Delta Air Lines is pricing about 3% of its domestic fares with an artificial intelligence system and plans to get to 20% by the end of 2025.
Speaking on Delta second quarter earnings conference call, Delta President Glen Hauenstein gave an update on the company's plan to leverage AI-driven dynamic pricing.
In January, Delta outlined its AI plans and pricing initiatives with Fetcherr, an Israeli startup that uses generative AI to create optimized offers.
Hauenstein said:
"We're optimizing revenue through our partnership with Fetcherr, leveraging AI-enhanced pricing solutions. While we are still in the test phase, results are encouraging. You have to train these models and give them multiple opportunities to provide different results. We like what we see and we're continuing to roll it out, but we're going to take our time and make sure that the rollout is successful."
Hauenstein added that the more data and cases Delta feeds to Fetcherr, the more it learns and optimizes offers. If Delta gets to the 20% mark, it should be able to scale dynamic pricing at a faster clip.
On its conference call, Delta emphasized that it continues to roll out its technology including Delta Concierge, a virtual personal assistant built into the Fly Delta app launching later this year.
Delta is also using AI to optimize maintenance and resource availability.
But the biggest wins appear to be revenue optimization via partnerships with Fetcherr. In the second quarter, Delta operating revenue was up about 1% from a year ago to $15.5 billion. Hauenstein said demand stabilized late in the second quarter and business travel was solid. "During the quarter, demand trends stabilized at levels that are flat to last year. Our teams did a great job optimizing revenue performance in this environment by leveraging Delta's structural advantages and engaging customers beyond flight to generate a revenue premium to the rest of the industry," he said. "Diverse, high-margin revenue streams continue to show resilience, growing mid-single digits year-over-year and driving double-digit operating margins. Premium revenue grew 5% over the prior year, outpacing main cabin."
The plan for Delta is to expand profit margins on multiple fronts. The company restored its financial guidance that it cut in the first quarter with earnings of $5.25 a share to $6.25 a share and free cash flow of $3 billion to $4 billion.
