing AI-based pricing tools to airlines.
Its customers include Delta Air Lines, Virgin Atlantic, WestJet, Azul and Viva Aerobus. The company says its platform studies market conditions, predicts demand and automatically recommends or publishes fares in real time.
Fetcherr co-founder Uri Yerushalmi said modern models can consider dozens or even hundreds of categories of information when calculating fares.
The company says its system mainly increases revenue by improving how many seats are filled and how they are priced, rather than simply increasing every ticket price. Fetcherr also says its models use market-level information rather than passengers’ personal data.
Azul now uses Fetcherr’s AI-driven pricing across more than 70% of its network, according to the company. The system produces more than three million fare recommendations each year.
Airlines are also using AI after passengers have already purchased their tickets.
Volantio develops systems that identify passengers who may be willing to move from a busy flight to another departure in return for compensation. The airline can then resell the released seat to a passenger willing to pay more at the last minute.
The company works with airlines including Japan Airlines, Southwest Airlines, Air Canada and Alaska Airlines. Its technology is designed to shift flexible passengers away from heavily booked flights and open those seats for higher-value demand.
The greater concern is that airlines could eventually use AI to set different prices for individual passengers based on their personal information and estimated willingness to pay.
This practice is often called surveillance pricing. It can involve information such as browsing history, location, shopping activity and other behavioural data.
The US Federal Trade Commission has examined how companies use AI and personal information to set individualized prices. Its study found that pricing intermediaries can use detailed consumer data to influence the prices or offers shown to different people.
US lawmakers have also questioned airlines about whether AI pricing could be used to identify each passenger’s maximum “pain point,” or the highest fare they might accept.
Delta has denied using personal data to determine ticket prices. The airline says its Fetcherr tests support pricing analysts and do not involve sharing personal passenger information with the company.
Several US states have started restricting some forms of personalized pricing, although the scope of the laws varies.
Maryland’s Protection from Predatory Pricing Act targets the use of personal information for individualized prices in the food sector rather than airline tickets. However, the law reflects growing political concern over AI-driven pricing.
China has also increased scrutiny of technology-based pricing practices. Regulators recently imposed penalties of about $765 million on Trip.com over monopolistic conduct involving hotel pricing and exclusive arrangements.
For now, airlines appear to be using AI mainly to improve pricing across entire routes and flights rather than setting a unique fare for every passenger.
However, as the systems become more accurate, travellers may find fewer overlooked bargains on popular routes. The cheapest fares may increasingly be limited to flights where airlines actively need more passengers.
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