Surveillance-style pricing is emerging as a flashpoint in the airline industry, as carriers accelerate their use of artificial intelligence and granular customer data to set fares and regulators consider more oversight to prevent the practice.
While airlines have long relied on dynamic pricing, adjusting fares based on factors such as demand, route competitiveness, and remaining seat inventory, anecdotal reports now suggest carriers have layered on AI tools that can segment customers and tailor offers in real time, using signals like booking history, loyalty status, and recent browsing behavior that tip off just how high individuals may be willing to pay for a route.
Consultants in the airline industry have argued that “personalized dynamic pricing” can improve revenue management, fill seats more efficiently, and even expand access by offering lower prices to more price-sensitive travelers. However, the growing practice leads to an uneven playing field where the airlines can quietly charge higher prices to highly engaged customers, while a potential customer without a trail of identifying data could see lower fares.
Regulators are now stepping in. Consumer protection and antitrust authorities in the United States and abroad have opened inquiries into algorithmic and personalized pricing, citing airlines as a high-risk sector. Policy proposals discussed include stricter disclosure requirements, limits on the categories of personal data that can be used in pricing models, and outright bans on practices that treat different consumers differently for the same product solely because of who they are.
The issue has heated up recently, with airline bookings around the World Cup in the U.S. creating some friction points on select routes.
For investors in the airline sector, the use of AI-fueled dynamic pricing is expected to boost profitability in the near term.
Airline stocks: American Airlines (AAL), Delta Air Lines (DAL), Southwest Airlines (LUV), United Airlines (UAL), JetBlue Airways (JBLU), Alaska Air Group (ALK), Allegiant Travel (ALGT), Spirit Airlines (SAVEQ) (FLYYQ), Mesa Airlines (MESA), SkyWest (SKYW), Sun Country Airlines (SNCY), Republic Airways (RJET), and Frontier Group (ULCC).