Disclosure of Code-Sharing Arrangements and Long-Term Wet Leases

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).

---------------------------------------------------------------------------

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).

---------------------------------------------------------------------------

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.

---------------------------------------------------------------------------

\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).

---------------------------------------------------------------------------

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.

---------------------------------------------------------------------------

\12\ 59 FR 40836, 40838 (August 10, 1994).

---------------------------------------------------------------------------

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