[Federal Register Volume 59, Number 236 (Friday, December 9, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30359]


[[Page Unknown]]

[Federal Register: December 9, 1994]


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DEPARTMENT OF TRANSPORTATION
Office of the Secretary

14 CFR Part 255

[Docket No. 49812]

 

Computer Reservations System (CRS) Regulations

AGENCY: Office of the Secretary, DOT.

ACTION: Request for Comments, petition for rulemaking.

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SUMMARY: The Department is inviting interested persons to comment on a 
petition for rulemaking filed by Alaska Airlines (Alaska) that asks the 
Department to amend its rules on computer reservations systems (CRSs). 
Alaska asks the Department to amend those rules to include a 
prohibition against CRS vendor contract clauses that bar a non-vendor 
carrier from choosing a level of participation in a vendor's system 
that would be lower than the carrier's level of participation in any 
other system.

DATES: Comments must be submitted on or before January 9, 1995. Reply 
comments must be submitted on or before January 23, 1995.

ADDRESSES: Comments must be filed in Room 4107, Docket 49812, U.S. 
Department of Transportation, 400 7th St., SW., Washington, DC 20590. 
Late filed comments will be considered to the extent possible. To 
facilitate consideration of comments, each commentor should file twelve 
copies of its comments.

FOR FURTHER INFORMATION CONTACT: Thomas Ray, Office of the General 
Counsel, 400 7th St., SW., Washington, DC 20590, (202) 366-4731.

SUPPLEMENTARY INFORMATION: Travel agencies, who sell the great majority 
of all airline tickets in the United States, largely rely on computer 
reservations systems to learn what airline services and fares are 
available for their customers, to make bookings, and to issue tickets. 
Each of the CRSs operating in the United States is owned by one or more 
airlines or airline holding companies. Those owners of the CRSs (``the 
vendors'') have some ability to distort airline competition and to deny 
travel agency customers accurate information on airline services 
because most travellers buy airline tickets from travel agencies and 
because travel agencies rely heavily on CRSs in selling airline 
transportation to travellers. The Civil Aeronautics Board, the agency 
that formerly administered the economic regulatory provisions of the 
Federal Aviation Act (``the Act''), now Subtitle VII of Title 49 of the 
U.S. Code, therefore adopted rules regulating CRS operations under 
section 411 of the Act, now 49 U.S.C. 41712. We reexamined and 
readopted those rules with changes designed to further protect airline 
competition. 14 CFR part 255 (57 FR 43780 (September 22, 1992)).
    One of our goals in that rulemaking was to give carriers (and 
travel agencies) a greater ability to choose alternative means of 
electronically transmitting information and making airline booking 
transactions. For example, we adopted a rule that gave travel agency 
subscribers the right to use CRS terminals not owned by a vendor to 
access other systems and databases with airline service information. We 
expected that this rule would make it practicable for carriers to 
create direct links between the carriers' internal reservations systems 
and CRS terminals at travel agencies, which would enable carriers to 
bypass CRSs for some transactions. 57 FR 43796-43798.
    Each CRS offers carriers several levels of participation in its 
system. For example, a carrier can participate at the ``call direct'' 
level, in which case the system displays the carrier's schedules but 
does not show whether seats are available and does not enable the agent 
to make a booking on the carrier. If a carrier participates at the 
``full availability'' level, travel agents can use the system to learn 
whether seats are available on the carrier and make a booking. Almost 
all major carriers have participated in each system at the full 
availability level or at an even higher level involving some form of 
direct access. The vendors obtain payment from participating carriers 
for CRS services by charging them a fee for each booking made through 
the system. The booking fee increases as the carrier's level of 
participation increases.

Alaska's Petition

    Alaska has filed a petition for rulemaking that asks us to amend 
the rules to add a provision which would prohibit each vendor from 
requiring a non-vendor carrier participating in its system to 
participate at a level based on the carrier's participation in another 
system. Alaska's proposed rule reads as follows:

    No system may claim discrimination or require participating 
carriers which are not system owners to maintain any particular 
level of participation in its system on the basis of participation 
levels selected by participating carriers in any other system.

    Alaska's petition stems from the efforts of American Airlines, 
whose affiliate operates the largest U.S. CRS, Sabre, to keep Alaska 
from lowering its level of participation in Sabre. To keep Alaska from 
reducing its level of participation, American is relying on a 
contractual clause of the kind that would be barred if we adopted 
Alaska's proposed rule.
    Alaska has been considering reducing its level of participation in 
Sabre from the full availability level to the call direct level in 
order to reduce its costs. One of Alaska's major competitors, Southwest 
Airlines, participates in Sabre at the call direct level and thus 
incurs lower CRS costs than Alaska for Sabre bookings. Like other 
systems, Sabre charges higher booking fees when a carrier participates 
in the system at a higher level. Sabre's booking fee for carriers at 
the full availability level is $2.43, while the booking fee for 
carriers at the call direct level is only $1.25. To enable Sabre 
subscribers to continue booking Alaska electronically, Alaska was 
considering creating direct links between many of those agencies and 
Alaska's internal reservations system.
    When American learned that Alaska was considering reducing its 
level of participation in Sabre, American told Alaska that Alaska's 
contract with Sabre barred Alaska from reducing its level of 
participation in Sabre if Alaska would then be participating at a 
higher level in any other system. Alaska would continue to participate 
in other systems at the full availability level (Alaska alleges that it 
cannot afford to reduce its level of participation in other systems to 
the call direct level, since Alaska has been relying heavily on CRSs in 
distributing its services through travel agencies). As a result, 
Alaska's Sabre contract requires Alaska to continue participating in 
Sabre at the full availability level. The mandatory participation 
clause cited by Alaska is apparently a standard clause in Sabre's 
contracts with participating carriers. American, moreover, has filed 
suit against Alaska to enforce the mandatory participation clause in 
Alaska's contract with Sabre. American Airlines v. Alaska Airlines, 
N.D. Texas Civ. Action No. 4-94CV-595-Y. Although American is 
attempting to use the Sabre contract to block Alaska's possible switch 
to call direct participation, Southwest can participate in Sabre at the 
call direct level since Southwest does not participate at all in other 
systems.
    Alaska's petition argues that the mandatory participation clause 
imposed by Sabre is contrary to the public interest and should be 
proscribed by our regulations. Alaska suggests that we act by 
rulemaking since two other systems--Worldspan and System One--allegedly 
have similar clauses in their contracts with participating carriers.
    To support its petition, Alaska first notes that we adopted a rule, 
section 255.9, in our last CRS rulemaking which gives travel agencies 
the right to use their CRS terminals, if not owned by the vendor, to 
access other systems and databases. We intended that this rule would 
give a non-vendor airline some ability to avoid CRS fees by creating 
direct links between travel agencies and the carrier's internal 
reservations system. Alaska argues that the vendors' mandatory 
participation clauses will discourage carriers from creating direct 
links, since the clauses would keep them from reducing their level of 
participation in one system unless they reduced it in all systems, 
which would be too risky for most carriers. According to Alaska, if a 
carrier cannot reduce its booking fee costs by reducing its 
participation level, the carrier will have little incentive to incur 
the costs of creating direct links between the agencies using that 
system and the carrier's own internal reservations system.
    Secondly, Alaska contends that the mandatory participation clauses 
limit a non-vendor carrier's ability to respond to unacceptable CRS 
service or pricing. If a carrier decides to reduce its level of 
participation in one system because the system's service was poor or 
overly expensive, the carrier could not do so unless it simultaneously 
reduced its level of participation in other systems, even if the other 
systems' service and pricing were superior.

Request for Comments

    We have decided that we wish to consider further the issues raised 
by Alaska's rulemaking petition. We invite interested persons to 
comment on Alaska's contention that the mandatory participation clauses 
are inconsistent with our goals of enabling carriers to create 
alternative methods of providing information on schedules, fares, and 
availability to travel agents and of enabling travel agents to book 
carriers electronically. Parties should also comment on whether the 
clauses unreasonably restrict a carrier from responding to 
unsatisfactory CRS services and fees, as Alaska claims.
    In addition, 49 U.S.C. 41712, formerly section 411 of the Federal 
Aviation Act, 49 U.S.C. 1381, authorizes us to prevent unfair methods 
of competition, which includes practices that violate the letter or the 
spirit of the antitrust laws. See, e.g., 57 FR 43789. We ask interested 
persons to comment on whether the mandatory participation clauses 
violate antitrust principles.
    We have decided to request comments on Alaska's petition without 
waiting for the completion of our current study of the effects of our 
1992 revision of the CRS rules, a study begun by Order 94-9-35 
(September 26, 1994). Our tentative view is that we should not delay 
our consideration of Alaska's petition pending the study's completion.
    We also note that one of our new rules, 14 CFR 255.7(a), requires 
carriers with a significant ownership interest in a U.S. CRS to 
participate in each other system and each of its enhancements (to the 
extent that such carrier participates in those features in its own 
system). Alaska's petition covers mandatory participation clauses 
applicable to carriers having no significant ownership interest in a 
U.S. CRS and thus does not appear to be contrary to the purposes of 
section 255.7(a).
    The Department accordingly invites other persons to file comments 
on Alaska's petition. After reviewing the comments the Department will 
consider whether any amendment to our rules should be proposed.

    Issued in Washington, DC on December 6, 1994.
Patrick V. Murphy,
Acting Assistant Secretary for Aviation and International Affairs.
[FR Doc. 94-30359 Filed 12-8-94; 8:45 am]
BILLING CODE 4910-62-P