Delta Air Lines has initiated trials involving artificial intelligence (AI) in its pricing strategies. This recent exploration, launched within the past month, is part of Delta's broader commitment to digital technology, an area the airline identifies as holding significant financial and operational potential.
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GLODelta Air Lines has initiated trials involving artificial intelligence (AI) in its pricing strategies. This recent exploration, launched within the past month, is part of Delta’s broader commitment to digital technology, an area the airline identifies as holding significant financial and operational potential.
Delta CEO Ed Bastian emphasized the substantial investments, exceeding $40 billion, in the airline’s capital base. He anticipates that even a modest increase, ranging from 2% to 4%, in asset value through the integration of digital and AI technologies could translate to billions of dollars in opportunities over time.
The focus of the AI experiments in pricing lies in determining the optimal price points for the airline’s premium offerings relative to its base fares. President Glen Hauenstein highlighted the collaborative process, with AI presenting recommendations for consideration by analysts. The aim is to streamline decision-making processes and enhance agility on the commercial front.
This exploration into AI-driven pricing coincides with Delta’s sustained strength in the premium segment of its business. In the third quarter, premium revenue experienced a 17% year-over-year growth to $5.1 billion, outpacing the growth in the main cabin segment by five percentage points. Diversified revenue streams, including premium and loyalty, have contributed to 55% of the airline’s revenues year-to-date.
The paradigm shift from front cabins being loss-leaders to becoming profit centers has been noteworthy, according to Hauenstein. As Delta progressively integrates AI into various facets of its operations, it is exercising caution to ensure the establishment of appropriate structures. The initial application of AI is in customer service, specifically within the reservations team. Bastian stressed the importance of large companies like Delta ensuring internal readiness when deploying AI, acknowledging that the AI journey is likely to unfold over a five-year period.
To support broader advancements in digital and AI capabilities, Delta is undergoing a significant migration to the cloud through a partnership with Amazon Web Services (AWS). The airline anticipates the completion of this migration by the end of 2024.
Source: Delta
