Delta is also already seeing strong demand for trans-Atlantic flights into 2024.
Delta CEO Ed Bastian spoke at the conference about the airline’s focus on its target market of high-income consumers. Households with $100,000 or more in annual income, or about 40% of households in the country, make up about 75% of all U.S. travel spending, he said.
Delta’s fares are often higher than other airlines’, and many air fares across the industry globally have increased as airlines’ costs for fuel, labor and maintenance have risen.
“Let’s not think that air fares are going to come back down to 2019 levels, because if they do, airlines are in serious trouble,” said John Grant, chief analyst at travel data firm OAG, during a webinar on the airline industry Wednesday. “If you’ve got 30% more costs and you’re going back to 2019 air fares, then it just doesn’t add up.”
Delta is also heavily focused on selling its higher-priced seats such as Comfort+ with extra legroom and first class.
Previously, the way airline tickets were sold “was not geared to sell premium products,” Hauenstein said. Instead, first class seats were priced almost prohibitively high, which often left them empty for airlines to give frequent fliers free upgrades.
Delta started making a shift more than a decade ago to stop giving away as many of its first class seats — to the chagrin of frequent fliers who have long prized the free upgrades in return for their loyalty.
Instead, Delta lowered the price of premium seats — allowing the airline to offer paid upgrades that seem affordable to more people, leaving fewer empty seats.
“It used to be that our front cabins were our loss leaders. Now our front cabins are our profit centers,” Hauenstein said.
As part of that shift, Hauenstein said the airline just in the last month has started experimenting with the use of artificial intelligence for pricing, to determine “really the amount people are willing to pay for the premium products.”
With dynamic prices on thousands of different flights on hundreds of routes on varying days of the week and times of year, it’s a complex array of factors that can influence demand.
Hauenstein said analysts can review the AI recommendations for pricing. “It takes a lot of time and a lot of effort — the feedback loops — and it really automates it, streamlines it and accelerates our ability to move faster,” he said.
If Delta’s use of AI drives shifts in the prices for premium seats, it could affect a growing number of customers.
An increase in travel by small- and medium-sized businesses has driven an increase in demand for premium seats for both work and personal trips, Haunstein said.
“Once I’ve been flying from here to Chicago in first class, when I go to my house in Palm Beach now, I’m not sitting in the back. I’m sitting in first,” Hauenstein said. “So people are getting used to it.”
Bastian said he also wants to use AI to improve the speed of customer service and reduce the amount of time customers have to wait on hold.
“They should only be on hold for five seconds getting an answer,” Bastian said. “That’s one of the first applications that we’re deploying.”
“I think the opportunity (with AI) is enormous. It’s probably a five-year journey,” Bastian said.