[Federal Register Volume 64, Number 49 (Monday, March 15, 1999)]
[Rules and Regulations]
[Pages 12838-12852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6138]



[[Page 12837]]

_______________________________________________________________________

Part II





Department of Transportation





_______________________________________________________________________



Office of the Secretary



_______________________________________________________________________



14 CFR Parts 257 and 399



Disclosure of Code-Sharing Arrangements and Long-Term Wet Leases; Final 
Rule

  Federal Register / Vol. 64, No. 49 / Monday, March 15, 1999 / Rules 
and Regulations  

[[Page 12838]]



DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 257 and 399

[Docket Nos. OST-95-179 & OST-95-623]
RIN 2105-AC10


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

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: This rule strengthens the Department's current consumer 
notification rules and policies to ensure that consumers have pertinent 
information about airline code-sharing arrangements and long-term wet 
leases in domestic and international air transportation. The rule, 
among other things, does the following: First, requires travel agents 
doing business in the United States, foreign air carriers, and U.S. air 
carriers: To give consumers reasonable and timely notice if air 
transportation they are considering purchasing will be provided by an 
airline different from the airline holding out the transportation, and 
to disclose the identity of the airline that will actually operate the 
aircraft.
    Second, for tickets issued in the United States, requires U.S. and 
foreign air carriers and travel agents to provide written notice of the 
transporting carrier's identity at the time of purchase of air 
transportation involving a code-sharing or long-term wet-lease 
arrangement.

DATES: This regulation is effective July 13, 1999. Comments on the 
information collection requirements must be received on or before May 
14, 1999.

ADDRESSES: Comments should be sent to Jack Schmidt, Office of Aviation 
and International Economics (X-10), Office of the Assistant Secretary 
for Aviation and International Affairs, Office of the Secretary, U.S. 
Department of Transportation, 400 Seventh St., SW., Washington, DC 
20590, (202) 366-5420 or (202) 366-7638 (FAX).

FOR FURTHER INFORMATION CONTACT: Laura Trejo, Office of International 
Law, Office of the General Counsel, Room 10118, (202) 366-9183, or 
Timothy Kelly, Aviation Consumer Protection Division, Room 4107, (202) 
366-5952, U.S. Department of Transportation, 400 7th Street, SW., 
Washington, DC 20590.

SUPPLEMENTARY INFORMATION:

Background

    The Department issued a Notice of Proposed Rulemaking (NPRM), 59 FR 
40836 (August 10, 1994), to obtain comments and reply comments on 
requiring the disclosure of code-sharing arrangements and long-term wet 
leases. In these operations, the operator of a flight differs from the 
airline in whose name the transportation is sold. The NPRM proposed to 
strengthen the current disclosure rules.
    The NPRM, among other things, proposed (1) to require travel agents 
doing business in the United States, foreign air carriers, and U.S. air 
carriers (a) to give consumers reasonable and timely notice if air 
transportation they are considering purchasing will be provided by an 
airline different from the airline holding out the transportation, and 
(b) to disclose the identity of the airline that will actually operate 
the aircraft; and (2) for tickets issued in the United States, to 
require U.S. and foreign air carriers and travel agents to provide 
written notice of the transporting carrier's identity at the time of 
purchase of air transportation involving a code-sharing or long-term 
wet-lease arrangement. The NPRM also stated that the Department wants 
to consider seriously a requirement that the transporting carrier's 
identity be printed on the flight coupon for services involving a code-
sharing or long-term wet-lease arrangement.
    This action was taken to ensure that consumers have pertinent 
information about airline code-sharing arrangements and long-term wet 
leases on domestic and international flights.
    We received comments on the NPRM and reply comments from ten U.S. 
airlines (Alaska Airlines, Inc., American Airlines, Inc., Continental 
Airlines, Inc., Delta Air Lines, Inc., Frontier Airlines, 
Inc.1, Northwest Airlines, Inc., Southwest Airlines Co., 
Trans World Airlines, United Air Lines, Inc., and USAir, Inc.), eight 
foreign airlines (Aerovias de Mexico, S.A. de C.V., British Airways, 
Qantas Airways Limited, SwissAir, LTU Lufttransport-Unternehmen GmbH. & 
Co. KG, British Midland Airways, Ansett Australia Holdings, and Lan 
Chile), the International Association of Machinists and Aerospace 
Workers, three associations (Regional Airline Association, 
International Airline Passengers Association, and National Air Carrier 
Association), three CRS vendors (Galileo International Partnership, 
Worldspan, and System One Information Management, Inc.), nine travel 
agent/industry groups (Action 6, Admiral Travel Bureau, American 
Automobile Association, American Society of Travel Agents, Mercury 
Travel, Omega World Travel, Rogal Associates, Township Travel, and 
USTravel), and five other groups or individuals (Americans for Sound 
Aviation Policy, the City of Philadelphia, Donald Pevsner, the British 
Embassy, and Congresswoman Rosa De Lauro).2
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    \1\ Frontier Airlines, Inc. subsequently withdrew its comments.
    \2\ The Saturn Corporation and PMI Mortgage Insurance submitted 
letters prior to publication of the NPRM.
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    The comments persuaded us that we should change one aspect of the 
proposal. The proposed rule would have allowed airlines operating under 
network names, e.g., American Eagle or Delta Connection, to identify 
themselves to the public only by those names. Supporters of this 
original proposal argued that giving passengers the actual corporate 
name, e.g., Atlantic Coast Airlines, could add to confuse passengers' 
confusion, because there are typically no airport signs using that name 
that would tell passengers where to check in.
    Some commenters, however, argued that the public should know 
precisely who is operating the aircraft. They asserted that permitting 
the commuters to operate only under a network name obscures, rather 
than clarifies, the nature of the operation.
    We issued a supplemental notice proposing to require all operators 
to disclose their corporate name. 60 FR 3359 (January 17, 1995). The 
notice also requested comments on whether, to avoid any airport-related 
confusion, we should also require disclosure of the network name where 
there is one. The purpose of this proposal was to help ensure that 
consumers will not assume that a major airline is the transporting 
carrier when purchasing transportation operated by one of its regional 
airline partners.
    We received comments on the supplemental notice from Northwest 
Airlines, American Airlines and AMR Eagle, Trans World Airlines, United 
Air Lines, USAir, Inc., Midwest Express Airlines and Astral Aviation 
doing business as Skyway Airlines, Delta Air Lines, Continental 
Airlines and System One, the International Association of Machinists 
and Aerospace Workers, the Port Authority of New York and New Jersey, 
Gulfstream International Airlines, Inc., the American Society of Travel 
Agents, and the Regional Airlines Association.
    The following is a summary of the comments and reply comments and 
the Department's decision on each component of the NPRM:

[[Page 12839]]

Written Notice on the Flight Coupon

    The NPRM announced that the Department was considering a 
requirement that, where the designator code on the ticket is different 
from that of the transporting carrier on any flight segment, there must 
be printed on the flight coupon (1) an asterisk, like the one that 
already identifies flights listed in computer reservation systems 
(CRSs) under an airline code different from that of the transporting 
carrier, and (2) a legend elsewhere on the coupon that states the 
transporting carrier's identity preceded by the words ``operated by.''
    American supported the proposal and stated that the legend 
``operated by'' could be printed on the newer ``Automated Ticket and 
Boarding Pass'' (``ATB'') ticket stock, which accounts for 80 percent 
of the tickets issued. However, American claimed that there is 
insufficient room on the older ``Transitional Automated Ticket'' 
(``TAT''), which still accounts for 20 percent of the tickets issued. 
American estimated that total modifications to its SABRE computer 
reservation system (used by travel agents and American's own ticket 
agents) to comply with the proposed requirement would cost between 
$250,000 and $300,000. The National Air Carrier Association (``NACA'') 
also supported the proposal. Mr. Pevsner proposed that an asterisk be 
placed in the ``CARRIER'' box with a bold-type disclosure elsewhere on 
the flight coupon.
    The American Automobile Association (``AAA''), British Airways, 
Delta, Galileo, Northwest, Qantas, Worldspan, USAir, the City of 
Philadelphia, Lan Chile, and SwissAir opposed printing on the ticket. 
Most of the opposition claimed that there was simply no room on the 
ticket and that the associated costs would be unduly burdensome. 
Worldspan argued that it would not be feasible to include the identity 
of the transporting carrier on a flight coupon, and it opposed 
American's suggestion that the notice should be carried on the ATB 
stock but not the TAT stock. Worldspan asserted that if notice were 
provided on one type of ticket stock but not the other, the result 
would be more confusing to passengers than providing no notice on 
either type of stock. Galileo stated that it would be necessary to 
retrofit about 13,000 ticket printers located in Apollo agencies, 
costing $500,000, and that the implementation phase would take longer 
than 60 days. Delta stated that if the Department imposed a new written 
notice requirement, the industry would need up to one year to comply.
    Because American stated that a notice could be placed on ATB stock 
but not on TAT stock, TWA suggested that the notice be required either 
on the ticket stock or on the mini-itinerary stapled to the ticket. TWA 
believes that the mini-itinerary, when stapled to the ticket package, 
is an adequate substitute for requiring notice of a code-share carrier 
on the ticket coupon.
    United claimed that printing on the tickets would duplicate the 
written notice on the itinerary and conflict with the movement towards 
ticketless travel. Further, United disagreed with American's cost 
estimate, because it was based on only one type of ticket generated on 
domestic ticket printers. According to United, most carriers would not 
want to limit such a ticketing change only to the type of ticket issued 
in the United States but would want it to apply system-wide, and to all 
types of printers. If the costs of reprogramming and retooling all 
ticket printers worldwide were taken into account, United estimated 
that costs would exceed $1 million and that implementation would take 
more than one year. Continental and System One estimated the costs to 
System One at more than $300,000 with a six to ten month implementation 
phase.
    Delta argued that the standard ticket format is based on an 
industry agreement. According to Delta, any changes to the format will 
require discussions between the carriers and CRSs, which would be time-
consuming and potentially costly.
    The International Airline Passenger Association (IAPA) stated that 
if there is insufficient space to print a notice on the ticket, a card 
could be added after each coupon on which a code-sharing flight appears 
stating that the flight on the prior coupon is actually being operated 
by another carrier.

Decision

    The Department has decided to defer further consideration of a rule 
requiring written notice on the face of the ticket until standards for 
ticketing, evolution of ticketless travel, and the effectiveness of 
other disclosure measures can better be evaluated. The comments have 
persuaded us that we could, at best, cover only 80 percent of the 
tickets issued at this time without imposing substantial costs, since 
the older TAT ticket stock cannot accommodate our proposed notice. It 
appears that the major cost of providing the written notification on 
the coupon is due to the reprogramming of the print command software 
and retooling the printer hardware. Based on the comments, these costs 
range from $300,000 to $1,000,000 depending upon the system. The total 
cost for the written notification on the ticket coupon would 
approximate $3,800,000 for the largest portion of the U.S. airline/CRS 
vendor industries.
    We believe that we should impose such a cost burden only if it 
could be shown that the benefits would clearly outweigh the costs. 
Given the difficulty of estimating the incremental benefit that notice 
on the ticket would add to the other measures we are requiring, such as 
the written and oral notice components of the rule, we cannot conclude 
at this time that imposition of the additional requirement is 
warranted. Also, as United argued, it is unclear at this point how the 
ticketless travel movement will develop. Therefore, during the two to 
three year period following effectiveness of this rule, the Department 
will monitor (1) the effectiveness of the disclosure rule as adopted, 
(2) the ticketless travel trend, and (3) the ability of airlines to 
give adequate consumer notices in a ticketless environment and will 
revisit this issue then if justified. We can then initiate further 
rulemaking action if it appears necessary.

Application of Rule to Wet Leases

    The NPRM proposed to apply the oral and written notice requirements 
to wet leases that last more than 60 days because, from the consumer's 
perspective, wet leasing is indistinguishable from code-sharing: the 
passenger buys a ticket from one airline, but the aircraft is operated 
by another.
    Continental, System One, British Airways, Qantas, USAir, NACA, the 
Government of the United Kingdom, Lan Chile, and Northwest opposed this 
proposal. They argued that wet-lease operations do not cause 
significant confusion problems and that the proposed notice would 
actually confuse passengers. In addition, these opponents claimed that 
it is not technically feasible to give notice, because aircraft used in 
wet leases are frequently used on different routings and/or on 
different days of the week, making advance identification 
impracticable. USAir in particular claimed that it would take at least 
a year to modify computer software, and it stated that the Department 
can impose any necessary consumer protection conditions through the 
present licensing process. British Airways argued that requiring notice 
will keep airlines from being able to enter into flexible aircraft 
arrangements. Northwest stated that a wet lease differs from a code-
sharing arrangement in that only one carrier is holding out service on 
the flight. Moreover, Northwest

[[Page 12840]]

argued that the lessee carrier is fully responsible for the operation 
of the flight even though the crew is provided by the lessor carrier, 
and the wet-lease agreement typically states the lessee's operating 
requirements.
    Americans for a Sound Aviation Policy (``ASAP'') stated that the 
notification requirement should be triggered by wet leases of two weeks 
since CRS notification to travel agents can be nearly instantaneous.
    LTU, a privately owned German carrier, suggested amending section 
257.3(f), the definition of a long-term wet lease, to add at the end 
the phrase, ``unless such lease is between air carriers with 100 
percent common ownership.'' LTU leases aircraft on a long-term basis to 
an affiliate with identical ownership. The aircraft are then leased 
back to LTU with crew for the same term. A limited portion of the 
operations of these aircraft are in scheduled service to the United 
States. LTU claimed that these are not true wet leases because LTU owns 
the aircraft it leases, but it noted that LTU's operations would appear 
to be subject to this proposal. According to LTU, its affiliate does 
not have a separate commercial identity or a designator code in the 
Official Airline Guides, and moreover, it and its affiliate have the 
same managing director and most of the same management. Reasoning that 
the disclosure requirement would only confuse passengers, LTU suggested 
amending the proposal as indicated above.
    Southwest asked the Department to revise the NPRM to exclude the 
Southwest-Morris Air arrangement and similar operating arrangements 
from the public disclosure requirements. Morris Air is now wholly owned 
by Southwest. Southwest stated that, under their transitional 
arrangement, Morris Air ceased holding out its services to the public 
on October 4, 1994, and after that date those services were held out 
solely in Southwest's name. For a period of six months, some flights 
would be operated by Morris Air aircraft and crews. This arrangement 
was to last only long enough to meet the FAA procedures for conversion 
of the remaining Morris Air aircraft to Southwest's certificate and 
operations specifications.

Decision

    The Department has decided to retain but modify the proposed 
requirement to disclose the identity of the actual operator of a long-
term wet lease. No commenter provided an adequate basis for 
distinguishing between long-term wet leases and code-sharing 
arrangements from the consumer's perspective. Northwest's observation 
that in a wet lease only one carrier is holding out service on the 
flight does not take into account major U.S. carriers' alliances with 
commuter carriers (such as United Express or American Eagle). In these 
alliances, generally only the major carrier holds out 
service.3
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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
---------------------------------------------------------------------------

    \6\ In re RMJ, 455 U.S. 191, 203 (1982).
---------------------------------------------------------------------------

    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