AI Airline Pricing Shrinks Bargain Fares as Delta, Virgin Atlantic Deploy Real-Time Systems

AI is coming for the cheap seats on busy flight routes

Airlines from Delta to Virgin Atlantic are handing seat pricing to AI that reprices flights in real time, shrinking the gaps that once let travellers find cheap seats on popular routes. Off-peak fares may fall, but the bigger worry is where it leads: "surveillance pricing" based on who you are. The lucky dip of stumbling on a cheap seat on a popular flight is starting to disappear. Airlines are handing their pricing to artificial intelligence, and on busy routes that mostly means one thing: higher fares. Carriers have long priced seats with analysts and rules of thumb, such as bumping fares by 20 per cent once a flight is a quarter full. AI replaces those spreadsheets with models that weigh dozens of variables in real time and adjust continuously to demand, Bloomberg reported. The effect is to shrink the pricing gaps that once let travellers find bargains. Airlines from Delta to Virgin Atlantic are adopting the tools to squeeze more from every flight. They sell fewer seats below what they think you will pay, and pack planes closer to capacity. Cheaper too, sometimes It is not all bad for flyers. The same models can cut fares on quieter routes to fill empty seats, so off-peak and low-demand flights could get cheaper. "Consumers should expect that airlines will be smarter about their pricing," said Bryan Terry of Alton Aviation Consultancy. They will "exploit that capability to raise fares where possible and cut prices where they have room to stimulate demand." Whether that helps travellers is contested. Booking early or smart can still beat the average fare, one analyst noted. Critics counter that airlines run on thin margins and will use ever-sharper tools to lift average fares and fill more seats. The secret sauce Israeli startup Fetcherr is one of the firms driving the shift. Its platform is used by nearly a dozen carriers, including Canada's WestJet and Brazil's Azul. During recent Middle East disruptions, it repriced flights worldwide in response to oil swings, cancellations and shifting demand. "Our models analyse dozens if not hundreds of classes of variables to come up with fares. You can only now do that because of AI," said co-founder Uri Yerushalmi. The company says it lifts revenue mainly by filling more seats, not by raising ticket prices. AI is extracting value even after you buy. Volantio's software, used by Japan Airlines, spots passengers who might swap a busy flight for a voucher. It then resells the freed-up seat to a last-minute business traveller for $1,000. The same tools are moving through hotels and booking, too. The worry: surveillance pricing The bigger fear is where this goes next: fares aimed at each traveller's highest "willingness to pay," what analysts bluntly call the "pain point." Consumer advocates and US lawmakers have warned that airlines could use generative AI for "surveillance pricing", charging different people different fares for the same seat based on data such as browsing history or income. That is no longer purely hypothetical. The US Federal Trade Commission has opened a civil investigation into whether airlines use individualised data profiles to push up prices, Simple Flying reported. Some states have moved first, with Maryland passing a Protection from Predatory Pricing Act. Regulators elsewhere are circling too, after cases like China's Trip.com fine. The firms say they are not there yet. Delta, which declined to comment, has publicly denied setting fares using personal information. Fetcherr says its models use aggregated market data, and Volantio says its offers are not personalised. For now, the squeeze is about the aggregate, not the individual. As AI keeps reshaping what consumers pay across travel and beyond, the old trick of hunting for a hidden bargain fare is quietly getting harder.

Airlines' AI-Powered Pricing Could Mean Fewer Cheap Fares | PYMNTS.com

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.

AI Airline Pricing Makes Cheap Tickets Harder to Find on Busy Routes

"Consumers should expect that airlines will be smarter about their pricing," Bryan Terry of Alton Aviation Consultancy told Bloomberg. He added that airlines would "exploit that capability to raise fares where possible and cut prices where they have room to stimulate demand." AI pricing can make unusually low fares harder to find on popular flights. The models compare current demand with past booking patterns and market data. They then update prices closer to what airlines estimate passengers will accept. Meanwhile, the same technology may produce cheaper tickets on routes with weaker demand. Airlines can reduce fares to attract bookings and fill more seats. Therefore, AI does not raise every ticket price, although it may reduce bargain fares during busy travel periods. Israeli technology company Fetcherr supplies AI pricing software to nearly a dozen carriers, including WestJet and Azul. Co-founder Uri Yerushalmi said its models review a wide range of information before setting fares. "Our models analyse dozens if not hundreds of classes of variables to come up with fares," Yerushalmi told Bloomberg. "You can only now do that because of AI." Fetcherr says its software raises airline revenue mainly by helping carriers fill seats. During recent Middle East travel disruptions, the platform in response to oil prices, cancellations and changing demand.