Sen. Mark Warner (D-Va.) is warning that Delta Air Lines’ use of artificial intelligence (AI) to tailor airfare prices to individual customers represents a troubling shift toward what he calls “surveillance pricing.”
“I’ve recently seen where I think AI can be used handily in a very anti-consumer way. And that’s what Delta Air Lines is starting to do,” Warner said at a Senate subcommittee hearing on AI held Wednesday (July 30).
Delta is testing AI-powered personalized pricing on about 3% of its flights, with plans to expand the program to 20% by year-end. The system leverages customer data — potentially browsing behavior, income estimates, purchase history and other factors — to offer customized fares.
That contrasts with traditional dynamic pricing, which fluctuates based on market supply and demand but displays the same price to all consumers at a given moment.
“We all know there’s ‘surge’ pricing,” Warner said. “Tickets for planes cost more around the holidays and cost more to go south in the winter than it does in the summer. That makes sense.”
But “surveillance” pricing is different since it considers “massive” amounts of data of the individual, Warner said.
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“Do we really want an airline to know that … if you’ve got Taylor Swift concert tickets in city Y, and they know that, they can individually price to collect a few extra dollars?” the senator asked.
These little price bumps add up. Warner said the prediction is that the airline industry would increase profits by $4.4 trillion.
“That’s a lot of money based upon a surveillance pricing scheme,” Warner said. “I think we at least ought to have more information before we move forward.”
Warner, Sen. Richard Blumenthal (D-Conn.), and Sen. Ruben Gallego (D-Ariz.) reportedly wrote a letter to Delta expressing their disapproval of the practice, according to Newsweek. The Chicago Tribune editorial board also has spoken out about “personalized” pricing as well.
In a statement last week to PYMNTS, a Delta spokesperson said, “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 spokesperson added, “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.”
Read also: American Airlines CEO Slams AI Fare Setting as Trickery
AI as the ‘Super Analyst’
During Delta’s briefing with analysts last November, President Glen Hauenstein had provided details about the airline’s “personalized” pricing experiment.
“We will have a price that’s available on that flight, on that time, to you, the individual,” Hauenstein said. He described the AI tool as a “super analyst,” adding that early results have shown “amazingly favorable unit revenues.”
Delta seeks to gain a “first-mover advantage,” Hauenstein had said. “We do believe that we are ahead of our competitors in terms of implementing this and in changing our business processes and rules around it.”
Ultimately, this is “a full reengineering of how we price — and how we will be pricing in the future,” Hauenstein added.
While Delta touts the approach as a competitive advantage, critics argue it raises ethical and regulatory concerns. The Federal Trade Commission (FTC) has labeled such practices as “surveillance pricing,” and its January report cited mounting examples of retailers using customer behavior to determine prices, sometimes without clear disclosure.
Delta maintains it is not targeting customers with personalized offers based on sensitive data. “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,” a spokesperson told PYMNTS.
Still, industry experts warn that trust could erode if consumers feel manipulated. Philip Carls, a board member at pricing platform Priceagent, told PYMNTS that “passengers won’t know if they’re getting a fair deal or being targeted.”
Europe’s stricter data rules under GDPR may also limit Delta’s ambitions abroad. Airlines must justify personalized pricing under a “legitimate interest” standard and could face lawsuits if consumers feel discriminated against, Carls said.
Read more:
Delta Air Lines Keeps Capacity Growth Flat Amid ‘Broad Economic Uncertainty’
United Airlines Raising Fees for Travel Perks
Airlines Boost Premium Offerings as Demand for Main Cabin Seats Slows
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