[Federal Register Volume 59, Number 153 (Wednesday, August 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19441]


[[Page Unknown]]

[Federal Register: August 10, 1994]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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                                                   VOL. 59, NO. 153

                                         Wednesday, August 10, 1994

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 257 and 399

[Docket Nos. 49702 and 48710; Notice 94-11]
RIN 2105-AC10

 

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

AGENCY: Department of Transportation; Office of the Secretary.

ACTION: Notice of Proposed Rulemaking (NPRM); Denial of petition for 
rulemaking.

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SUMMARY: The Department proposes to strengthen its current rules 
requiring airlines to notify consumers of the existence of a code-
sharing arrangement or long-term wet lease whereby the operator of a 
flight differs from the airline in whose name the transportation was 
sold. This action is being taken to ensure that consumers have 
pertinent information about airline code-sharing arrangements and long-
term wet leases on domestic and international flights. The Department 
is proposing: (1) to require ticket agents (including travel agents) 
doing business in the United States and foreign air carriers, as well 
as U.S. air carriers, to give consumers reasonable and timely notice 
that the travel 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; and (2) for tickets issued in the United States, to require 
U.S. and foreign air carriers and ticket agents (including travel 
agents) to provide written notice of the transporting carrier's 
identity at the time of sale of transportation involving a code-sharing 
or long-term wet-lease arrangement. The Department also wants to 
consider seriously a requirement to print the transporting carrier's 
identity on the flight coupon for services involving a code-sharing or 
long-term wet-lease arrangement. The Department is making this proposal 
on its own initiative. In addition, the Department is denying a 
petition filed in Docket 48710 by Donald Pevsner that requested a 
complete ban on code-sharing arrangements.

DATES: The Department requests comments by October 11, 1994. Reply 
comments should be filed by November 8, 1994. The Department will 
consider late-filed comments only to the extent practicable.

ADDRESSES: Comments should be sent to the Docket Clerk, Docket No. 
49702, Department of Transportation, 400 7th Street S.W., Room 4107, 
Washington, DC 20590. To facilitate consideration of the comments, we 
ask commenters to file twelve copies of each comment. We encourage 
commenters who wish to do so also to submit comments to the Department 
through the Internet; our Internet address is dot_
[email protected].\1\ Note, however, that at this time the 
Department considers only the paper copies filed with the Docket Clerk 
to be the official comments. Comments will be available for inspection 
at this address from 9:00 a.m. to 5:00 p.m., Monday through Friday. 
Commenters who wish the Department to acknowledge the receipt of their 
comments should include a stamped, self-addressed postcard with their 
comments. The Docket Clerk will date-stamp the postcard and mail it 
back to the commenter.

    \1\Our X.400 e-mail address is G=DOT/S=dockets/OU1=qmail/O=hq/
p=gov+dot/a=attmail/c=us.

FOR FURTHER INFORMATION CONTACT: Patricia N. Snyder, Office of 
International Law, Office of the General Counsel, U.S. Department of 
Transportation, 400 7th Street SW, Room 10105, Washington, DC 20590. 
(202) 366-9179. The Department of Transportation studies noted in this 
NPRM may be reviewed in the Department's technical library, 400 7th 
Street SW, Room 2200, Washington, DC 20590, between 9:00 a.m. and 4:00 
p.m., Monday through Friday; phone (202) 366-0746.

SUPPLEMENTARY INFORMATION:

Background

    Several sources of information on airline services widely used in 
the United States--most notably the Official Airline Guide and computer 
reservations systems `` use a two-character airline designator code to 
identify the carrier operating a flight. Code-sharing is the term given 
to a common airline industry marketing practice where, by mutual 
agreement between cooperating carriers, at least one of the airline 
designator codes used on a flight is different from that of the airline 
operating the aircraft. In one version, two or more airlines each use 
their own designator codes on the same aircraft operation. Although 
only one airline operates the flight, each airline in a code-sharing 
arrangement may hold out, market and sell the flight as its own in 
published schedules.
    The term ``code-sharing'' also refers to other arrangements where 
the code on a passenger's ticket is not that of the operator of the 
flight, but where the operator does not also hold out the service in 
its own name. Such code-sharing arrangements are common between 
commuter air carriers and their larger affiliates. Arrangements falling 
into this category are similar to leases of aircraft and crew (wet 
leases).
    The Department regulates all international code-sharing 
arrangements as wet leases under 14 CFR Parts 207, 208, 212 and 218.
    Although code-sharing and wet-lease arrangements can offer 
significant consumer benefits, they can also be misleading unless 
consumers know that the transportation they are buying will not be 
provided by the airline whose designator code is shown on the ticket 
and unless they know the identity of the airline on which they will be 
flying. The recent growth in use of code-sharing, wet-leasing and 
similar marketing tools, particularly in international air 
transportation, has given the Department concern about whether the 
current disclosure rules (described below) protect the public interest 
adequately. This notice proposes to strengthen the rules and requests 
public comment.

Benefits of Code-Sharing Services

    In its examination of domestic airline interline practices, the 
Department noted that only 10% of passengers on certificated air 
carriers used interline services, indicating the strong preference of 
passengers on connecting flights for on-line service. Interline 
Practices in the Airline Industry at 24 (January 1986). There may be 
even fewer today. Data for the quarter ended September 30, 1993, show 
that interline passengers account for approximately 2.3% of total 
passengers based on the Department's Passenger Origin and Destination 
Survey. Code-sharing arrangements, which enable airlines to hold out 
multi-carrier connections as on-line service, are, in part, a market 
response to this demand for on-line service. Often, code-sharing 
partners offer services similar to those available for on-line 
connections with the goal of offering ``seamless'' service (i.e., 
service where the transfers from flight to flight or airline to airline 
are facilitated). They may, for example, locate gates near each other 
to make connections more convenient, or coordinate baggage handling to 
give greater assurance that baggage will be properly handled.
    In addition, airlines claim that code-sharing can help them operate 
more efficiently, because they can spread costs by providing a joint 
service with one aircraft rather than operating separate services with 
two aircraft. Particularly in thin markets, this efficiency can 
increase consumers' price and service options or enable the use of 
equipment sized appropriately for the market. Thus, overall, the 
Department believes that code-sharing can offer significant economic 
benefits.
    Code-sharing services have expanded significantly since USAir (then 
Allegheny Airlines) set up the first code-sharing arrangements in the 
1960s. A 1986 DOT study of the regional airline industry found that 
code-sharing agreements were a prominent feature of the nationwide air 
service network. A Study of the Regional Airline Industry at 80 (May 
1986). The study also found that 16 of the 20 largest regional airlines 
operating in the continental U.S. participated in a code-sharing 
agreement with a major airline. Id. at 27. The Regional Airline 
Association's 1993 Annual Report reported that by 1992, the largest 29 
regional carriers were code-sharing, 36 of the largest 50 regional 
airlines had code-sharing agreements, and 96% of regional airline 
passengers flew on code-sharing carriers.
    Similarly, international code-shares, which have existed at least 
since the early 1980s, have expanded recently. Early international 
code-shares tended to involve individual routes; the more recent trend 
has been towards code-sharing agreements that involve total route 
systems, such as the one between Northwest and KLM. Today, most major 
U.S. airlines have code-sharing agreements with foreign airlines.

Benefits of Wet Leases

    Some airlines perform some or all of their scheduled passenger air 
transportation services by contracting for the equipment and crew of 
another carrier (wet lease). Operating by wet lease can permit such 
carriers to offer services that might otherwise be unavailable. The 
flexibility to contract with other airlines for equipment and crew to 
fill operational needs benefits the public by avoiding disruptions and 
creating service alternatives that could not otherwise be provided.

DOT Regulatory Policy and Statutory Bases

    Section 41712 of Title 49 of the U.S. Code (formerly Sec. 411 of 
the Federal Aviation Act) authorizes the Department to decide if a U.S. 
or foreign air carrier or ticket agent (including travel agents) has 
engaged in unfair or deceptive practices and to ban such practices. 
Under that section, the Department has adopted various regulations and 
policies to prevent unfair or deceptive practices, such as the rules 
governing computer reservations systems (14 CFR Part 255) and the 
policy on fare advertising (14 CFR Sec. 399.84).
    Although code-sharing and wet-leasing can afford public benefits, 
they can also confuse and mislead the public unless prospective 
travelers are aware of the arrangements before they select a flight. 
Current DOT policy has dealt only with code-sharing, and has been to 
consider the practice to be unfair and deceptive and in violation of 49 
U.S.C. Sec. 41712 unless consumers are given reasonable and timely 
notice of the existence of the code-sharing arrangement. 14 C.F.R. 
399.88 (Docket No. 42199, 50 FR 38508, September 23, 1985). The policy 
statement expressly applies only to U.S. air carriers, however. It 
states that the obligation to give ``reasonable notice'' requires air 
carriers, at a minimum to:

    (1) Identify, with an asterisk or other means, each flight in 
which the airline code is different from the code of the airline 
actually providing the service, in written or electronic schedule 
information;
    (2) Provide information in any direct oral communication with a 
consumer concerning a code-sharing flight sufficient to alert the 
consumer that the flight will occur on an airline different from the 
airline whose code is shown on the ticket and identify the 
airline(s) actually providing the service; and
    (3) provide frequent, periodic notice in advertising media of 
the existence of a code-sharing relationship and the identities of 
the airline(s) actually providing the service.

    Thus, the current policy recognizes that, to be timely, notice must 
be given during all discussions about a code-shared flight. Consumers 
must be given clear notice before they make reservations or buy 
transportation both that the service they are considering is on a code-
shared flight and of the actual operator's identity, so that they can 
consider these facts in making travel purchase decisions.
    When adopted, the policy statement on code-sharing disclosure was 
not applied directly to ticket agents, since it was believed that 
ticket agents would communicate important information to travelers to 
retain them as clients. 49 FR 43709; October 31, 1984. Furthermore, 
section 41712 of title 49 of the U.S. Code prohibits unfair and 
deceptive practices by ticket agents, and Department rules also 
prohibit ticket agents from misrepresenting the kind or quality of 
service being sold. 14 CFR 399.80(c). In practice, the Department has 
not expressly required ticket agents to disclose code-sharing 
arrangements, although it would consider enforcement action against 
ticket agents who misrepresent code-sharing services as single-carrier 
services in response to specific inquiries.
    Moreover, since there were few code-sharing arrangements between 
U.S. and foreign air carriers at the time of its adoption, the policy 
did not explicitly cover foreign air carriers. 14 CFR 399.88. To some 
extent, the Department has since moved to address this matter. 
Specifically, when the Department approves a code-sharing arrangement 
involving a foreign air carrier, it now explicitly requires the foreign 
air carrier to adhere to the requirements of 14 CFR 399.88 as a 
condition of its approval. See, e.g., Order 94-5-35 (May 24, 1994).
    Finally, although the earlier notification rule did not cover wet 
leases other than code-sharing arrangements as then defined, other wet 
leases appear to present similar opportunities to mislead consumers 
into thinking that they are buying transportation from one carrier, 
when in fact the transporting carrier will be different.
    The Department continues to believe that the public interest is 
best served by permitting carriers to engage in code-sharing and wet-
lease arrangements, so long as the public is given reasonable 
notice.\2\ These arrangements can expand the price and service options 
available to consumers. Moreover, several of our international 
agreements specifically authorize code-sharing arrangements. We have 
determined, therefore, to limit this rulemaking to whether more notice 
is necessary to assure adequate public disclosure. We will not expand 
it to entertain comments on other issues, such as whether code-sharing 
should be banned.

    \2\For this reason, we deny the petition for rulemaking filed by 
Donald Pevsner in Docket 48710 to ban code-sharing entirely.
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Inadequacy of the Current Rule

    Experience with the increasing number of code-sharing arrangements 
in recent years, combined with consumers' receiving only haphazard 
disclosure, has tentatively persuaded us to modify our rules. A recent 
DOT enforcement investigation found that airlines and travel agents 
failed to disclose code-sharing arrangements 30% of the time. In the 
case of two particular airlines, failure to disclose was the norm. The 
Department has taken enforcement action against those companies, 
including the issuance of cease-and-desist orders, the assessment of 
civil penalties and the issuance of warning letters. However, 
enforcement action alone will not solve the overall problem.
    Failure to disclose the relationship and the identity of the actual 
flight operator is deceptive and can result in confusion, hardship and 
inconvenience to consumers. It can also increase the costs of travel 
unexpectedly. For example, the Department receives complaints from 
consumers who mistakenly assumed that their carrier would use jet 
aircraft, rather than propeller-driven aircraft. Consumers enrolled in 
the frequent-flyer program of the airline whose code was on the ticket 
have found that they got no or fewer miles when they flew on the code-
sharing partner's flights or that miles could be earned but not used on 
such flights or vice versa. Consumers have reported not knowing where 
to check in, a problem that can result in missed connections. Elderly 
or physically challenged passengers needing particular equipment have 
complained that the failure to disclose the code-sharing arrangement 
and the actual operator's identity has inconvenienced them. Travelers 
have only discovered at the airport that their flight was being 
operated by an airline they preferred not to use, a situation that can 
occur whenever a wet-lease arrangement is involved. Finally, consumers 
have complained that a service held out as on-line was in fact 
interline and there was no integration between the two airlines. These 
problems can also occur with certain wet leases. The Department 
believes that consumers can make travel decisions to avoid such 
problems if carriers and ticket agents notify them adequately.

Proposed Changes

    First, the Department has tentatively concluded that no basis 
exists for differentiating among U.S. air carriers, ticket agents doing 
business in the United States, and foreign air carriers in the 
requirement to give full disclosure. Thus, we propose to expand the 
rule to cover the latter two classes explicitly. Ticket agents 
(including travel agents) sell about 80% of all airline tickets issued 
in the United States. Secretary's Task Force on Competition in the U.S. 
Domestic Airline Industry, Airline Marketing Practices: Travel 
Agencies, Frequent Flyer Programs, and Computer Reservations Systems at 
7 (1990). A requirement that applies to only 20% of ticket sales 
affords the public too little protection. We therefore propose to 
require ticket agents doing business in the United States and foreign 
air carriers, when giving information about air transportation 
involving code-sharing arrangements, to disclose these arrangements and 
the identity of the transporting carrier, just as U.S. airlines are 
currently required to do. This should not be a burden to ticket agents 
since, to avoid misrepresentations, they are already required to tell 
consumers when asked that the carrier holding out the service is not 
the same as the one operating the flight. Ticket agents should also be 
able to identify code-shared flights easily, since computer 
reservations systems already identify them and airlines can update 
those systems to reflect changes very quickly. As noted above, 
extending the notice requirement to foreign air carriers merely 
conforms our rules to agency practice when we approve code-share 
applications. In this way, we hope to assure that all U.S. consumers 
have a complete understanding of the transportation they are buying at 
the time when they make a travel purchase decision.
    Some domestic code-sharing arrangements consist of several commuter 
carriers that operate under a ``network'' name, e.g., Northwest 
Airlink, Delta Connection. In disclosing the transporting carrier for 
purposes of this rule, it is permissible to use such a network name if 
that is the name in which the service is generally held out to the 
public. Since the purpose of this rule is to prevent confusion, we do 
not wish to require disclosure of a corporate name that is not the name 
used by the carrier to identify itself in airports or in advertisements 
and will thus mean nothing to consumers. However, we remind airlines 
and ticket agents that the proposed rule requires disclosure not only 
of the name of the transporting carrier or network, but also of the 
fact that this entity is not the one shown on the ticket. Since many 
network names may connote a special type of service rather than a 
different carrier, the transporting airline should be identified with a 
statement such as ``our affiliate, Northwest Airlink'' or ``our partner 
in travel, Delta Connection.''
    Second, we also propose to require U.S. and foreign air carriers 
and ticket agents (including travel agents) to provide written notice 
of the transporting carrier's identity in conjunction with the sale of 
any air transportation sold in the United States that involves a code-
sharing arrangement or long-term wet lease. The proposed rule would 
therefore require that, if a separate itinerary is issued with the 
ticket, the itinerary contain a legend that states ``Operated by'' 
followed by the name of the transporting carrier in conjunction with 
the listing of any flight segment on which the designator code is not 
that of the transporting carrier. In the case of single-flight number 
service where a segment will be operated by a carrier other than the 
carrier in whose name the transportation was sold, the rule would 
require the carrier identity for that segment to be disclosed, e.g., 
``Service between XYZ City and ABC City will be operated by Jane Doe 
Airlines.''
    If no itinerary is issued, the proposal would require the selling 
carrier or ticket agent to provide a separate written notice that 
clearly identifies the transporting carrier for any flight segment on 
which the designator code is not that of the transporting carrier. The 
following notice would satisfy this requirement:

    ``IMPORTANT NOTICE: Service between XYZ City and ABC City will 
be operated by Jane Doe Airlines.''

    Many ticket agents and airlines already provide written information 
that specifies the carrier that will operate the service on behalf of 
the airline shown on the ticket. Thus, addition of this notice should 
not be unduly burdensome.
    The Department intends that this written notice be given to any 
consumer buying, in the United States, air transportation involving any 
arrangement whereby one carrier uses the code of another except for 
short-term wet leases, as discussed below. The separate written notice 
requirement would apply whether or not the consumer is given an actual 
ticket to evidence the transportation, and it must be given or sent 
when he or she buys the transportation. Further, the Department 
tentatively concludes that it would not be acceptable to make this 
written notice a standard part of tickets given to every consumer, 
because consumers would not be able to tell from a universal notice 
whether their particular flight was a code-shared operation.
    However, the Department remains concerned that the appearance of 
one carrier's designator code on the face of the ticket, or flight 
coupon, when the service is in fact being provided by a different 
carrier may mislead some passengers. In particular, we are concerned 
that some passengers may rely on their flight coupons for information, 
notwithstanding the presence of an itinerary. We are seriously 
considering a requirement that, where the designator code on the ticket 
is not that of the transporting carrier on any flight segment, there 
must be printed on the flight coupon covering that segment (1) the 
asterisk that already identifies flights listed in the CRS 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.'' This information is 
already available in the CRSs, and the Department invites specific 
technical comments on the feasibility and costs of implementation or on 
alternative ways of providing the information on the ticket. Comments 
should be supported by concrete data and economic analysis and should 
contain sufficient detail to allow the Department to evaluate the 
position advocated. If the Department were to adopt such a requirement, 
it would be in addition to the separate written notice requirement.
    The above oral and written notification requirements would apply to 
most situations in which the operating airline is different from the 
one in whose name the service is being held out, including code-sharing 
arrangements and long-term wet leases. The Department believes that, as 
a general rule, consumers are entitled to know both the identity of the 
company that will be transporting them and the one holding out the 
transportation.
    However, the Department recognizes that periodically situations 
arisewhere full disclosure is impractical or would be extremely 
disruptive. For example, advance notification is impossible where an 
aircraft is rendered unusable and temporary substitute transportation 
is arranged at the last minute. For this reason, the Department 
proposes to apply the rule only to long-term wet leases. The proposed 
rule would use the same definition of long-term wet lease that appears 
in other parts of the Department's regulations, i.e., a lease of 
aircraft and crew that either lasts more than 60 days or is part of a 
series of such leases that amounts to a continuing arrangement lasting 
more than 60 days. The Department would nonetheless expect that, in the 
interest of maintaining good customer relations, an airline or ticket 
agent would make every effort to notify consumers of changes in the 
operator of a flight that take place after they have purchased their 
transportation.
    Finally, the Department proposes to clarify the current obligation 
of code-sharing partners to include clear notice about the code-sharing 
arrangement in public advertisements. As written, the current policy 
statement merely directs the partners to advertise the fact of the 
arrangement and the identity of the actual operator periodically. To 
comply, carriers have routinely included general and often 
uninformative language in advertisements, whether or not they are 
advertising code-shared services. We tentatively conclude that this 
does not suffice. We consider that it would be more useful to the 
public if the partners were required to include both the nature of the 
operational arrangement and the identity of the transporting carrier 
only when they are advertising services in a city-pair market where the 
service is provided under a code-sharing arrangement or by long-term 
wet lease.
    Because the Department believes that the rule conforms in many ways 
to prevailing practice, it believes that airlines and ticket agents can 
implement the proposed changes at little, if any, cost. We invite 
specific cost data to help us evaluate the cost to the industry of 
complying with the proposed requirements if any commenter believes the 
cost to be burdensome. In particular, the Department is interested in 
comments regarding its proposal to cover all types of long-term wet 
leases. Opponents of this aspect of the proposal should support their 
comments with economic or other data that would assist the Department 
in distinguishing among types of wet lease for the purpose of 
protecting consumers from unfair and deceptive practices.
    As discussed above, the Department also requests that commenters 
address its concern that, despite the separate written notice that is 
being proposed, the current approach to printing flight coupons may 
mislead the consumer.
    The Department recognizes that the airlines and ticket agents will 
require time to implement the proposed separate written notice 
requirement. The Department is proposing that the final rule be 
effective 60 days after publication, but it requests comments on other 
possible effective dates. In addition, we invite information about the 
time necessary to implement inclusion of the transporting carrier's 
identity on flight coupons if we should adopt a rule requiring this.
    The Department also proposes to remove 14 CFR 399.88 of the Policy 
Statements, since the proposed rule would replace it.

Regulatory Analyses and Notices

    The Department has determined that this action is not a significant 
regulatory action under Executive Order 12866 or under the Department's 
Regulatory Policies and Procedures. The Department has placed a 
regulatory evaluation that examines the estimated costs and impacts of 
the proposal in the docket.
    The Department certifies that this rule, if adopted, would 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 
be minimal. The Department seeks comment on whether there are small 
entity impacts that should be considered. If comments provide 
information that there are significant small entity impacts, the 
Department will prepare a regulatory flexibility analysis at the final 
rule stage.
    The Department does not believe that there would be sufficient 
federalism implications to warrant the preparation of a federalism 
assessment.

Paperwork Reduction Act

    The proposed rule does not contain information collection 
requirements that require approval by the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 2507 et seq.).

List of Subjects

14 CFR Part 257

    Air carriers, Foreign air carriers, and Consumer protection.

14 CFR Part 399

    Administrative practice and procedure, Air carriers, Air rates and 
fares, Air taxis, Consumer protection, and Small business.

    For the reasons set forth in the preamble, the Department of 
Transportation denies the petition for rulemaking in Docket 48710 and 
proposes to add part 257 and to amend part 399 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: Sections 204 and 411, Pub. L. 85-726, as amended, 72 
Stat. 743 and 769; 49 U.S.C. Secs. 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 rule applies to:
    (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) Carrier means any air carrier or foreign air carrier as defined 
in 49 U.S.C. Sec. 40102(2) or 49 U.S.C. Sec. 40102(21), respectively, 
that is engaged directly in scheduled passenger air transportation, 
including by wet lease.
    (b) Code-sharing arrangement means an arrangement whereby a 
carrier's designator code is placed on a flight operated by another 
carrier.
    (c) Designator code means the airline designations originally 
allotted and administered pursuant to Agreements CAB 24606 and 26056.
    (d) Ticket agent has the meaning ascribed to it in 49 U.S.C. 
Sec. 40102(40).
    (e) Transporting carrier means the carrier that is operating the 
aircraft in a code-sharing arrangement or long-term wet lease.
    (f) Long-term wet lease means a lease by which the lessor provides 
both an aircraft and crew, which either (a) lasts more than 60 days, or 
(b) is part of a series of such leases that amounts to a continuing 
arrangement lasting more than 60 days.


Sec. 257.4  Unfair and deceptive practice.

    The holding out and 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. Sec. 41712 
unless, in conjunction with such holding out or sale, carriers and 
ticket agents follow the requirements of this part.


Sec. 257.5  Notice requirement.

    (a) Notice in schedules. In written or electronic schedule 
information provided by carriers to the public, the Official Airline 
Guide and comparable publications, and, where applicable, computer 
reservations systems, carriers involved in code-sharing arrangements or 
long-term wet leases shall 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.
    (b) Oral notice to prospective consumers. In any direct oral 
communication with a prospective consumer 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.
    (c) Written notice. At the time of sale, 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 name of the transporting carrier. 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. The following form of statement will satisfy the requirement 
of the preceding sentence:

    IMPORTANT NOTICE: Service between XYZ City and ABC City will be 
operated by Jane Doe Airlines; or

    (2) If no itinerary is issued, the selling carrier or ticket agent 
shall provide a separate written notice that identifies clearly the 
transporting carrier 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 subparagraph:

    IMPORTANT NOTICE: Service between XYZ City and ABC City will be 
operated by Jane Doe Airlines.

    (d) Advertising. In any advertisement for service in a city-pair 
market that is provided under a code-sharing arrangement or by long-
term wet lease, the advertising carrier or ticket agent shall clearly 
indicate the nature of the service and shall identify the transporting 
carrier[s].
    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, 31305, 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, and 46102, unless otherwise noted.


Sec. 399.88  [Removed]

    3. Section 399.88 is removed.

    Issued under authority delegated in 49 C.F.R. Sec. 1.56a(h)(2) 
in Washington, D.C. on August 4, 1994.
Patrick V. Murphy,
Acting Assistant Secretary for Aviation and International Affairs.
[FR Doc. 94-19441 Filed 8-5-94; 1:40 pm]
BILLING CODE 4910-62-P