Ronell and Creedy had mentioned the recent white paper on the Delta/Fletcherr“AI pricing” approach. It was authored by Courtney Miller of a consultancycalled Visual Approach Analytics. https://app.visualapproach.io/research/pricing-at-the-speed-of-data-the-new-airline-ai-arms-race
TL;DR—it is a useless load of hot air 1. Delta’s 2024 passenger revenue was $52 billion. Miller absurdly claimsthat the Delta/Fletcherr “AI pricing” approach couldincrease revenue by 10% (“and could be higher than 10%”). Such $5+ billion gainswould obviously dwarf every financial improvement in the history of aviation.Miller provides no concrete evidence/examples of how this “AI pricing” approachcould possibly produce improvements anywhere close to this magnitude. 2. Miller describes the Delta/Fletcherr “AI pricing” approach as “arevolution in ticket pricing” but never defines (much less explains) any algorithmicbreakthrough versus traditional airline revenue management. Miller claims thatFletcherr “offers an impressively detailed look into their methodology” attheir website and is astounded that only 400 people downloaded thatinformation. I was one of those 400 people, and as I pointed out back in Julythose documents presented nothing close to a coherent methodology and seemed largelybased on vague notions that airlines were “outdated” and “undisrupted” and hadseen few recent technological advances and that hedge fund practices wouldreadily apply to airlines and help lead them out of the darkness. 3. Miller never explains what specific pricing/yield management decisionsthe Delta/Fletcherr “AI pricing” approach is designed to support, whatdecisions are currently made badly, and how the new approach would make betterones. Is it strictly supporting short-term YM (at what point should discountbuckets be shut off; what response should be made to competitor price changes)or is it supporting longer term competitive/capacity planning decisions(improving market share on key routes/hubs; would capacity/schedule changes bemore profitable than pricing changes)? He completely ignores the problem that “AI”tools don’t make decisions and can’t support decisions that aren’t followingpatterns thoroughly documented in the training data. 4. After initially pounding the pricing revolution drum, Miller begins tobacktrack. Perhaps longstanding RM practices aren’t all that bad, and heacknowledges several past failed efforts to demonstrate structuralshortcomings. Nonetheless he insists the Delta/Fletcherr “AI pricing” approach will improve “implementation” and would supportfaster decision making by “coalesce[ing] all an airline’s data into one datawarehouse.” Miller presents no evidence that Delta or other airlines have poordata warehousing practices today and makes no attempt to explain the poor “implementation”that badly suboptimizes revenue. He can’t cite any input data that airlineshaven’t been using for decades. Surely any airline RM system can be improved butMiller’s claim that “Fletcherr and Delta have begun to automate pricing”suggests profound ignorance of current levels of automation. 5. The major issue, raised by my original posts and numerous outsidearticles, is whether the Delta/Fletcherr “AI pricing” approach is just tryingto marginally improve traditional RM, or whether it’s part of a larger effortto introduce first-degree price discrimination in the hope of charging higherfares to people who may be willing to pay more than others. Miller makesinsincere efforts to discredit critics of extreme personalized pricing, claimingwithout citations that they said Delta was planning to collect informationabout personal checking accounts. Miller parenthetically admits that the Deltaapproach might use personal information including historical spend and IP addresseswhile evading the questions of whether first-degree price discrimination is aDelta/Fletcherr objective, or whether gains from this are included in the 10%revenue improvement he claims is possible. Miller’s paper provides absolutely no value to any objective outsidertrying to figure out what algorithmic/RM process improvements Delta is hopingto achieve, or whether generative tools could significantly improve RM. As tothe more important “are airlines really trying to move to first-degree pricediscrimination” question I would refer to Senator Gallego’s comments afterDelta’s Glenn Hauenstein testified about their plans—either Delta is lying toits investors (about the huge potential returns from the Fletcherr AI project)or they are lying to us (when they insist they have no intention to imposepersonalized pricing).
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