My sincere apologies, Gary. I would have worded my thoughts much more, er, thoughtfully.
I do not think youâre an idiot, nor evil nor stupid. Iâve enjoyed some of your articles, especially about frequent flier stuff, . I suspect we have very different ways of viewing the worldâwhich can be a positive thing! Many years ago, I participated in a session about presenting to people who have differing ways of viewing the world: those who see things at a high-level, and those who revel in the minutiae. Iâm in the latter group. (Protons and neutrons? You know they are made up of quarks and gluons, right? đ) It can be a struggle for me to remember to climb up to the big picture. (My GF loves me despite my deep delves into details; my dog loves me because I offer him samples of my cooking plus belly rubs.) Your comments in response to me went into, more detail, which I appreciate. Perhaps too much for your target audience, depending upon who you view them to be. Bereavement fares are a good example. They used to be a thing, but in my experience over the past few years they arenât really a thing. A decade ago my goddaughterâs grandfather passed away and I needed to get to Chicago, stat. SFO-ORD ought to be ease on United (I live 26 miles from SFO and grew up roughly the same distance from ORD) but the non-stops were sold out. I ended up with a connection via PITâon United!âfor the âbargainâ fare of $1,266 round-trip. I sucked it up and flew. Iâd hate to see what AI-based pricing would have done to me. I hope you are right that AI-based pricing will help fine-tune the low-end incremental revenue but fear that Hubertâs worries of gouging will play out. -- Karl > On Jul 22, 2025, at 5:50 PM, Gary Leff via Mifnet <mifnet@lists.mifnet.com> > wrote: > > Karl, > > You may not think much of me â fair enough â as long as my wife does Iâm a > happy guy. But I promise that not everyone who disagrees with you is evil or > stupid! > > Hubert Horan says that airlines are out to screw customers. To some extent > thatâs right but it doesnât mean that this new technology allows them to do > it. My suggestion is that the mechanism by which it will help airlines > generate incremental revenue is greater price discrimination, better > tailoring whom to offer the lowest fares. And maybe thatâs screwing the > customer â perfectly fair to hold that view. I think Iâve been pretty > non-normative in thinking through this. Iâm not saying âAI is good for youâ > Iâm saying, letâs think about the economics of the product and what AI will > accomplish in the near-term. > > As we all know, an airline seat that takes off empty can never be sold again. > And carrying a marginal passenger comes at extremely low cost to an airline. > Most of the expense of a trip is baked in â the plane, fuel, crew. > > Airlines have gotten much better at filling seats. And they try to maximize > revenue â yet the real cost of a ticket has fallen over time, inclusive of > fees. Thatâs no accident. > > Airlines will sell that marginal seat for almost any amount they can get for > it > Except they donât want to offer a lower fare to someone that would buy the > seat anyway, at a higher fare > And so airlines go to great lengths to price discriminate, segment customers. > > There have been lots of tools for this over time, like Saturday night stays > and advance purchase requirements to separate price-insensitive business > travelers from more price-sensitive leisure travelers â in order to offer the > lower fares only to the latter group. Thatâs what basic economy is all > about, offering cheap flights that are just annoying enough they wonât be an > option for businesses who will spend more. > > AI is another tool to get more granular with price discrimination. And so it > seems reasonably likely that itâll be used to figure out whom to offer those > lower fares to, filling more seats at even lower fares but only offering > those prices to people who wouldnât buy at all at a higher price. Airlines > can fill seats and generate incremental revenue without cannibalizing > existing higher yield traffic. > > And what of the fear that an airline will know your aunt died and you are > highly motivated to attend her funeral? That ticket will generate valuable > incremental revenue to whichever airline gets it. So if one airline (in this > case, say, Delta) offers you $2,000 when theyâll sell the ticket to someone > else for $600⌠then United will offer it at $1,800⌠and American at $1,500 > and Southwest at $1,200 and Spirit will come along, desperate for any revenue > after a first quarter in which they generated a -27% margin and offer it to > you for $500. > > Our best defense against AI pricing of the parade of horribles sort (besides > our own personal AI!) is competition. Which is a whole separate topic that I > very much worry about, but not necessarily for the same reasons that are most > commonplace. > > Best, > Gary > > p.s. Iâd love to hear why you believe Iâm mistaken â thatâs an opportunity > for learning â and not just that you think Iâm an idiot đ > > > From: Karl L. Swartz via Mifnet <mifnet@lists.mifnet.com > <mailto:mifnet@lists.mifnet.com>> > Sent: Tuesday, July 22, 2025 4:27 PM > To: Mifnet <mifnet@lists.mifnet.com <mailto:mifnet@lists.mifnet.com>> > Cc: Karl L. Swartz <k...@kls2.com <mailto:k...@kls2.com>> > Subject: [Mifnet đ° 73239] Re: Why does anyone think that airline "AI pricing" > will benefit consumers? > > Your points just reinforce my view of Gary Leff, which is that he does a > lightweight job of reporting with minimal substance. Heâs better than > Simpleton Flying, but thatâs a very low shadow to surmount. > > -- Karl > > >> On Jul 22, 2025, at 1:28 PM, Hubert Horan via Mifnet >> <mifnet@lists.mifnet.com <mailto:mifnet@lists.mifnet.com>> wrote: >> >> Gary Leff published a follow up to the Delta âAI pricingâ article [1] >> previously posted on the Mifnet. As with the first article, it includes Glen >> Hauenstein quotes claiming that this he was anticipating âa full >> re-engineering of how we price, and how we will be pricing in the futureâ â >> Delta was working to âget inside the mind of our consumer and present them >> something that is relevant to them, at the right time, at the right price.â >> >> But unlike the first article Leff claimed that AI pricing at Delta would be >> a wonderful thing for consumers because it would mean âlower prices, rather >> than higher prices and agreeing to AI pricing could even become a >> requirement of airline elite status.â This makes absolutely no sense to me. >> Leff didnât support this claim with any explanation of how Deltaâs âAI >> pricingâ would actually work, or what the overall effect of âAI pricingâ >> might be. He didnât quote anyone with direct experience with todayâs >> pricing/yield management practices or anyone familiar with LLCs in consumer >> pricing. Can anyone explain how one might conclude that Deltaâs âAI pricingâ >> would produce lower overall prices? >> >> Why would Delta undertake a major project if it thought the net result would >> be lower fares? Maximizing its share and yield from âhigh-endâ passengers >> has been central to Deltaâs strategy for the last decade. Why would it >> highlight the project to investors, who are only interested in evidence of >> the market power needed to extract higher and higher fares? >> >> Delta (and its competitors) already have very high load factors. Figuring >> out how to sell more cheap tickets makes no sense unless you have tons of >> empty seats, and even then airlines understand the solution is to cut >> capacity. And selling more cheap seats is the easy part of revenue >> management (if you are departing with lots of empty seats donât shut off >> discount sales so soon). Figuring out how to grab a few more dollars from >> the last seats on high-demand flights is the hard part. >> >> Hypothetically âAI systemsâ might be of some value in pricing tickets to >> very frequent/higher-yield passengers although no one has explained what >> exact information about these passengers an LLC might use, where the new >> info would come from, or how it would be used to change the fare displays >> those customers might see. But most domestic pax are very infrequent flyers. >> I vaguely recall a Scott Kirby quote saying something like 80% of his >> traffic only bought one ticket a year. What info would an LLC be able to >> collect on these more price-sensitive passengers, and how would it determine >> that a customized deeper discount would get this person to buy but not this >> other person? >> >> Leffâs point about trying to force Delta customers with elite status into an >> AI-driven sales channel might be correct, but I suspect thereâd be backlash, >> and as Leff notes most of these folks would know how to determine whether >> they are getting the market fare. But this falls into the âforcing our best >> customers to pay even higher fares than they do nowâ category, not the offer >> consumers lower fares category. >> >> I understand that âforcing our best customers to pay even higher fares than >> they do nowâ may be a strategic priority at Delta given the lack of obvious >> other ways to quickly juice profits. But that approach would logically focus >> on forcing them into captive, controlled channels, and preventing them from >> being able to readily access information about competitive alternatives. All >> of which should be seen as pure evil by anyone who thinks âmarket >> competitionâ is a good thing. Again it is not clear what the LLC vendors are >> offering that could actually make Deltaâs higher-yield frequent flyers more >> willing to use captive, controlled channels. >> >> There is a bit of a parallel here with ongoing Mifnet discussion about >> ATC/airline reliability issues. No one stops to explain what they think the >> deficiencies of longstanding airline pricing/revenue management systems are. >> What is preventing these weel-developed systems from maximizing network unit >> revenue today? We jump immediately to an announcement that we are throwing >> big bucks at consultants offering a fancy sounding âtechnologicalâ solution >> without ever explaining exactly what the new technology does (that the >> current technology couldnât) and how it will solve the defined problem. >> >> Since no one (including airline investors and executives) takes that >> approach, reporting is dominated by PR hackery based on transparently false >> claims. Airline âAI pricingâ is just the same type of âprice discriminationâ >> weâve seen for decades (as Hauenstein says itâs an attempt to radically >> reengineer traditional pricing). Like traditional revenue management it will >> drive major efficiency/productivity gains (none of the conditions that >> allowed traditional revenue management to improve overall efficiency in past >> decades exist anymore). It will hugely benefit consumers by lowering prices >> (a sure signal that the real objective is to screw consumers). >> >> >> [1] >> https://viewfromthewing.com/several-airlines-now-quietly-let-ai-set-ticket-prices-surprisingly-thats-great-news-for-your-wallet/ >> >> <https://viewfromthewing.com/several-airlines-now-quietly-let-ai-set-ticket-prices-surprisingly-thats-great-news-for-your-wallet/> >> >> -------------------------------------------------------------------------- >> Revised: 20250507 >> >> You are receiving The Mifnet because you requested to join this list. >> >> The Mifnet is largely a labor of love, however the infrastructure isn't >> exactly cost-free. 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See instructions at: >> https://lists.mifnet.com/ <https://lists.mifnet.com/> >> >> * Manage your personal Mifnet SUBSCRIPTION at: >> https://lists.mifnet.com/ <https://lists.mifnet.com/> >> >> * For a list of all available Mifnet commands, SEND THIS MESSAGE via email: >> mifnet-requ...@lists.mifnet.com?subject=help >> <mailto:mifnet-requ...@lists.mifnet.com?subject=help> >> >> * View The Mifnet LIST POLICIES and PRIVACY POLICY at: >> https://mifnet.com/index.php/policies >> <https://mifnet.com/index.php/policies> >> >> * View instructions for Mifnet DELIVERY PROBLEMS at: >> https://mifnet.com/index.php/delivery-problems >> <https://mifnet.com/index.php/delivery-problems> >> >> * View The Mifnet LIST ARCHIVE at: >> https://lists.mifnet.com/hyperkitty/list/mifnet@lists.mifnet.com/ >> <https://lists.mifnet.com/hyperkitty/list/mifnet@lists.mifnet.com/> > > -------------------------------------------------------------------------- > Revised: 20250507 > > You are receiving The Mifnet because you requested to join this list. > > The Mifnet is largely a labor of love, however the infrastructure isn't > exactly cost-free. 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