Airlines may use algorithms, AI for ‘customer specific’ pricing

[Ray]

Airlines are exploring ways to implement customer specific pricing using AI and algorithms, meaning everyone would pay a different price for the same seats on the same flight. 

The revelation was made during a Senate hearing on the multibillion dollar business of fees, which Senators say are misleading and deceptive. 

Sen. Richard Blumenthal, D-CT: “They are piggy banks to be shaken down by these skyrocketing fees that seem to have no connection to any costs that the airlines incur. In fact, our investigation shows they have no connection to actual costs that the airlines are bearing.” 

From 2018 to 2023, five of the nation’s largest airlines made $12.4 billion from seat fees. 

Over the last six years they made $25.3 billion on bag fees. 

Sen. Josh Hawley, R-MO: “I mean, you guys do appreciate that flying on your Airlines is a disaster, don’t you?”

Some airlines have offered incentives for employees to charge customers. 

In 2022 and 2023, budget airlines Frontier and Spirit paid $26 million in bonuses to gate agents who charged customers bag fees. Frontier paid agents $10 for every extra carry-on. 

Frontier’s Chief Commercial officer offered this explanation. 

Robert Schroeter, Chief Commercial Officer Frontier Airlines, Inc.: “This program is meant to enhance compliance by passengers with frontiers carry on bag policy. This in turn enhances cabin safety and boarding efficiency and ensures that all passengers are treated equally.”

The committee also said the way in which fees are applied may break federal law. 

Senators contend hidden fees may violate consumer protection laws through deceptive practices. They also accused airlines of charging fees that are non-taxable to avoid excise taxes, an allegation United denied. 

Andrew Nocella, United Chief Commercial Officer: “United has always paid the seven and a half percent, transportation, tax on all excise tax, but it’s not displayed in the booking path because United pays this directly to the Treasury.” 

Overall the airlines defended their pricing with corporate speak like – it’s a business model consistent with market demands and It’s never been more affordable to fly. But it’s clear the Senators want to tighten the rules so at a minimum the prices are more transparent, even if they can’t lower the cost.