Dynamic AI Pricing Could Mean Fewer Cheap Airline Seats for Travelers, Analysts Say

Southwest Airlines passengers checking in at San Francisco International Airport in July. Airlines are turning to AI to make their dynamic pricing methods more efficient. Photo by David Paul Morris /Photographer: David Paul Morris/

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(Bloomberg) — Globetrotters hunting for airfare bargains are in for a rude awakening: the days of stumbling across a cheap seat on a popular flight could soon disappear.

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Airlines have long relied on analysts to devise pricing rules — such as increasing fares by 20% once a flight is a quarter full. Now, artificial intelligence is enabling carriers to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking the pricing gaps that once allowed travelers to find bargain fares.

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Driven by soaring costs, carriers from Delta Air Lines Inc. to Virgin Atlantic are increasingly adopting the technology to squeeze more revenue from every flight. For travelers, that will likely mean higher fares on busy routes as fewer seats are sold below what airlines believe customers are willing to pay and flights are packed closer to capacity.

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The shift marks a new era in airline pricing, replacing rules and spreadsheets with predictive models that continuously adjust fares to demand.

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“Consumers should expect that airlines will be smarter about their pricing and will exploit that capability to raise fares where possible and cut prices where they have room to stimulate demand,” said Bryan Terry, an analyst at New York-based Alton Aviation Consultancy. “Airlines will see those conditions clearer, more in advance, and with more certitude, allowing them to adjust pricing — both upwards and downwards — more dynamically.”

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The technology could also work in travelers’ favor on quieter flights. Passengers should expect to pay less on off-peak and lower-demand routes as airlines use AI to stimulate bookings and fill empty seats, Terry said.

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The push comes as airlines grapple with rising labor, maintenance and fuel costs, increasing pressure to extract more revenue from every flight. Established airline software providers including Amadeus and PROS now offer AI-powered pricing tools as airlines modernize their revenue management systems.

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While airlines have typically turned to dynamic pricing to adjust fares based on demand, advances in AI are making those systems faster and more sophisticated, according to aviation analyst Guy Leitch. Machine-learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory and seasonal trends, while also continuously tracking competitors’ fares and capacity changes to update prices in near real time.

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Whether that ultimately benefits travelers remains contested.

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“Efficient markets are passenger friendly in that by booking smart or early, passengers can get below-average fares,” Leitch said. Critics, however, argue airlines operate on thin margins and will use increasingly powerful pricing tools to maximize average fares, aircraft occupancy and overall yields.