[Federal Register Volume 64, Number 49 (Monday, March 15, 1999)]
[Rules and Regulations]
[Pages 12838-12852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6138]
[[Page 12837]]
_______________________________________________________________________
Part II
Department of Transportation
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
14 CFR Parts 257 and 399
Disclosure of Code-Sharing Arrangements and Long-Term Wet Leases; Final
Rule
Federal Register / Vol. 64, No. 49 / Monday, March 15, 1999 / Rules
and Regulations
[[Page 12838]]
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
14 CFR Parts 257 and 399
[Docket Nos. OST-95-179 & OST-95-623]
RIN 2105-AC10
Disclosure of Code-Sharing Arrangements and Long-Term Wet Leases
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
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SUMMARY: This rule strengthens the Department's current consumer
notification rules and policies to ensure that consumers have pertinent
information about airline code-sharing arrangements and long-term wet
leases in domestic and international air transportation. The rule,
among other things, does the following: First, requires travel agents
doing business in the United States, foreign air carriers, and U.S. air
carriers: To give consumers reasonable and timely notice if air
transportation they are considering purchasing will be provided by an
airline different from the airline holding out the transportation, and
to disclose the identity of the airline that will actually operate the
aircraft.
Second, for tickets issued in the United States, requires U.S. and
foreign air carriers and travel agents to provide written notice of the
transporting carrier's identity at the time of purchase of air
transportation involving a code-sharing or long-term wet-lease
arrangement.
DATES: This regulation is effective July 13, 1999. Comments on the
information collection requirements must be received on or before May
14, 1999.
ADDRESSES: Comments should be sent to Jack Schmidt, Office of Aviation
and International Economics (X-10), Office of the Assistant Secretary
for Aviation and International Affairs, Office of the Secretary, U.S.
Department of Transportation, 400 Seventh St., SW., Washington, DC
20590, (202) 366-5420 or (202) 366-7638 (FAX).
FOR FURTHER INFORMATION CONTACT: Laura Trejo, Office of International
Law, Office of the General Counsel, Room 10118, (202) 366-9183, or
Timothy Kelly, Aviation Consumer Protection Division, Room 4107, (202)
366-5952, U.S. Department of Transportation, 400 7th Street, SW.,
Washington, DC 20590.
SUPPLEMENTARY INFORMATION:
Background
The Department issued a Notice of Proposed Rulemaking (NPRM), 59 FR
40836 (August 10, 1994), to obtain comments and reply comments on
requiring the disclosure of code-sharing arrangements and long-term wet
leases. In these operations, the operator of a flight differs from the
airline in whose name the transportation is sold. The NPRM proposed to
strengthen the current disclosure rules.
The NPRM, among other things, proposed (1) to require travel agents
doing business in the United States, foreign air carriers, and U.S. air
carriers (a) to give consumers reasonable and timely notice if air
transportation they are considering purchasing will be provided by an
airline different from the airline holding out the transportation, and
(b) to disclose the identity of the airline that will actually operate
the aircraft; and (2) for tickets issued in the United States, to
require U.S. and foreign air carriers and travel agents to provide
written notice of the transporting carrier's identity at the time of
purchase of air transportation involving a code-sharing or long-term
wet-lease arrangement. The NPRM also stated that the Department wants
to consider seriously a requirement that the transporting carrier's
identity be printed on the flight coupon for services involving a code-
sharing or long-term wet-lease arrangement.
This action was taken to ensure that consumers have pertinent
information about airline code-sharing arrangements and long-term wet
leases on domestic and international flights.
We received comments on the NPRM and reply comments from ten U.S.
airlines (Alaska Airlines, Inc., American Airlines, Inc., Continental
Airlines, Inc., Delta Air Lines, Inc., Frontier Airlines,
Inc.1, Northwest Airlines, Inc., Southwest Airlines Co.,
Trans World Airlines, United Air Lines, Inc., and USAir, Inc.), eight
foreign airlines (Aerovias de Mexico, S.A. de C.V., British Airways,
Qantas Airways Limited, SwissAir, LTU Lufttransport-Unternehmen GmbH. &
Co. KG, British Midland Airways, Ansett Australia Holdings, and Lan
Chile), the International Association of Machinists and Aerospace
Workers, three associations (Regional Airline Association,
International Airline Passengers Association, and National Air Carrier
Association), three CRS vendors (Galileo International Partnership,
Worldspan, and System One Information Management, Inc.), nine travel
agent/industry groups (Action 6, Admiral Travel Bureau, American
Automobile Association, American Society of Travel Agents, Mercury
Travel, Omega World Travel, Rogal Associates, Township Travel, and
USTravel), and five other groups or individuals (Americans for Sound
Aviation Policy, the City of Philadelphia, Donald Pevsner, the British
Embassy, and Congresswoman Rosa De Lauro).2
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\1\ Frontier Airlines, Inc. subsequently withdrew its comments.
\2\ The Saturn Corporation and PMI Mortgage Insurance submitted
letters prior to publication of the NPRM.
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The comments persuaded us that we should change one aspect of the
proposal. The proposed rule would have allowed airlines operating under
network names, e.g., American Eagle or Delta Connection, to identify
themselves to the public only by those names. Supporters of this
original proposal argued that giving passengers the actual corporate
name, e.g., Atlantic Coast Airlines, could add to confuse passengers'
confusion, because there are typically no airport signs using that name
that would tell passengers where to check in.
Some commenters, however, argued that the public should know
precisely who is operating the aircraft. They asserted that permitting
the commuters to operate only under a network name obscures, rather
than clarifies, the nature of the operation.
We issued a supplemental notice proposing to require all operators
to disclose their corporate name. 60 FR 3359 (January 17, 1995). The
notice also requested comments on whether, to avoid any airport-related
confusion, we should also require disclosure of the network name where
there is one. The purpose of this proposal was to help ensure that
consumers will not assume that a major airline is the transporting
carrier when purchasing transportation operated by one of its regional
airline partners.
We received comments on the supplemental notice from Northwest
Airlines, American Airlines and AMR Eagle, Trans World Airlines, United
Air Lines, USAir, Inc., Midwest Express Airlines and Astral Aviation
doing business as Skyway Airlines, Delta Air Lines, Continental
Airlines and System One, the International Association of Machinists
and Aerospace Workers, the Port Authority of New York and New Jersey,
Gulfstream International Airlines, Inc., the American Society of Travel
Agents, and the Regional Airlines Association.
The following is a summary of the comments and reply comments and
the Department's decision on each component of the NPRM:
[[Page 12839]]
Written Notice on the Flight Coupon
The NPRM announced that the Department was considering a
requirement that, where the designator code on the ticket is different
from that of the transporting carrier on any flight segment, there must
be printed on the flight coupon (1) an asterisk, like the one that
already identifies flights listed in computer reservation systems
(CRSs) under an airline code different from that of the transporting
carrier, and (2) a legend elsewhere on the coupon that states the
transporting carrier's identity preceded by the words ``operated by.''
American supported the proposal and stated that the legend
``operated by'' could be printed on the newer ``Automated Ticket and
Boarding Pass'' (``ATB'') ticket stock, which accounts for 80 percent
of the tickets issued. However, American claimed that there is
insufficient room on the older ``Transitional Automated Ticket''
(``TAT''), which still accounts for 20 percent of the tickets issued.
American estimated that total modifications to its SABRE computer
reservation system (used by travel agents and American's own ticket
agents) to comply with the proposed requirement would cost between
$250,000 and $300,000. The National Air Carrier Association (``NACA'')
also supported the proposal. Mr. Pevsner proposed that an asterisk be
placed in the ``CARRIER'' box with a bold-type disclosure elsewhere on
the flight coupon.
The American Automobile Association (``AAA''), British Airways,
Delta, Galileo, Northwest, Qantas, Worldspan, USAir, the City of
Philadelphia, Lan Chile, and SwissAir opposed printing on the ticket.
Most of the opposition claimed that there was simply no room on the
ticket and that the associated costs would be unduly burdensome.
Worldspan argued that it would not be feasible to include the identity
of the transporting carrier on a flight coupon, and it opposed
American's suggestion that the notice should be carried on the ATB
stock but not the TAT stock. Worldspan asserted that if notice were
provided on one type of ticket stock but not the other, the result
would be more confusing to passengers than providing no notice on
either type of stock. Galileo stated that it would be necessary to
retrofit about 13,000 ticket printers located in Apollo agencies,
costing $500,000, and that the implementation phase would take longer
than 60 days. Delta stated that if the Department imposed a new written
notice requirement, the industry would need up to one year to comply.
Because American stated that a notice could be placed on ATB stock
but not on TAT stock, TWA suggested that the notice be required either
on the ticket stock or on the mini-itinerary stapled to the ticket. TWA
believes that the mini-itinerary, when stapled to the ticket package,
is an adequate substitute for requiring notice of a code-share carrier
on the ticket coupon.
United claimed that printing on the tickets would duplicate the
written notice on the itinerary and conflict with the movement towards
ticketless travel. Further, United disagreed with American's cost
estimate, because it was based on only one type of ticket generated on
domestic ticket printers. According to United, most carriers would not
want to limit such a ticketing change only to the type of ticket issued
in the United States but would want it to apply system-wide, and to all
types of printers. If the costs of reprogramming and retooling all
ticket printers worldwide were taken into account, United estimated
that costs would exceed $1 million and that implementation would take
more than one year. Continental and System One estimated the costs to
System One at more than $300,000 with a six to ten month implementation
phase.
Delta argued that the standard ticket format is based on an
industry agreement. According to Delta, any changes to the format will
require discussions between the carriers and CRSs, which would be time-
consuming and potentially costly.
The International Airline Passenger Association (IAPA) stated that
if there is insufficient space to print a notice on the ticket, a card
could be added after each coupon on which a code-sharing flight appears
stating that the flight on the prior coupon is actually being operated
by another carrier.
Decision
The Department has decided to defer further consideration of a rule
requiring written notice on the face of the ticket until standards for
ticketing, evolution of ticketless travel, and the effectiveness of
other disclosure measures can better be evaluated. The comments have
persuaded us that we could, at best, cover only 80 percent of the
tickets issued at this time without imposing substantial costs, since
the older TAT ticket stock cannot accommodate our proposed notice. It
appears that the major cost of providing the written notification on
the coupon is due to the reprogramming of the print command software
and retooling the printer hardware. Based on the comments, these costs
range from $300,000 to $1,000,000 depending upon the system. The total
cost for the written notification on the ticket coupon would
approximate $3,800,000 for the largest portion of the U.S. airline/CRS
vendor industries.
We believe that we should impose such a cost burden only if it
could be shown that the benefits would clearly outweigh the costs.
Given the difficulty of estimating the incremental benefit that notice
on the ticket would add to the other measures we are requiring, such as
the written and oral notice components of the rule, we cannot conclude
at this time that imposition of the additional requirement is
warranted. Also, as United argued, it is unclear at this point how the
ticketless travel movement will develop. Therefore, during the two to
three year period following effectiveness of this rule, the Department
will monitor (1) the effectiveness of the disclosure rule as adopted,
(2) the ticketless travel trend, and (3) the ability of airlines to
give adequate consumer notices in a ticketless environment and will
revisit this issue then if justified. We can then initiate further
rulemaking action if it appears necessary.
Application of Rule to Wet Leases
The NPRM proposed to apply the oral and written notice requirements
to wet leases that last more than 60 days because, from the consumer's
perspective, wet leasing is indistinguishable from code-sharing: the
passenger buys a ticket from one airline, but the aircraft is operated
by another.
Continental, System One, British Airways, Qantas, USAir, NACA, the
Government of the United Kingdom, Lan Chile, and Northwest opposed this
proposal. They argued that wet-lease operations do not cause
significant confusion problems and that the proposed notice would
actually confuse passengers. In addition, these opponents claimed that
it is not technically feasible to give notice, because aircraft used in
wet leases are frequently used on different routings and/or on
different days of the week, making advance identification
impracticable. USAir in particular claimed that it would take at least
a year to modify computer software, and it stated that the Department
can impose any necessary consumer protection conditions through the
present licensing process. British Airways argued that requiring notice
will keep airlines from being able to enter into flexible aircraft
arrangements. Northwest stated that a wet lease differs from a code-
sharing arrangement in that only one carrier is holding out service on
the flight. Moreover, Northwest
[[Page 12840]]
argued that the lessee carrier is fully responsible for the operation
of the flight even though the crew is provided by the lessor carrier,
and the wet-lease agreement typically states the lessee's operating
requirements.
Americans for a Sound Aviation Policy (``ASAP'') stated that the
notification requirement should be triggered by wet leases of two weeks
since CRS notification to travel agents can be nearly instantaneous.
LTU, a privately owned German carrier, suggested amending section
257.3(f), the definition of a long-term wet lease, to add at the end
the phrase, ``unless such lease is between air carriers with 100
percent common ownership.'' LTU leases aircraft on a long-term basis to
an affiliate with identical ownership. The aircraft are then leased
back to LTU with crew for the same term. A limited portion of the
operations of these aircraft are in scheduled service to the United
States. LTU claimed that these are not true wet leases because LTU owns
the aircraft it leases, but it noted that LTU's operations would appear
to be subject to this proposal. According to LTU, its affiliate does
not have a separate commercial identity or a designator code in the
Official Airline Guides, and moreover, it and its affiliate have the
same managing director and most of the same management. Reasoning that
the disclosure requirement would only confuse passengers, LTU suggested
amending the proposal as indicated above.
Southwest asked the Department to revise the NPRM to exclude the
Southwest-Morris Air arrangement and similar operating arrangements
from the public disclosure requirements. Morris Air is now wholly owned
by Southwest. Southwest stated that, under their transitional
arrangement, Morris Air ceased holding out its services to the public
on October 4, 1994, and after that date those services were held out
solely in Southwest's name. For a period of six months, some flights
would be operated by Morris Air aircraft and crews. This arrangement
was to last only long enough to meet the FAA procedures for conversion
of the remaining Morris Air aircraft to Southwest's certificate and
operations specifications.
Decision
The Department has decided to retain but modify the proposed
requirement to disclose the identity of the actual operator of a long-
term wet lease. No commenter provided an adequate basis for
distinguishing between long-term wet leases and code-sharing
arrangements from the consumer's perspective. Northwest's observation
that in a wet lease only one carrier is holding out service on the
flight does not take into account major U.S. carriers' alliances with
commuter carriers (such as United Express or American Eagle). In these
alliances, generally only the major carrier holds out
service.3
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\3\ Furthermore, Northwest's assertion that the lessee carrier
is fully responsible for the operation of the flight even though the
crew is provided by the lessor carrier is only partially correct.
The Federal Aviation Administration policy requires ``each U.S. air
carrier to retain operational control of each wet leased aircraft
listed on its operations specifications regardless of whether the
aircraft is U.S. or foreign registered.'' Air Transportation
Operations Inspector's Handbook, Order 8400.10, August 23, 1988,
section 4.309.
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The Department will modify the proposal, however, to apply only to
those wet leases where the aircraft are dedicated to particular routes.
This modification addresses the commenters' concern that giving notice
may not be feasible if aircraft are not dedicated to particular routes
and that the requirement will keep airlines from entering into flexible
aircraft arrangements. Carriers in situations such as those like LTU
and Southwest may seek individual relief from the rule from the
Department.
We are not adopting USAir's suggestion that the Department impose
any necessary consumer protection conditions through the present
licensing process, since the purpose of this rule is to impose clear
and uniform disclosure requirements, not ad hoc conditions. Moreover,
wet leases involving only U.S. carriers are not now subject to any
economic licensing process, but are authorized by regulation.
Corporate and Network Names
The Supplemental Notice of Proposed Rulemaking (SNPRM) proposed a
requirement that for operations conducted under a network name, such as
``The Delta Connection,'' that is applied to several airlines, the
transporting carrier's corporate name itself be disclosed to consumers
in code-share and long-term wet lease operations. The Department stated
that it expects airlines and ticket agents also to disclose the network
name, if that is the name in which service is generally held out to the
public. We solicited comments on whether we should make this an
explicit requirement in the final rule.
American, AMR Eagle, and the International Association of
Machinists and Aerospace Workers (IAM) supported this proposal. IAM
based its support on its concern that consumers should have this
pertinent information about airline code-sharing arrangements and long-
term wet leases on domestic and international flights. American and AMR
Eagle asserted that the rule should require the disclosure of both the
network name and the identity of the transporting carrier to minimize
confusion and to tie the reputation of the major carrier to the service
provided by the commuter code-share partner. They stated that the rule
is feasible and relatively inexpensive to implement. To this extent,
they asserted that in American's timetables, the American Eagle logo is
used to indicate that service in a particular city-pair is provided by
one of the American Eagle carriers. They noted that a simple chart in
the timetable can correlate the flight numbers with each of the four
operating entities that make up the American Eagle network.
Furthermore, they stated that in the SABRE computer reservations system
used by about 24,000 travel agencies world wide, the identity of the
individual network carrier is already available for most airlines.
According to American and AMR Eagle, SABRE would not have difficulty
complying with the proposed rule so long as the individual carriers in
code-sharing networks are obligated to provide the required
information.
Opponents argued that there would be substantial costs and
confusion. TWA stated that the rule would increase costs that are
impossible to quantify for consumers, carriers, and travel agents. TWA
asserted that the rule would cause consumer delays as they search
airports vainly for gates showing the carrier's corporate name.
According to TWA, the Department has no basis to believe that
passengers experience any confusion when they hear the name of commuter
carrier affiliates of major carriers.
Northwest stated that many carriers already voluntarily disclose
the corporate identity to passengers who want the information.
Northwest claimed that Worldspan and its internal reservation system
identify the corporate names in both the availability and booking
screens. Northwest also noted that American does not provide the
corporate names of its American Eagle network commuters in the Official
Airline Guides or of its American Eagle carriers in its system
timetable.
United argued that the Department's consumer complaint files do not
indicate a consumer demand for identification of network commuters by
their corporate names. United stated that it already instructs its
reservation agents to provide the corporate name where a passenger
books a ticket involving United Express. United noted
[[Page 12841]]
that its Apollo CRS displays the commuter carrier's actual name on the
screen when the reservation is made.
United stated that the Department should require disclosure of the
corporate name in addition to the network name only when a passenger
requests it. However, United asserted that if any regulation is deemed
necessary, it should be limited to the requirement in proposed sections
257.5(a) and 257.5(c) regarding information in CRSs and in carrier
schedules and a written notice. United asserted that it, like most
other carriers (except for American), already provides the corporate
name in written or electronic schedule information, so adoption of this
portion of the rule should not be burdensome. As for written notice,
United stated that it does not object to the rule so long as the
Department clarifies that United can use, as it does currently,
abbreviations where these are used by the commuter carriers themselves.
In contrast, United stated that there is no need for proposed section
257.5(b) requiring corporate name information in the oral notices or in
advertising as indicated in proposed section 257.5(d). United argued
that a requirement to disclose the corporate name would be an undue
burden and restrictions on carrier advertising would represent an
unconstitutional restraint on freedom of commercial speech. Finally,
United noted that the Department did not conduct a cost-benefit
analysis for the additional notice proposed in the SNPRM.
The Port Authority of New York and New Jersey asserted that the
proposed rule would not avoid consumer confusion. It argued that it is
unclear whether the term ``corporate name'' means the name in which the
Department issued the applicable certificate or the ``doing business
as'' name, which is easy to change .
According to Midwest Express, its only code-share partner is its
subsidiary with the official corporate name of Astral Aviation, Inc.
doing business as Skyway Airlines. Midwest Express stated that Skyway
Airlines is not the name of a network of different commuter operations
by different, independent corporations. It urged the Department to
exempt from the corporate name identification requirement the situation
where only one corporation is using a particular servicemark. Midwest
Express argued that requiring it to identify Skyway as ``Astral
Aviation/Skyway Airlines'' will not help consumers know that Midwest
Express and Skyway are separate operations. It argued that the proposed
rule would only confuse consumers and increase costs. Astral estimated
that the corporate name disclosure requirement would add about $90,000
annually to its reservation costs based on the assumption of an average
increase in ``talk time'' of 15 seconds per call to its reservation
number. Astral alleged that the costs are a significant percentage of
its projected profits on its forecast 1995 revenues of $35 million.
Astral stated that its estimate does not include, among other things,
the increased expenses to travel agents, which book about 80 percent of
the tickets on Midwest Express/Skyway Airlines.
Delta argued that the proposal represents a significant
modification to long-standing industry practice and would impose
substantial costs and burdens without bringing any countervailing
public benefits. Delta estimated that several hundred hours of
programming would be required over several months to include the
corporate names of the Delta Connection carriers and all other code-
share partners in its primary availability screens. It noted that if
the proposed rule requires disclosure of the corporate name of the
Delta Connection carrier to be included as part of each relevant flight
listing, such requirement would substantially increase the size and
costs of the printed schedules. Delta stated that it is unaware of any
confusion among the public concerning domestic code-sharing under
network names and argued that disclosing the corporate name would not
provide additional information concerning the type and size of
aircraft, crew qualifications, comfort, and in-flight amenities. If
anything, Delta argued, the proposal would promote consumer confusion.
Delta also stated that travel agents would likely only disclose what is
required (i.e., the corporate name) and argued that requiring
disclosure of the corporate name would dilute the value of the network
name. Delta suggested that if the Department requires disclosure of the
corporate name, it should key the timing of such disclosure to the
point at which the customer purchases the transportation rather than
requiring such notice before booking transportation.
Continental and System One argued that if the Department adopts any
rule requiring disclosure of corporate names, that rule should be
limited to code-sharing arrangements. They asserted that corporate
names change frequently and are relatively meaningless to the general
public. Moreover, like Delta, they also stated that use of network
names has long been standard industry practice. They claimed that
requiring disclosure of corporate names in electronic and written
schedule information provided to the public with respect to long-term
wet-lease arrangements would force System One to spend about $200,000
in implementation costs. According to them, written disclosure of
corporate names at time of sale and in advertising would also incur
substantial costs.
USAir stated that of the 2500 USAir Express departures per day, not
one is operated by a USAir commuter affiliate under its own corporate
name. Furthermore, USAir argued that there are no public identifiers
used for these operations except for the USAir Express network name.
According to USAir, if consumers are given both the network name and
corporate name, they will be unsure of which name to seek at the
airport. In addition, USAir estimated that complying with the proposed
rule would cost $255,000 in programming hours and at least six months
to a year's time to update USAir's PACER reservations system.
The Regional Airline Association (RAA) supports the disclosure of
network names. However, it does not believe that disclosure of the
corporate name would have any benefits for the public.
The American Society of Travel Agents (ASTA) argued that the
proposed rule was not the most efficient method of notifying travel
agents about code-sharing details. ASTA suggested that the Department
require that CRS displays clearly indicate the existence of code-
sharing by showing all code-shared flights only once in the CRS
availability displays and using a double airline code, with the first
displayed code indicating the transporting carrier. According to ASTA,
the rest of the rule should be deferred until voluntary compliance with
their proposal can be monitored. ASTA questioned whether any rule is
necessary on this subject if the Department is convinced that agents
and airlines are going to disclose the existence of code-sharing
situations voluntarily along with the network name.
Gulfstream International Airlines, Inc. (Gulfstream) asserted that
the network name is sufficient to alert customers to a code-shared
flight. Although it opposes the rule, Gulfstream stated that if the
rule is adopted, the Department should make it mandatory for travel
agents to inform the public of the network name to avoid airport
terminal confusion. As to potential costs for the regional carriers to
re-identify themselves in terminal facilities, Gulfstream noted that a
major terminal will charge a new airline between $5,000 to $10,000 for
a signage package.
[[Page 12842]]
According to Gulfstream, any argument that network names might be
intentionally masking the true corporate identities is not valid,
because all information concerning the corporate name of the
transporting carrier is provided at the customer's request by the
issuing airline or travel agency. In addition, Gulfstream claimed, all
pertinent information is provided by the major carriers' publications
and published in the Official Airline Guides.
Decision
The Department has decided to require airlines and ticket agents to
disclose to consumers the corporate name of the transporting carrier in
code-share and long-term wet lease operations. In addition, we have
decided to revise this proposal to require the sellers of air
transportation to disclose the network name, if one is used, as well as
the corporate name. This requirement will apply to all four notice
requirements: information supplied to CRS vendors, oral notice during
the decision making portion of the purchase of transportation, written
notice, and advertisements.
Internationally, the practice of code sharing is expanding
dramatically. The gradual liberalization of our bilateral air services
agreements will increasingly enable foreign airlines to offer through
service to many interior U.S. points. We expect much of this service,
particularly international service to our smaller communities, to be
provided through code-sharing arrangements with U.S. airlines.
As discussed below, we are taking this action because we believe
strongly that consumers are entitled to know all significant
information regarding the air transportation they are purchasing and
that consumers can make fully informed choices only when they have all
relevant information. Further, we believe that the failure to disclose
both the corporate and network names is inherently unfair and
deceptive. Failure to disclose would leave many consumers without
information important to them and not readily available to them
otherwise. The potential for their confusion would increase as the
practice of code sharing becomes more widespread.
The Requirement To Disclose the Corporate Name
Service to many U.S. communities is provided by commuter airlines
that share the code of major airline partners. Services such as these
are marketed using a trade name that is often similar to that of the
major airline partner. This ``network'' name may be shared by a number
of independent, separately owned and managed carriers. However, the
contract of carriage is frequently between the commuter airline and the
passenger in domestic transportation, and except in certain
circumstances, the major airline may bear no legal responsibility to
the passenger. Further, the passenger may erroneously believe that he
or she is traveling on that major airline.
Without disclosure requirements, code sharing carriers can obscure
their relationships as well as important aspects of the contract of
carriage. Indeed, one marketing objective in the domestic code sharing
practice of using a network name may well be to draw upon the goodwill
and reputation of the major airline to attract passengers to the
commuter airline. However, if the relationship is not fully disclosed,
it is often unclear to the consumer who is responsible to them in cases
of lost baggage, for example, making recovery difficult. Moreover,
consumers purchasing air transportation are purchasing a service to be
performed in the future: in essence, the consumer is extending credit
to the carrier. The use of the network name, without disclosure of the
corporate name, could result in a passenger's inadvertently purchasing
transportation from a carrier that the passenger believes is not worthy
of his or her credit.
Passengers may prefer to avoid certain carriers because of prior
negative experiences. Their ability to do so is a critical part of a
competitive system. Yet undisclosed or inadequately-disclosed code-
sharing, by obscuring the identity of the actual operator, could
inhibit the free operation of the market. Finally, passengers can be
misled by code-sharing arrangements between commuter carriers and major
carriers into thinking that they have purchased jet transportation
because they dealt with a major carrier. This confusion has proved
particularly troublesome for passengers with disabilities since
commuter aircraft are often less accessible than large jets. For all
these reasons, we believe that passengers should be told the identity
of the company with which they are doing business and that the failure
to identify the transporting carrier by its corporate name is
inherently unfair and deceptive.
The only passenger groups that have participated in this rulemaking
strongly supported requiring disclosure of the corporate name, citing
the right of consumers to make fully informed choices.4
Moreover, we do not understand most other commenters to be advocating
that the information be withheld from consumers: the dispute seems to
be over when and how it should be provided, and whether a rule
requiring disclosure is warranted.
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\4\ See, Comments of International Airline Passenger Ass'n. and
Americans for Sound Aviation Policy.
---------------------------------------------------------------------------
United and Northwest say that some carriers already make the
corporate name available to passengers who want the information, if
they ask.5 We believe that the reasons that compelled these
carriers to do so, and the interest shown by the consumers who ask,
justify requiring that this information be provided to all passengers.
Moreover, if several carriers already have a system for providing this
information, this would appear to undermine the assertions that the
proposal is unduly burdensome.
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\5\ Reply comments of Northwest Airlines, Inc. at 3 (Feb. 23,
1995); Comments of United Air Lines, Inc. at 4 (Feb. 16, 1995).
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Like our predecessor, the Civil Aeronautics Board, we have long
believed that code-sharing can be misleading if not disclosed to
purchasers of air transportation. When it first examined the need for
consumer protection in a code-sharing context in 1984, the CAB found
that ``code sharing * * * may cause confusion and may be deceptive to
consumers in some cases.'' United is mistaken when it suggests that the
First Amendment precludes us from requiring airlines to divulge the
corporate name: the First Amendment protects only truthful speech, not
false and misleading commercial speech.6
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\6\ In re RMJ, 455 U.S. 191, 203 (1982).
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Moreover, we have recently undertaken a study of the economics of
code sharing,7 and we believe that in the future, code-
sharing arrangements will become even more common than they are today.
Also, they may be more complex, involving more partners, and
potentially global in scope.8 Although United accurately
notes that we had few complaints in 1994, we expect that the trend
towards expanded and more complex code-sharing arrangements will result
in many more complaints unless we improve disclosure to the consumer.
---------------------------------------------------------------------------
\7\ A Study of International Airline Code Sharing prepared for
the Department of Transportation, December 1994.
\8\ International Air Transportation Policy Statement, 60 FR
21841 at 21842 (May 3, 1995).
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Thus, we conclude that consumers will benefit from having complete
information. Consumers have a right to know what kind of service they
are purchasing and with whom they are dealing. Our rule will effectuate
this right.
[[Page 12843]]
Our analysis indicates that the costs of providing this information
should not be substantial, especially over time. Although some
commenters claimed that revealing the corporate name to passengers
would be unduly burdensome and expensive, they provided very little
evidence to support their claims, despite our specific request that
they do so.9 Indeed, Northwest's internal reservation system
provides the information already.10 Continental/System One
and USAir provided only conclusory estimates of the costs of
reprogramming. United confirmed that it instructs its reservations
agents to provide the corporate name when a passenger books a ticket
involving a United Express carrier and that its internal reservation
system displays the commuter carrier's actual name on the screen at the
time the reservation is entered.11 It did not estimate the
cost of reprogramming its systems to display the information at the
earlier decision making point.
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\9\ 60 FR 3361, January 17, 1995.
\10\ Motion for Leave to File and Reply Comments of Northwest
Airlines, Inc. at 3 (Feb. 23, 1995).
\11\ Comments of United Air Lines, Inc. at 10 (Feb. 16, 1995).
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Reprogramming costs are, of course, one-time costs. The Department
is aware, as Midwest/Astral and other commenters point out, that there
will be recurring operating costs due to the increase in time that it
will take to disclose the additional information required by this rule.
Among the commenters, only Midwest Express/Astral provided a more
detailed estimate of the increase. Based on increased labor costs
($30,000) resulting from additional talk time of 15 seconds per call
for reservation agents and increased telephone line usage charges
($58,000), they calculated an annual increase in operating costs of
$88,000.
In order to estimate annual operating costs, we estimated the
number of airline tickets that involve code-sharing or long-term wet-
lease arrangements since the Department does not collect data on the
actual number of tickets that involve these arrangements. We have
therefore determined that a reasonable estimate of the number of
tickets issued under a code-sharing arrangement could be made based on
the number of passenger enplanements. For domestic air transportation,
code-sharing arrangements typically involve agreements between a larger
major airline and a regional airline. For the year ended December 31,
1994, the U.S. regional airline industry reported 57.1 million
passenger enplanements of which 94 percent (or 53.7 million
enplanements) were transported by code-sharing regional airlines. As a
proxy, the figure 53.7 million enplanements, which are 10.3 percent of
the total domestic enplanements, serves as a starting point for
estimating the number of code-sharing tickets. We know, however, that
this total overstates the number of code-sharing tickets, since many
tickets are written to cover a round-trip journey that would encompass
two enplanements but only a single ticket. For these passengers, use of
the number of enplanements overstates the number of tickets by a factor
of two.
To estimate the number of tickets for U. S. and foreign airlines on
international routes, which include some travel to or from a U.S. point
or points, we began with the total of 89.8 million passengers for the
year ended December 31, 1994. Of this total, 48.6 million flew on U.S.
flag carriers and 41.2 million used foreign carriers. In estimating the
number of code-sharing tickets based on these passenger totals, it is
apparent that the number of code-sharing tickets would be overstated
for the same reason of round-trip ticketing as stated previously. We
also believe that in 1994, on a volume basis, code-sharing was not
nearly as prevalent internationally as it was domestically. Since
domestic regional enplanements are 10.3 percent of total domestic
enplanements, we believe that it is reasonable to assume that code-
sharing tickets comprise less than 10.3 percent of total international
tickets and have used five percent for purposes of this analysis.
Based on U.S. airlines' estimated code-sharing domestic traffic of
32.2 million (calculated on the assumption that 80 percent of the 53.7
million passengers purchase round-trip tickets), U.S. estimated code-
sharing international traffic of 1.5 million (five percent of the total
of 48.6 million using the 80 percent round-trip assumption), and 1.2
million estimated code-sharing foreign flag passengers (five percent of
the total of 41.2 million with the same 80 percent round-trip
assumption), this analysis estimated that there were approximately 34.9
million code-sharing tickets issued in the year ended December 31,
1994.
We then estimated the annual increase in operating costs for the
airline and travel agent industries. Using the 15 seconds (0.25
minutes) of additional talk time and assuming that each of the
estimated 34.9 million code-sharing purchasers in 1994 made an average
of 2.1 phone calls during the process of purchasing tickets, the
estimated number of total calls amounted to 73.3 million representing
18.3 million additional minutes or 305,375 additional hours. Based on
an hourly rate of $17.44 (salary and fringe benefits) for a travel
agent and $24.04 for an airline ticket agent, weighted by the relative
number of tickets sold by each, and an assumed rate of $0.25 per minute
for the cost of additional telephone line usage, the annual increase in
operating costs for the airline and travel agent industries amounted to
$10.3 million. In the context of the $68 billion in annual passenger
revenues that the U.S. airline industry generated in 1994 or the $94
billion in sales ($56 billion of which pertained to airline sales) that
travel agencies produced in 1993, the increased operating cost is
clearly not prohibitive.
We also used similar assumptions (duration of call, number of
tickets, and number of calls) to estimate the potential increase in
cost to the prospective traveler that would result from the loss of
productive time due to the additional talk time. Based on the value of
time at $34 per hour and $65 per hour for domestic and international
travelers, respectively, we estimated that the annual additional cost
to travelers would amount to $11.1 million. On a per ticket basis, the
average cost to consumers would be $0.30 for domestic travel and $0.57
for an international trip. While the Department would prefer not to
take actions which have the potential to increase the cost of travel or
result in a loss of productive time, we believe these amounts are
minimal and not prohibitive considering that the average ticket price
for domestic travel is approximately $140 and the average price for
international travel exceeds $400. Based on these, the cost to
consumers would represent approximately 0.2 percent and 0.1 percent of
the domestic and international ticket prices.
The Department recognizes that code-sharing arrangements and the
number of code-sharing trips are likely to increase in the future. We
also recognize that the cost for fully informing prospective travelers
will impact different segments of the travel industry and the public to
varying degrees. However, we believe that the fact that such
arrangements are increasing and becoming more sophisticated emphasizes
the paramount importance that the traveling public be fully informed.
This benefit clearly outweighs the minor cost increases and we further
believe that these costs will decrease in the future as consumers and
frequent travelers adjust and as new, less-costly, channels of
[[Page 12844]]
distribution become available (such as the Internet.)
Midwest Express/Astral pointed out that the $88,000 increase is
significant for an airline the size of Astral. While we recognize that
the impact of the rule will vary among airlines and travel agencies, we
are reluctant to accept the impact on Astral as stated since the
increase in telephone line charges was not documented and was difficult
to evaluate in comparison to our research into toll-free calling
systems.
The Requirement To Disclose the Network Name
We have also decided to require disclosure of the network name, if
any, under which the services are operated. As we noted in our August
1994 NPRM, many carriers have chosen not to advertise or publicize
their corporate name, choosing instead to operate under the network
name of a major airline.12 As a result, if a carrier or
ticket agent were to identify the code-shared service of a small
carrier only by its corporate name, passenger confusion is likely. In
particular, we wish to avoid having passengers arrive at the airport
and look for a carrier that they know only by its corporate name (or
which the ticket or written notice identifies only by its corporate
name), when that particular carrier identifies itself at the airport
only by its network name. Not only would such passengers be
inconvenienced as they attempted to locate the carrier, but in some
cases, particularly in the case of a connection, they could miss their
flights.
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\12\ 59 FR 40836, 40838 (August 10, 1994).
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When and How Disclosure Should Be Made
1. Notice in schedules. The rule will require airlines involved in
code-sharing arrangements or long-term wet leases to ensure that
schedule information provided to the public identifies both the
corporate name and the network name, if any, of the transporting
carrier. We believe that this information is the minimum necessary to
enable reservations agents and travel agents to help the consumer make
an informed decision about the transportation that they are purchasing.
2. Oral Notice. As discussed elsewhere, it is our policy that
prospective purchasers of air transportation should know all the
relevant facts during the decision making portion of the reservation
transaction. We believe that the true corporate identity of the
transporting carrier is highly relevant to deciding what air
transportation to purchase. Accordingly, the rule will require airlines
and travel agents to tell consumers, in any direct oral communication,
before booking transportation, that the transportation they are
considering involves a code-sharing arrangement or a long-term wet
lease, and to identify the transporting carrier by both its corporate
name and its network name (if any).
3. Written Notice. We will require the transporting carrier to be
identified by corporate name and network name (if any) in the written
notice requirement of section 257.5(c). Written notice that clearly
identifies the carrier by corporate and network name will serve at
least two important functions. It will provide consumers with relevant
information about the transportation being purchased, and with the
written notice as a reminder, the consumer will be more likely to find
the proper ticket counter, check-in desk, or gate.
4. Advertisements. Advertisements are part of the decision making
process. Therefore, we believe that the transporting carrier should be
identified in printed advertisements by both its corporate name and its
network name, if any. As discussed below, we have decided that a
generic disclosure will be acceptable in the case of broadcast
advertisements.
Application of Rule to Ticket Agents
The NPRM proposed to require travel agents doing business in the
United States, when giving information about air transportation
involving code-sharing arrangements and long-term wet leases, to
disclose these arrangements and the identity of the transporting
carrier.
Delta, Northwest, the RAA, Continental, System One, TWA, Worldspan,
Qantas, Mr. Pevsner, and United supported the proposal. United and
Qantas asked the Department to clarify that if the agent fails to
provide notice, but the carrier has provided it with the necessary
code-share information, any Department enforcement action would be
directed against the travel agency, not against the carrier.
American, Alaska Airlines, ASTA, and PMI Mortgage Insurance
complained about multiple listing of code-sharing arrangements on CRS
displays. They claimed that it would be unfair to impose the notice
requirement on travel agents unless there is better disclosure in the
CRSs and the ``screen clutter'' problem is addressed. Omega World
Travel requested that the Department terminate this rulemaking
proceeding and prohibit all code-sharing arrangements except those
where the carriers are affiliated by more than 10 percent ownership.
Omega World Travel stated that the rule was unnecessary because travel
agencies already have an interest in providing notice to their
customers. Rogal Associates stated that code sharing should be
abolished and that the travel agency business should not be burdened
further.
Decision
The Department has decided to adopt this requirement. Ticket agents
(including travel agents) sell about 80 percent of all airline tickets
issued in the United States. They are an important source of
information for consumers. Omega Travel stated that travel agents
already have a economic incentive to provide information about code
sharing. We agree. In order to attract repeat business, agencies have
an incentive to give their customers accurate and complete information
so that the customers will not be disappointed on their trips. However,
not all travel agents may respond to this incentive in the same way. We
believe it necessary to have a uniform rule so that all consumers will
have complete information no matter who sells the ticket.
United, Qantas, and most travel agencies that commented voiced
concerns with the implementation of this rule. Regarding United's and
Qantas' concerns, the fact remains that carriers, as principals, bear
responsibility for the acts of their agents, the travel agents. In
cases involving violations, we will decide whether to take enforcement
action, and, if so, against which entity or entities, based on the
circumstances of any particular case. The travel agency industry's
concerns regarding the resolution of the CRS display issue is outside
the scope of this proceeding. Furthermore, that issue has been directly
raised in a different proceeding, Dockets 49620 and 49622.
Application of Rule to Foreign Air Transportation
The NPRM proposed to apply the notice requirement to foreign air
carriers. Northwest, United, Delta, Continental, System One, and TWA
support this proposal. However, Qantas, the British Embassy, and
British Airways argue that the disclosure rules should apply only to
the sale in the United States of tickets for flights to, from, or
within the United States.
TWA stated that British Airways' concern about the applicability of
the proposed rule to sales and operations wholly within a foreign
country is
[[Page 12845]]
overstated. According to TWA, the Department's jurisdiction only
applies to foreign air transportation (traffic between the United
States and another country). TWA noted that the application of the rule
to inbound sales made abroad would protect consumers abroad who are
buying transportation to the United States and that such
transportation, as foreign transportation, is within the jurisdiction
of the Department. American argued that the rule should cover all
tickets sold in the United States, including segments between non-U.S.
points. Continental and System One stated that the rule should apply to
foreign carrier sales outside the United States for travel to and from
the United States.
Decision
Based on these comments, we have decided that the notice
requirement should apply to the marketing of foreign air
transportation, within the meaning of the aviation statutes i.e.,
excluding transportation between two foreign points, in the United
States whether the service is offered by a U.S. carrier or a foreign
carrier. This provision merely conforms our rules to the Department's
existing practice of imposing a notice requirement when we approve
applications for code-share authority. Our decision to limit this rule
to sales and calls made in the United States is consistent with our
overall policy of limiting this type of rule to transactions that take
place in the United States. (For example, the Department's recently-
adopted rule on special event tours covers only tours in interstate air
transportation, or in foreign air transportation originating at a point
in the United States. (See 59 FR 61508 (November 30, 1994), 14 CFR Part
381.) We disagree with the arguments that the rule should apply to
sales made overseas, because such an application might conflict with
foreign consumer protection measures that would make implementation of
this rule impractical. However, in view of the comments, we will
clarify the rule.
The rule will require four types of disclosure:
1. Notice in printed or electronic schedules: The rule will require
carriers to provide certain information regarding flights to, from, or
within the United States to schedule publishers like the Official
Airline Guides and CRSs in the United States, as well as in carriers'
own schedules and timetables.
2. Oral notice: The requirement to give oral notice will apply to
discussions in the United States, including all calls placed from the
United States, including those that are routed to carrier reservation
agents outside the United States.
3. Written notice: The rule will require carriers and travel agents
to give written notice in connection with any air transportation sold
in the United States--i.e., when either the seller or the buyer is
located in the United States.
4. Advertising: The requirement to give notice in advertising will
be limited to materials published, mailed or broadcast in the United
States.
Oral Notice
The NPRM proposed to require disclosure to the prospective consumer
in any direct oral communication, before booking transportation, that
the transporting carrier is not the carrier whose designator code will
appear on the ticket, as well as identification of the transporting
carrier.
Several commenters expressed concerns with regard to including the
phrase ``before booking transportation.'' American and TWA argued that
disclosure should be made during any oral communication regarding a
code-shared flight. American suggested that the phrase ``before booking
transportation'' could be read to imply that a carrier need only
disclose the information sometime before the transportation is booked.
Current policy has been to require disclosure in any communication, and
American supports continuation of that policy. American recommended
that the Department make clear that the disclosure must occur during
any oral communication that offers or refers to a code-sharing flight,
regardless of whether a booking is made by the prospective customer.
TWA found American's proposal reasonable because many consumers would
be making multiple calls to decide which carrier they should use.
Qantas complained that the proposed rule would require notice to
the same potential customer every time there was contact between a
seller and purchaser. Qantas argued that only one oral notification
should be required to the same consumer.
TWA claimed that the proposed requirement is inadequate because it
could be delivered at any time prior to the actual booking of the
transportation. According to TWA, notice should be offered at the first
instance that the schedule is offered. In addition, TWA stated that the
Department should clarify that providing the disclosure to the person
requesting schedule/booking information on behalf of the actual
consumer (e.g., a secretary acting for an executive) fulfills the
requirements of the rule.
Delta argued that the most important time to provide notification
of code-sharing arrangements is during conversations prior to booking,
because that is the time during which the consumer is evaluating the
available options. Delta further argued that the Department should
reject the suggestion that notification be given ``at the first
instance'' or on each and every occasion that contact is made with an
airline representative.
Northwest recommended that the disclosure be made during the
booking, rather than before the booking, because it still affords the
passenger an opportunity to decline the service if the passenger
objects to the code-shared service. TWA disagrees with Northwest and
argued that notice during booking is inadequate because it moves the
notice to a time after the consumer has made a decision.
American asserted that the current CRS displays of code-shared
flights fail to list flight information in a comprehensible manner and
noted that ASTA, TWA, Frontier Airlines, and ASAP also discussed the
problems of the CRS displays. Therefore, American argued that to
implement the oral notice requirement, the Department should mandate
improvements to the CRS displays.
Decision
We have decided to make final the proposal that the seller must
tell the consumer, before booking transportation, that the transporting
carrier is not the carrier whose designator code will appear on the
ticket and must also identify the transporting carrier. We have decided
to apply the rule to carriers and ticket agents to ensure that the
notice reaches all consumers of air transportation.
The rule is meant both to amend and to clarify the Department's
existing policy of requiring that customers be informed ``in any direct
oral communication'' of a code-sharing arrangement. As for American's
request for a clarification of the phrase ``in any direct oral
communication,'' it continues the Department's existing policy that
requires notice ``in any direct oral communication'' concerning a code-
shared flight. The phrase ``before booking transportation'' reflects
the Department's enforcement policy: during a given encounter (phone
call, visit, etc.) the agent or carrier may not wait until after the
consumer has decided to make the reservation or purchase the ticket and
disclose the code-sharing arrangement only when reading back the flight
information. Instead, the disclosure must be made at
[[Page 12846]]
the time that the schedule information is being provided to the
consumer during the ``information'' and ``decision-making'' portion of
the conversation, as TWA and Delta recognize. We therefore reject
Northwest's argument that disclosure should only be required during the
booking process. Furthermore, the term ``booking'' has no meaning that
departs from current policy, since it encompasses a reservation.
Moreover, none of the commenting parties, except for Qantas,
claimed that this requirement would impose an undue financial or
administrative burden. The comments support the Department's belief
that agents can already find the information needed to inform
prospective travelers properly.
TWA wanted the Department to clarify that the requirements of the
rule are fulfilled by disclosure to persons acting on behalf of a
consumer. The rule requires a seller to disclose information only to
whomever is booking the transportation, and does not require a seller
to seek out, and communicate orally directly with, anyone else.
Written Notice
The NPRM proposed to require written notice of the transporting
carrier's identity in conjunction with the sale of any air
transportation in the United States that involves a code-sharing
arrangement or long-term wet lease. If a separate itinerary is issued
with the ticket, the itinerary would have to contain a legend that
states ``operated by'' followed by the name of the transporting carrier
for any flight segment on which the designator code is not that of the
transporting carrier. If no itinerary is issued, the rule would require
a separate written notice that clearly identifies the transporting
carrier for any such segment.
TWA, IAPA, Northwest, and United supported the written notice
requirement. American supported written notice so long as it is to be
given at time of ticketing. American noted that three CRSs--SABRE,
Galileo International, and System One--each has indicated it can
produce itineraries with the required disclosure. Thus, American argued
that the cost of a separate notice to passengers who are not already
receiving a printed itinerary seems likely to be minimal. In American's
view, moreover, the benefit of a written notice is that it stays with
the passenger, whereas an oral notice given to someone making travel
arrangements for a business traveler may never reach a passenger at
all, or a passenger may forget about the code-share before embarking on
the trip. According to American, written notice will help the passenger
at several critical points, such as at check-in or when boarding the
aircraft. Northwest requested that the Department permit carriers to
use a standard prepared notice that contains a cross-reference list of
ranges of a carrier's flight numbers that are code-share services
similar to the way carriers now identify code-share carriers in the
Official Airline Guides.
In contrast, British Airways, Delta, and RAA opposed the written
notice requirement. They argued that it would impose substantial
financial and administrative burdens. Delta argued that the written
notice would complicate and lengthen the ticket transaction and result
in substantial delays at airport ticket counters and gates.
Continental and System One stated that written notice should be
given at the time an itinerary or ticket is issued and opposed separate
written notice where no itinerary or other document is issued prior to
airport check-in. USAir argued that written disclosure should be
required only if an itinerary is provided and claimed that updating
software for other written notice would take six months. Where no
itinerary is issued, USAir argued that a separate written notice is
costly and of minimal benefit to the consumer who has already received
oral notice and purchased the service. ASTA stated that in the case of
travel agents making courtesy bookings of frequent flyer awards, the
airlines should be responsible for providing the written itinerary with
the notice of code-share details, because the tickets themselves are
issued by the airlines.
TWA suggested that the Department clarify that written notice is to
be given at the earliest point in the reservation process that a
document is transferred to the consumer. In addition, TWA suggested
that the Department consider expanding the role of electronic mail and
telecopier in reservations. TWA asserted that the code-share
information should be included at the earliest point in the exchange of
electronic information as is possible (e.g., when the agent transmits a
list of schedule choices to the consumer).
United, Delta, and ASTA contended that the rule must accommodate
ticketless travel. United stated that code-shared service sold as a
ticketless product will be accompanied by a written notice like the
itinerary card that accompanies a ticket. United suggested that a
considerable percentage of customers using ticketless travel would not
want a written notice, but would prefer to rely entirely on the
reservation confirmation number provided to them orally at the time
they book the flight. United therefore suggested that the Department
allow passengers to waive the right to written notice. ASTA asserted
that written notice should be required when an agent obtains a document
confirming the purchase. According to ASTA, the term ``provide'' notice
as used in proposed section 257.5(c) must be interpreted to mean
``give, transmit or send'' to account for non-face-to-face
transactions. In addition, ASTA asked the Department to clarify that an
agent who provides written notice to the purchaser of the ticket along
with the ticket has complied with the rule, even if the purchaser is
not the actual traveler.
In contrast, American argued that written notice would not
seriously affect ticketless travel and that the efficiencies of
ticketless travel will continue to justify its development even if
carriers are required to give written notice. American claimed that
much of the efficiency of ticketless travels results from automating
the functions represented by the ticket, not by eliminating the piece
of paper itself. According to American, none of the costly features of
issuing tickets, such as accounting, tracking, or security, applies to
the written notice requirement, and the notice can presumably be
delivered physically to the passenger by mail, by telecopier, or even
by electronic mail.
Some parties voiced concerns with the technical drafting of the
written notice. United urged the Department to accept language
equivalent to ``operated by'' such as ``via.'' Galileo also wanted the
Department to make clear that issuance of only a mini-itinerary,
bearing the legend ``VIA XYZ AIRLINE'' would satisfy any written notice
requirement. In addition, Galileo wanted the Department to make clear
that no special typeface or underlining will be required for the
written notice, because it would cost more than $25 million to purchase
replacement printers for all Apollo subscribers.
ASTA, American, SwissAir, TWA, and Qantas stated that the term
``time of sale'' needs to be clarified. American stated that in
industry parlance ``time of sale'' could be construed as the time of
making a reservation rather than the time when the ticket is presented.
According to American, written notice should be given when the ticket
is presented to the consumer. United, similarly, assumed that ``time of
sale'' means when the ticket is presented. ASTA too assumed that ``time
of sale'' refers to ``ticket issuance'', which happens when the final
itinerary is
[[Page 12847]]
normally printed, and it observed that this is also the point, in
credit card transactions, at which the purchaser is charged for the
ticket. SwissAir suggested that the Department should define the term
``sale'' to mean the delivery of a ticket or itinerary to the
passenger, whichever occurs first. Qantas claimed that the phrase ``at
the time of sale'' should be replaced with a requirement that prior to
or upon the receipt of the ticket, the consumer be provided with the
written notice. Qantas also asked the Department to amend the rule to
allow carriers and agents to provide notice either in an itinerary or
on another piece of paper.
Decision
We will require separate written notice, which can be included on
the traveler's itinerary. We agree with American that this requirement
will make it more likely that the passenger knows about the code share
at critical junctures. The passenger will have either an itinerary or a
separate notice that will serve as a reminder at all times before
departure.
Moreover, this rule should not be unduly burdensome or entail more
than minimal additional costs, since many sellers already provide
written itineraries. American's comments confirmed that SABRE already
prints out the information the Department would require under the
proposed rule for airline personnel and travel agents. Furthermore,
Galileo enables Apollo subscribers to generate a standard form
itinerary/invoice document that includes the name of the marketing
carrier and also a statement such as ``OPERATED BY XYZ AIRLINE'' as
well as a mini-itinerary. On the other hand, the opposition (British
Airways, Delta, and USAir) did not substantiate their claims of
financial and administrative burden. USAir provided no estimate of its
costs for the programming changes. Since a significant portion of
tickets is issued and distributed by travel agents and many other
tickets are sent by mail, we doubt that our rule will cause significant
passenger delays at airport counters.
Having reviewed the technical drafting comments, the Department has
decided that the use of ``via'' in place of ``operated by'' would be
ambiguous, since it does generally connote ``by way of an intermediate
point'' as noted by TWA.
We used the term ``time of sale'' in the NPRM in order to
accommodate ticketless travel. We acknowledge American's concern that
``time of sale'' could be misconstrued as the time of making a
reservation rather than the time when the ticket is presented. Agents
taking reservations often refer to ``selling'' a seat when no money has
changed hands. Therefore, merely making a reservation without
consummating a sale will not trigger the written notice requirement. We
will clarify section 257.5(c) by substituting ``purchase'' for
``sale.''
We will also add two paragraphs: one to account for ticketless
travel and cases where there is not enough time for the written notice
to be mailed, the other to allow for delivery of the written notice by
telecopier, e-mail, or other means at the purchaser's request.
Paragraph (3) provides for mail delivery of the written notice along
with the ticket when transportation is purchased far enough in advance
of travel. We expect sellers of air transportation to make a reasonable
assessment of whether or not enough time remains for mailing based on
their experience with the United States Postal Service. Paragraph (3)
provides for delivery of the written notice at the airport if time does
not allow for advance delivery by mail or otherwise.
Paragraph (3) also accounts for delivery of the written notice in
the case of ticketless travel. Consistent with our policy on other
passenger notices, see 62 FR 19473 (April 22, 1997), we will require
the written notice of the transporting carrier's identity to be given
to ``ticketless'' passengers no later than the time that they check in
at the airport for the first flight in their itinerary. Of course,
nothing prohibits sellers of air transportation from providing this
written notice at an earlier juncture, such as along with any itinerary
they send the passenger. We encourage sellers to do whatever they can
to see that passengers receive the best possible notice, as early as
possible.
Paragraph (4) allows for delivery of the written notice of code-
sharing service other than by mail at the passenger's request. This
paragraph offers carriers and ticket agents greater flexibility in
meeting the written notice requirement.
Several points raised warrant clarification. First, in response to
ASTA's concern regarding the liability of travel agents making courtesy
bookings of frequent flyer awards, whoever issues the ticket is
responsible for giving the written notice. Second, ASTA asked that the
Department address the case where the purchaser and the actual traveler
are not the same. We clarify that notice with the ticket is acceptable
even if the purchaser is not the same as the actual traveler. Third,
the Department is not requiring an itinerary in particular, only some
form of written notice. We will amend the language in section
257.5(c)(1) as suggested by ASTA.13 Fourth, regarding
Galileo's concern about typefaces, we are not prescribing any
particular type-size or requiring bold lettering. Fifth, some
commenters expressed concern regarding how this rule will affect the
trend toward ticketless travel. On January 19, 1996, the Department
published a Federal Register notice seeking comment on passenger notice
requirements as applied to ticketless travel; see 61 FR 1309. Sixth, we
do not accept United's suggestion that we allow passengers to waive the
right to written notice. Passengers might not understand what rights
they were waiving, and we wish to avoid disputes over whether notice
was waived or not. Seventh, as for TWA's concern regarding the timing
of the requirement in the exchange of electronic information, the
requirement is the same as with telephone transactions: notice in
schedules, before booking transportation, and then written notice at
the time of purchase as in Paragraph (3) of the rule. Eighth and
finally, we do not adopt Northwest's suggestion that the Department
permit carriers to use a standard prepared notice. We do not believe
that such a notice would inform travelers of the transporting carrier
as effectively as the more specific notice because the latter would
name the transporting carrier.
---------------------------------------------------------------------------
\13\ASTA suggested that the last sentence of proposed section
257.5(c)(1), which states that the indicated form of notice will
``satisfy the requirement of the preceding sentence,'' should state
that the form of notice will satisfy ``the requirement of this
subparagraph,'' as does the parallel language of section
257.5(c)(2).
---------------------------------------------------------------------------
Notice in Schedules
The NPRM proposed that, in written or electronic schedule
information provided by carriers in the United States to the public,
the Official Airline Guides and comparable publications, and, where
applicable, computer reservation systems, carriers involved in code-
sharing arrangements or long-term wet leases ensure that an asterisk or
other easily recognizable mark identifies each flight in scheduled
passenger air transportation on which the designator code is not that
of the transporting carrier.
Galileo stated that its current Apollo displays appear to be
consistent with the proposed requirement, and participating carriers
and Apollo subscribers should be able to comply.
ASTA and American suggested requiring that code-shared services be
indicated in CRSs by a double-airline code. ASTA suggested that the
first
[[Page 12848]]
displayed code should indicate ``which carrier is in fact operating the
flight.'' American estimated that the double-airline code suggestion
could be accomplished with under 200 hours of reprogramming and
suggested that it would be easier for SABRE to show the transporting
carrier's code second. ASTA (supported by Township Travel) also
suggested that all code-shared services be displayed only once.
American has filed a petition to require this in another docket. Alaska
Airlines, Rogal Associates, and TWA supported the double-airline code
suggestion.
USAir, British Airways, Continental, System One, United, and
Galileo generally opposed this suggestion, because it is beyond the
scope of this proceeding. Several parties claimed that it would be
costly and force the elimination of other useful information from CRS
displays, and that it would be impracticable for blocked-space
arrangements where each carrier independently markets its seats on a
flight. Galileo estimated that it would take 800 person hours of
reprogramming work to redesign the Apollo screen to accommodate two
codes for a single flight. Although Worldspan took no position on the
merits, it opposed additional requirements concerning the screen
display.
TWA said that the name of the code-share carrier should also be
included in the CRS display or timetable schedule, rather than merely
displaying an asterisk, which would have little meaning to the
consumer. TWA proposed that the Department require that the explanation
for the asterisk be placed in close proximity to its appearance in the
text. Omega stated also that the ``asterisk or . . . other mark'' will
not mean anything to the average consumer.
Decision
The Department will clarify the proposed rule by requiring that
carriers provide information disclosing the corporate name of the
transporting carrier as proposed in the SNPRM. We will not address any
proposals regarding CRS displays, including the double-airline code
proposal, because they are outside the scope of this proceeding. The
NPRM did not propose changes to or seek comments on CRS displays. As
for TWA's and Omega's concern that the asterisk does not mean anything
to the average consumer, the consumers do not see CRS screens, and the
travel agents that do see them are familiar with the meaning of the
asterisk. As for timetables distributed to consumers, this provision
requires that the name(s) of the carrier be disclosed, so the asterisk
would have to lead to a means of determining these names, as is
currently done in the Official Airline Guides and in all carrier
timetables of which we are aware.
Advertising
The NPRM proposed to require notice, in any advertisement for any
service in a city-pair market that is provided under a code-sharing
arrangement or by long-term wet lease, that clearly indicates the
nature of the service and identifies the transporting carrier(s).
USAir, Delta, United, and British Airways supported the advertising
proposal as long as the requirement is limited to printed
advertisements, because the cost of including the required information
in radio and television advertisement would be exorbitant, and the need
is unsupported in light of the other NPRM provisions. TWA questioned
why radio or TV advertising should be excluded and noted that even in a
TV advertisement, notice of code-sharing could be scrolled over the
video. American also argued that there is no basis for limiting the
requirement to printed advertisements. Continental and System One
supported the requirement as written. Galileo stated that the
requirement appears not to affect CRS vendors.
RAA opposed the requirement, claiming that the benefits appear to
be limited. RAA assumed that the requirement would not only apply to
air carrier advertisements, but to all advertising, which included air
travel.
Some carriers sought clarification of the proposed requirement in
cases where both code-shared and direct service are offered in a
market. Northwest, which supported the advertising requirement, assumed
that when carriers advertise service to a group of points and all
points are served by the same code-sharing arrangement, it would be
sufficient to make a generalized statement. Furthermore, Northwest
assumed that if some points are served by code-share and others are
served directly, the carrier may use an asterisk or similar device to
identify the code-sharing services. In cases where a carrier serves a
point both by code-share and directly, Northwest assumed that the
carrier may state that some of the flights are operated by another
carrier.
United has no objection to the identification of affiliated
commuters in print ads as long as adequate time is allowed for
implementation (six months). However, United also maintained that the
intent of the rule is unclear where a carrier is operating services
both with its own equipment and under a code-sharing arrangement in the
same city-pair market. United proposed that a notice would not be
needed in this situation. USAir supported United's position on this
issue.
American recommended that the Department clarify the proposal to
require that any advertising, no matter where it occurs, that relates
to a city-pair in which service is provided by a code-sharing
arrangement must make the required disclosures.14 TWA stated
that the Department should define ``service'' in the phrase ``service
in a city-pair market'' so that both price and destination advertising
must identify the transporting carrier. TWA suggested that the
Department rephrase proposed section 257(d) to state ``In any
advertisement of fares or service in a city-pair market''.
---------------------------------------------------------------------------
\14\ We also received on July 5, 1995, a letter from Gayle
Michaels, American's Advertising Manager, discussing the proposed
ruling on advertising of code shares and claiming , among other
things, that under certain situations the rule would be difficult,
complex or unduly burdensome.
---------------------------------------------------------------------------
Decision
We believe that the basic provision is necessary to ensure that
prospective consumers are informed of code-sharing arrangements or
long-term wet leases. There is a strong public interest in consumers
knowing the nature of the transportation advertised before they begin
arranging a trip. As previously stated, the rule will only apply to
advertising in the United States.
However, the comments have persuaded us to modify the rule. For
print media, the rule will require notice in reasonably sized type
(e.g., not in fine-print fare conditions) specifically identifying the
transporting carrier. Printed advertisements holding out service to a
group of points where some points are served by a code-sharing or wet-
lease arrangement must identify each such arrangement. On the other
hand, for broadcast media, the disclosure of a code-sharing or wet
lease arrangement can be generic; for example, the following statement:
``Some services are provided by other airlines.'' We accept TWA's
suggestion that in a TV advertisement, a generic notice such as the one
noted above may be scrolled over the video in a legible fashion, or it
may be verbal. The requirement applies to all advertising, as assumed
by RAA.
Northwest presented three scenarios that would trigger the
disclosure requirement. First, Northwest assumed that when a carrier
advertised service to a group of points and all points are served by
the same code-sharing
[[Page 12849]]
arrangement, it would be sufficient to make a single statement
identifying the transporting carrier. Under this scenario, we would
accept a statement at the bottom of the advertisement that says, for
example, ``Service provided by Mesaba Aviation.'' However, if all of
the service in the advertisement is a Northwest code-share and some is
provided by Mesaba and the rest is provided by Simmons, then asterisks
or other symbols must identify which service is provided by which
carrier.
Second, Northwest assumed that if some points are served by code-
share and others are served directly, the carrier may use an asterisk
or similar device to identify the code-sharing services. We find the
use of an asterisk acceptable. However, as in the first scenario, if
the service is provided by more than one code-sharing carrier, an
advertisement may have to display separately-numbered footnotes (e.g.,
footnote 1 next to some cities will refer to a note that states service
is by Mesaba, and footnote 2 next to other cities will say the service
is by Simmons.) Where service is provided by two or three different
carriers, a single generic footnote applying to all cities that states
``Service operated by Mesaba Aviation or Simmons Airlines,'' is not
acceptable, since the reader has no way to determine the name of the
carrier that is operating the service in the individual markets.
Finally, where a carrier serves a point both by code-share and
directly, Northwest assumed that the carrier may state that some of the
flights are operated by another carrier. Northwest is correct as long
as the name of the transporting carrier is provided.
New Proposals
Commenters offered several new proposals as follows:
1. Notification Beyond the Reservation and Ticketing Process
IAPA suggested that in addition to the Department's proposal,
notification of code-sharing arrangements should also be required at
airport check-in (whether at the ticket counter or at the gate), during
boarding and announcements at the gate, and on board aircraft.
According to IAPA, these ``last chance'' announcements will inform the
passengers of the actual operator of the flight and allow them to
forego the flight if they do not want to fly on the transporting
carrier.
2. Notice of Aircraft Type
AAA, IAPA, ASAP, and Frontier suggested requiring notice of
aircraft type. IAPA, ASAP, and Frontier asserted that this information
is important to passengers who want to avoid certain types of aircraft.
IAPA suggested that the notification should commence at the time of
reservation and that aircraft type should be listed at least on the
itinerary, but also on the ticket if possible. AAA suggested that if
equipment is a passenger concern, then perhaps the aircraft type should
be identified in every itinerary, not just those involving code-sharing
arrangements. United stated that the suggestion is beyond the scope of
this proceeding and noted that this information is available in
schedules and CRS displays to those passengers who want the
information.
3. Treatment of Frequent Flyer Miles
AAA suggested requiring notice when and if frequent flyer miles are
affected adversely by a code-sharing arrangement.
4. Airport Signs
British Airways, Qantas, and USAir complained that some airport
operators cause passenger confusion by denying some carriers adequate
signs for their code-sharing flights in the terminal building. They
suggested that the Department consider requiring airports to let
airlines post signs to direct passengers to the right terminal,
counters, or gates. Qantas argued that it is just as important from a
passenger viewpoint to find the right check-in counter and gate at the
correct terminal for a code-shared service as it is to be informed of
the name of the carrier operating that service. USAir acknowledged that
the scope of the NPRM did not encompass new rules applicable to
airports, but it requested that the Department address this issue in
the final rulemaking decision, even if merely in an advisory manner,
arguing that this could obviate more direct regulatory action. The City
of Philadelphia opposed the airport sign suggestion on the grounds that
adequate notice of code-shared flights is not the responsibility of
airports but of airlines. In addition, the City of Philadelphia
contended that the proposal is outside the scope of this proceeding and
that the Department should go no further than making an advisory
reference to airport signs in its final rulemaking decision.
5. Refunds
IAPA, ASAP, and Mr. Pevsner suggested that refunds should be
available to consumers who object to the code-sharing or wet-lease
arrangements. IAPA stated that this rule would create an incentive for
airlines to ensure that passengers are fully informed as to the
transporting carrier before they arrive at the airport. Continental and
System One opposed such a rule, because it would render non-
refundability provisions meaningless for any code-shared flight, and
because adoption of the rules proposed should assure early notice to
passengers.
Decision
The Department finds all of these proposals outside the scope of
this proceeding. In addition, we believe that our new disclosure
requirements will assure that consumers receive notice sufficiently
ahead of time to make refunds and notification beyond the reservation
and ticketing process unnecessary. However, our decision not to
incorporate a refund provision now does not mean that carriers are free
to apply refund penalties to passengers who are not given notice of
code-shared service before purchasing transportation and who choose to
cancel when they do discover the actual operator of their flight.
Depending on the circumstances, refusal to provide refunds in such a
situation could be a violation of the contract of carriage or an unfair
or deceptive practice within the meaning of 49 U.S.C. 41712 (previously
Sec. 411 of the Federal Aviation Act). We encourage airports to permit
carriers to post signs for their code-sharing flights to prevent
passenger confusion.
Effective Date
The NPRM proposed that the final rule be effective 60 days after
publication. Several commenters requested more time. USAir stated that
it needed one year for the wet-lease requirement, six months for the
written notice requirement, and six months to a year's time to update
its PACER reservation system to accommodate the SNPRM proposal on
corporate names. SwissAir stated that it needs 90 days, and Lan Chile
stated that it needs three months. United stated that it could comply
within 60 days assuming the Department does not adopt substantive
changes in its notification requirement beyond those contained in the
proposal. Delta stated that if the Department requires carriers to
issue a written statement when itineraries are not issued or requires
changes in the ticket format, it would need a six-month effective date.
In the alternative, Delta suggested that the Department make the rule
effective within 60 days with respect to issues unrelated to the
written notice requirement and defer the issue of written notice
pending additional input from the industry.
[[Page 12850]]
Decision
The final rule will be effective 120 days after publication. Some
of the commenters made it clear that a 60 days would not be sufficient
for compliance. However, the commenters did not provide enough detail
to justify allowing any more time than what we shall provide here.
Regulatory Analyses and Notices
The Department has determined that this action is not an
economically significant regulatory action under Executive Order 12866
and it has not been reviewed by the Office of Management and Budget. It
also is significant under the Department's Regulatory Policies and
Procedures because of congressional and public interest. This rule does
not impose unfunded mandates or requirements that will have any impact
on the quality of the human environment. The Department has placed a
regulatory evaluation that examines the estimated costs and impacts of
the rule in the docket.
Summary of Regulatory Analysis
Based upon a detailed regulatory analysis, the Department has
determined that this rule will result in increased costs. However, the
Department has also decided that the enhanced notification benefits of
the rule justify the increased costs.
With regard to cost, the Department finds that this rule will
result in increased implementation costs as well as increased operating
costs for U.S. airlines, foreign airlines, computer reservations
systems (CRSs), and travel agents doing business in the United States.
The implementation costs will mainly affect the airlines and CRSs by
requiring changes to computer systems for the electronic notification.
The Department has estimated that these implementation costs could
range from $432,000 to $2.3 million.
However, the Department has determined that these implementation
costs are not prohibitive since they are one-time, nonrecurring costs
that will result in benefit for a large number of travelers in the
future.
The Department has also found that this rule will result in
increased operating costs for the airlines, travel agents and air
travelers. Most of the increased operating costs are attributable to an
increase in the amount of ``talk time'' and telephone connection time
necessary for airline ticket agents and travel agents to provide the
proper disclosure to prospective air travelers. At the same time, air
travelers incur a cost through the loss of productive time for the time
spent in listening to the notification. Using assumptions of 15 seconds
of additional ``talk time'' per telephone call, an average of 2.1 phone
calls per ticket, and an estimate of 48.6 million tickets involved in
code-sharing arrangements in 1997, the Department has estimated that
travel agents and airline ticket agents will expend an additional
339,995 hours and 84,999 hours, respectively, to meet the requirements
of this rule. Adding the cost of additional telephone line connection
time, the annual increase in operating costs amounted to $12 million
for the travel agent industry and $3.4 million for the airline
industry. For airline passengers, the annual increase in costs
associated with the loss of productive time is estimated at $11.8
million.
While the Department would prefer not to take actions which have
the potential to increase the cost of travel or result in a loss of
productive time, it believes these amounts are minimal and not
prohibitive when considered on a per ticket basis--an average increase
of approximately $.56 per ticket. At the same time, the Department has
found that it is difficult to quantify the benefits of this rule. The
Department recognizes that code-sharing arrangements and the number of
code-sharing trips are likely to increase in the future. It also
recognizes that the cost for fully informing prospective travelers will
impact different segments of the travel industry and the public to
varying degrees. However, the Department has determined that such
arrangements are increasing and becoming more complex especially in
international operations at the same time that other marketing
strategies are being developed. This fact emphasizes the paramount
importance that the traveling public must be fully informed. This
benefit clearly outweighs the cost increases and the Department further
believes that these costs will decrease in the future as consumers and
frequent travelers adjust and as new, less-costly, channels of
distribution become available (such as the Internet).
In analyzing the impact of this final rule, the Department
considered several alternatives to this final rule. While most of the
alternatives involved less enhanced notification both oral and written,
one alternative considered the more costly requirement of written
notification on the ticket coupon. The Department has decided that the
level of enhanced notification as contained in the final rule provides
the best net public benefits. A more limited approach would have
provided only a partial response to consumers' needs while still
increasing costs. On the other hand, the Department has rejected the
alternative of requiring the written notification on the ticket coupon.
In effect, this costly disclosure would represent a third level of
consumer notification that is not warranted at this time.
Small Business Impact
The Department has evaluated the effects of this rule on small
entities. I certify that this rule will not have a significant economic
impact on a substantial number of small entities. Although many ticket
agents and some air carriers are small entities, the Department
believes that the costs of notification will not be burdensome on these
two groups. We believe that travel agents already have an incentive to
provide this information to their customers and many have found a low-
cost means of providing it.
Year 2000 Problem
In an effort to ensure that our regulations do not interfere or
delay solutions for the Year 2000 Problem (Y2K), the Department has
decided that, in preparing proposed and final rules that mandate
business process changes and require modifications to computer systems
between now and July 1, 2000, the Department will discuss those rules
specifically with reference to Y2K requirements and determine whether
the implementation of those rules should be delayed to a time after
July 1, 2000.
Since the Department does not have detailed knowledge about the Y2K
status of the systems that will need to be changed as a result of this
rule, we attempted to gauge the effect based on a review of statements
from Annual Reports, 10-K and 10-Q Statements filed with the Securities
and Exchange Commission, news reports, press releases, and other
documents. We researched this issue with regard to four computer
reservations systems, the nine largest airlines, one smaller airline,
and five organizations closely associated with airline computerized
systems and databases. While this information did not reflect detailed
technical assessments, it allowed us to establish a broad baseline
against which to judge the issuance of our rule.
Our analysis has shown a widespread effort involved in the Y2K
program for air transportation. In general, most of the companies we
examined have stated that they expect to be Y2K-compliant in a timely
manner. However, most also reflect caution by noting that there are no
guarantees or assurances that all systems will be ready and that their
[[Page 12851]]
operations could be adversely affected. In response to this
possibility, many have established contingency plans that will allow
continued operations.
Because of the amount of progress these companies have already
made, the Department has determined that it is in the public interest
to issue this rule now and not delay its implementation to a time after
July 1, 2000. The number and type of marketing practices that include
code-sharing arrangements, change-of-gauge services, marketing
alliances and other marketing agreements, especially among multiple
carriers and involving international operations have grown
substantially. These agreements are likewise expected to continue to
grow in the future. At the same time, they have increased in complexity
as well. For these reasons, the Department has determined that it is
now essential to issue this disclosure rule so that prospective
travelers have as clear and complete information as possible prior to
buying air transportation as well as during the journey.
Federalism
The Department has analyzed this rule under the principles and
criteria contained in Executive Order 12612 (``Federalism'') and has
determined that the rule does not have sufficient federalism
implications to warrant the preparation of a federalism assessment.
Paperwork Reduction Act
This rule contains information collection requirements that are
being submitted to the Office of Management and Budget (OMB) for
approval under the Paperwork Reduction Act of 1995. In the Notice of
Proposed Rulemaking (NPRM) and the Supplemental Notice of Proposed
Rulemaking (SNPRM) that preceded this rule, the Department stated that
the proposed rule did not contain information collection requirements
that required approval by OMB under the then current Paperwork
Reduction Act. However, the requirements under the Paperwork Reduction
Act of 1995 consider third party notifications as data collections and
thus subject to the regulations. Persons are not required to respond to
a collection of information unless it displays a currently valid OMB
control number. This final rule is therefore being submitted to the
Office of Management and Budget for review. The Department has
determined an estimate of the burden hours associated with this rule
and is requesting comments on its estimate.
Those potentially affected by this rule include 192 U.S. air
carriers, 205 foreign air carriers, five computer reservations systems
and approximately 33,500 travel agents doing business in the United
States. With respect to the traveling public, we estimate that 102
million phone calls will be affected by this rule. The annual reporting
burden hours for this data collection is estimated at 424,994 hours for
all travel agents and airline ticket agents and 424,994 for air
travelers based on 15 seconds per phone call and an average of 2.1
phone calls per trip.
Comments are invited on: (a) Whether this collection of information
(third party notification) is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
burden of the proposed collection of information; (c) ways to enhance
the quality, utility, and clarity of the information to be collected;
and (d) ways to minimize the burden of the collection of information on
the respondents, including through the use of automated techniques or
other forms of information technology. Comments should be sent to Jack
Schmidt, Office of Aviation and International Economics (X-10), Office
of the Assistant Secretary for Aviation and International Affairs,
Office of the Secretary, U.S. Department of Transportation, 400 Seventh
St. SW, Washington, DC 20590, (202) 366-5420 or (202) 366-7638 (FAX)
List of Subjects
14 CFR Part 257
Air carriers, Consumer protection, Foreign air carriers, Reporting
and recordkeeping requirements.
14 CFR Part 399
Administrative practice and procedure, Air carriers, Air rates and
fares, Air taxis, Consumer protection, Small businesses.
For the reasons set forth in the preamble, the Department of
Transportation amends 14 CFR chapter II, subchapters A and F, as
follows:
1. Part 257 is added to read as follows:
PART 257--DISCLOSURE OF CODE-SHARING ARRANGEMENTS AND LONG-TERM WET
LEASES
Sec.
257.1 Purpose.
257.2 Applicability.
257.3 Definitions.
257.4 Unfair and deceptive practice.
257.5 Notice requirement.
Authority: 49 U.S.C. 40113(a) and 41712.
Sec. 257.1 Purpose.
The purpose of this part is to ensure that ticket agents doing
business in the United States, air carriers, and foreign air carriers
tell consumers clearly when the air transportation they are buying or
considering buying involves a code-sharing arrangement or a long-term
wet lease, and that they disclose to consumers the transporting
carrier's identity.
Sec. 257.2 Applicability.
This part applies to the following:
(a) Direct air carriers and foreign air carriers that participate
in code-sharing arrangements or long-term wet leases involving
scheduled passenger air transportation; and
(b) Ticket agents doing business in the United States that sell
scheduled passenger air transportation services involving code-sharing
arrangements or long-term wet leases.
Sec. 257. 3 Definitions.
As used in this part:
(a) Air transportation means foreign air transportation or
interstate air transportation as defined in 49 U.S.C. 40102 (a)(23) and
(25) respectively.
(b) Carrier means any air carrier or foreign air carrier as defined
in 49 U.S.C. 40102(2) or 49 U.S.C. 40102(21), respectively, that is
engaged directly in scheduled passenger air transportation, including
by wet lease.
(c) Code-sharing arrangement means an arrangement whereby a
carrier's designator code is used to identify a flight operated by
another carrier.
(d) Designator code means the airline designations originally
allotted and administered pursuant to Agreements CAB 24606 and 26056.
(e) Long-term wet lease means a lease by which the lessor provides
both an aircraft and crew dedicated to a particular route(s), and which
either:
(1) Lasts more than 60 days; or
(2) Is part of a series of such leases that amounts to a continuing
arrangement lasting more than 60 days.
(f) Ticket agent has the meaning ascribed to it in 49 U.S.C.
40102(40).
(g) Transporting carrier means the carrier that is operating the
aircraft in a code-sharing arrangement or long-term wet lease.
Sec. 257.4 Unfair and deceptive practice.
The holding out or sale of scheduled passenger air transportation
involving a code-sharing arrangement or long-term wet lease is
prohibited as unfair and deceptive in violation of 49 U.S.C. 41712
unless, in conjunction with such holding out or sale, carriers and
ticket agents follow the requirements of this part.
[[Page 12852]]
Sec. 257.5 Notice requirement.
(a) Notice in schedules. In written or electronic schedule
information provided by carriers in the United States to the public,
the Official Airline Guides and comparable publications, and, where
applicable, computer reservations systems, carriers involved in code-
sharing arrangements or long-term wet leases shall ensure that each
flight in scheduled passenger air transportation on which the
designator code is not that of the transporting carrier is identified
by an asterisk or other easily identifiable mark and that the corporate
name of the transporting carrier and any other name under which that
service is held out to the public is also disclosed.
(b) Oral notice to prospective consumers. In any direct oral
communication in the United States with a prospective consumer and in
any telephone calls placed from the United States concerning a flight
that is part of a code-sharing arrangement or long-term wet lease, a
ticket agent doing business in the United States or a carrier shall
tell the consumer, before booking transportation, that the transporting
carrier is not the carrier whose designator code will appear on the
ticket and shall identify the transporting carrier by its corporate
name and any other name under which that service is held out to the
public.
(c) Written notice. Except as specified in paragraph (c)(3) of this
section, at the time of purchase, each selling carrier or ticket agent
shall provide each consumer of scheduled passenger air transportation
sold in the United States that involves a code-sharing arrangement or
long-term wet lease with the following notice:
(1) If an itinerary is issued, there shall appear in conjunction
with the listing of any flight segment on which the designator code is
not that of the transporting carrier a legend that states ``Operated
by'' followed by the corporate name of the transporting carrier and any
other name in which that service is held out to the public. In the case
of single-flight-number service involving a segment or segments on
which the designator code is not that of the transporting carrier, the
notice shall clearly identify the segment or segments and the
transporting carrier by its corporate name and any other name in which
that service is held out to the public. The following form of statement
will satisfy the requirement of this paragraph (c)(1):
Important Notice: Service between XYZ City and ABC City will be
operated by Jane Doe Airlines d/b/a QRS Express.
(2) If no itinerary is issued, the selling carrier or ticket agent
shall provide a separate written notice that clearly identifies the
transporting carrier by its corporate name and any other name under
which that service is held out to the public for any flight segment on
which the designator code is not that of the transporting carrier. The
following form of notice will satisfy the requirement of this paragraph
(c)(2):
Important Notice: Service between XYZ City and ABC City will be
operated by Jane Doe Airlines d/b/a QRS Express.
(3) If transportation is purchased far enough in advance of travel
to allow for advance delivery of the ticket by mail or otherwise, the
written notice required by this part shall be delivered in advance
along with the ticket. If time does not allow for advance delivery of
the ticket, or in the case of ticketless travel, the written notice
required by this part shall be provided no later than the time that
they check in at the airport for the first flight in their itinerary.
(4) At the purchaser's request, the notice required by this part
may be delivered in person or by telecopier, electronic mail, or any
other reliable method of transmitting written material.
(d) Advertising. In any printed advertisement published in or
mailed to or from the United States for service in a city-pair market
that is provided under a code-sharing arrangement or long-term wet
lease, the advertisement shall clearly indicate the nature of the
service in reasonably sized type and shall identify the transporting
carrier[s] by corporate name and by any other name under which that
service is held out to the public. In any radio or television
advertisement broadcast in the United States for service in a city-pair
market that is provided under a code-sharing arrangement or long-term
wet lease, the advertisement shall include at least a generic
disclosure statement, such as ``Some services are provided by other
airlines.''
PART 399--STATEMENTS OF GENERAL POLICY
2. The authority citation for part 399 is revised to read as
follows:
Authority: 49 U.S.C. 40101, 40102, 40105, 40109, 40113, 40114,
40115, 41010, 41011, 41012, 41101, 41102, 41104, 41105, 41106,
41107, 41108, 41109, 41110, 41111, 41112, 41301, 41302, 41303,
41304, 41305, 41306, 41307, 41308, 41309, 41310, 41501, 41503,
41504, 41506, 41507, 41508, 41509, 41510, 41511, 41701, 41702,
41705, 41706, 41707, 41708, 41709, 41711, 41713, 41712, 41901,
41902, 41903, 41904, 41905, 41906, 41907, 41908, 41909, 42111,
42112, 44909, 46101, 46102.
Sec. 399.88 [Removed]
3. Section 399.88 is removed.
Issued in Washington, DC on March 8, 1999.
Rodney E. Slater,
Secretary of Transportation.
[FR Doc. 99-6138 Filed 3-10-99; 1:23 pm]
BILLING CODE 4910-62-P
