Airlines’ AI-Powered Pricing Could Mean Fewer Cheap Fares

Travelers could soon face more trouble finding low-cost seats as airlines adopt AI-powered pricing practices.

That’s according to a report Thursday (July 30) by Bloomberg News, which charts the air travel industry’s evolution away from using analysts to come up with pricing rules, like rising fares once a flight is a quarter booked.

But with artificial intelligence (AI), airlines can change seat prices faster by considering multiple variables in real time, thus bringing in more revenue while closing the pricing gaps that had allowed consumers to find cheaper flights.

The report added that it’s a practice being adopted by airlines such as Delta and Virgin Atlantic as they contend with rising costs.

“Consumers should expect that airlines will be smarter about their pricing and will exploit that capability to raise fares where possible and cut prices where they have room to stimulate demand,” Bryan Terry, an analyst with Alton Aviation Consultancy, told Bloomberg.

“Airlines will see those conditions clearer, more in advance, and with more certitude, allowing them to adjust pricing — both upwards and downwards — more dynamically.”

The technology could benefit consumers on quieter flights, the report added. Travelers should expect lower fares for off-peak and lower-demand routes as airlines employ AI to stimulate bookings and fill empty seats, said Terry.

Although airlines have normally used dynamic pricing to adjust fares according to demand, AI advances are helping those systems evolve, said aviation analyst Guy Leitch.

Machine-learning models can more accurately predict demand by studying historical booking patterns, seat inventory and seasonal trends, while also continuously monitoring competitors’ rates and capacity changes to adjust prices in near real time, the report said, adding that it’s still not clear whether that benefits consumers.

“Efficient markets are passenger friendly in that by booking smart or early, passengers can get below-average fares,” Leitch said.

But critics contend that airlines operate on thin margins and will boost average fares, occupancy and overall yields with the help of increasingly powerful pricing tools, Bloomberg said.

The report comes at a time when AI is continuing to transform the travel sector. For example, PYMNTS wrote earlier this month about the effect agentic AI is having on tourism, with agents now able to query availability, compare prices across airlines and hotels, apply traveler preferences and even complete a booking without a human clicking a button.

“For an industry built on search, discovery and conversion, that shift changes nearly everything,” that report said.