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Airlines to Increase Use of AI in Setting Fares by 2026

Airlines to Increase Use of AI in Setting Fares by 2026
The Evolution of Airline Pricing
Airline fare pricing has traditionally been a complex and rigid process, constrained by filed fares, fixed booking classes, and legacy global distribution systems (GDS). These systems limited price adjustments to predetermined increments, preventing airlines from responding fluidly to market fluctuations. However, this era is rapidly coming to an end as carriers embrace more flexible pricing models.
Over the past decade, airlines have invested significantly in continuous pricing, a model that discards the limitations of traditional fare buckets and allows for virtually any price point to be set. Building on this foundation, artificial intelligence (AI) is now being integrated into these platforms, enabling airlines to determine fares with greater precision and responsiveness. This shift has gained prominence following Delta Air Lines’ recent use of AI to support its pricing decisions, a move that sparked debate about the potential for algorithms to drive fares higher. Delta is not alone; numerous airlines are experimenting with or have already implemented AI tools to enhance decision-making within their dynamic pricing frameworks.
Vinay Varma, Senior Vice President and General Manager at AirGain by RateGain, shared insights on this transformation during the World Aviation Festival. AirGain provides AI-enabled pricing intelligence to carriers including Singapore Airlines, Air India, Thai Airways, Malaysia Airlines, and IndiGo, offering a unique vantage point on the rapid evolution of airline pricing.
From Fare Buckets to AI-Driven Pricing
For decades, airline pricing was anchored in ATPCO-filed fares and a complex array of booking classes within traditional GDSs. Today, an increasing number of carriers are transitioning to the New Distribution Capability (NDC) and continuous pricing models, where fares are dynamically calculated rather than selected from a fixed ladder. Early adopters such as Air France-KLM and the Lufthansa Group introduced continuous pricing on select markets via NDC several years ago and have since expanded its application.
“Airline pricing has always been very traditional,” Varma explained. “Now we are looking at NDC pricing, dynamic and continuous pricing, which is really great for the business because you are not restricted to the old GDS pricing mechanisms.” With these constraints removed, AI’s potential is significantly enhanced. Algorithms can recommend any price point by analyzing factors such as demand, capacity, seasonality, competitor actions, and shopping data patterns. Industry analyses indicate that fully dynamic pricing strategies, supported by rich data, can increase revenue by several percentage points compared to traditional methods.
Opportunities and Challenges Ahead
While dynamic pricing powered by AI offers clear commercial benefits, it also presents challenges. Regulatory scrutiny is intensifying, with authorities focusing on transparency and consumer protection. Concerns have emerged regarding potential surveillance and the rise of hyper-personalized pricing, which may provoke consumer backlash over fairness and data privacy.
Market reactions are mixed. Some travelers express unease about how their data is utilized and question the fairness of AI-driven pricing, while others may appreciate the prospect of more responsive and potentially competitive fares. Airlines face a strategic choice: to adopt AI-driven models and navigate regulatory pressures or to maintain traditional pricing approaches.
For airlines, the incentive to harness AI is compelling. “Data is gold,” Varma remarked, “but airlines have so much data today that they do not know how to interrogate it.” Revenue and pricing teams are inundated with vast amounts of information—from fares scraped across hundreds of airlines and online travel agencies to demand forecasts and operational constraints. AI offers a means to process this data at scale, enhancing productivity and enabling more nuanced pricing decisions.
As the industry accelerates the adoption of AI in fare setting, it stands on the cusp of a new era characterized by unprecedented pricing flexibility and heightened regulatory scrutiny. By 2026, AI-driven pricing is expected to become the standard, fundamentally reshaping how travelers experience and perceive airfare.

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