Delta Air Lines has begun experimenting with using artificial intelligence (AI) for its pricing.
The experiments, started in the last month, are part of Delta’s overall investments in digital technology—an area the airline sees as having “tremendous” potential both financially and operationally.
“We have over $40 billion of assets that we’ve invested in [our capital base],” CEO Ed Bastian said during the Dec. 6 Morgan Stanley Global Consumer and Retail Conference. “If digital and AI just can increase the value of that just by 2, 3, 4%, you’re looking at billions of dollars of opportunity over time.”
For pricing, AI could help determine the amount consumers are willing to pay for the airline’s premium products, relative to its base fares. “[It’s] having the machine show us what do they think we should be doing and having the analysts then look and see, what are the machines recommending,” President Glen Hauenstein said.
“It streamlines and accelerates our ability to move faster ... from the commercial side, that’s one we really think has some great power for us.”
The exploration into AI-powered pricing comes while the premium segment of its business shows continued strength. In the third quarter, Delta’s premium revenue grew 17% year-over-year to $5.1 billion, outpacing main cabin growth by five points. Diversified revenue streams, including premium and loyalty, have generated 55% of its revenues year-to-date.
“It used to be that our front cabins were our loss-leaders, now our front cabins are our profit centers, and that’s a huge paradigm shift,” Hauenstein said.
As it rolls out AI into more areas of the business, Delta is exercising discipline to ensure the right structures are in place. Its “initial foray” into AI is on the customer service side, working with its reservations team. “I think it’s really important that large companies such as Delta ensure that when you deploy AI you have your house in order,” Bastian said. “But I think the opportunity is enormous; it’s probably a five-year journey.”
Infrastructure preparations supporting further advancements in digital and AI include a “massive migration” to the cloud, under a partnership with Amazon Web Services (AWS). Delta expects that migration to be complete by the end of 2024.
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