[Federal Register Volume 64, Number 135 (Thursday, July 15, 1999)]
[Rules and Regulations]
[Pages 38111-38114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17963]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 257 and 258

[Docket Nos. OST-95-179, OST-95-623, and OST-95-177]
RIN: 2105-AC10, 2105-AC17


Petitions Involving the Effective Dates of the Disclosure of 
Code-Sharing Arrangements and Long-Term Wet Leases Final Rule and the 
Disclosure of Change-of-Gauge Services Final Rule

AGENCY: Office of the Secretary (OST), Transportation.

ACTION: Final rule and notice of proposed disposition of petitions.

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SUMMARY: Two new rules that the Department of Transportation adopted on 
March 15, 1999, the Final Rule on Disclosure of Code-Sharing 
Arrangements and Long-Term Wet Leases, 14 CFR part 257 (``Code-Share 
Rule''), and the Final Rule on Disclosure of Change-of-Gauge Services, 
14 CFR part 258 (``Change-of-Gauge Rule''), are both scheduled to go 
into effect on July 13, 1999. These rules will enable consumers to make 
informed choices about their air transportation and to travel without 
undue confusion. We have received one petition requesting a waiver 
until October 15, 1999, of the Code-Share Rule's requirement that the 
transporting carrier's corporate and network names be disclosed. We 
grant this petition. We have also received seven petitions requesting 
delay of both rules' effective date, one to mid-October, 1999, and six 
to March 15, 2000; one of these seeks an additional grace period until 
September 15, 2000, for tour operators. These latter petitions cite 
Computer Reservations Systems' (``CRSs'') and other information 
systems' programming and software problems related to the year 2000 
(``Y2K'') as justification for delaying the rules' effective date. We 
are postponing the effective date of both rules until August 25, 1999, 
and we are requesting comments on our tentative findings that those 
parts of the rules that are not affected by CRS reprogramming should 
take effect on August 25, that the effective date of those parts of the 
rules that are affected by CRS reprogramming should be further 
postponed until March 15, 2000, and that as a matter of discretion we 
should refrain from enforcing both rules in their entirety against the 
tour operators for an additional grace period of six months.

DATES: Effective Dates: The effective date of the rule adding 14 CFR 
part 257 and removing 14 CFR 399.88, published at 64 FR 12838 on March 
15, 1999, is delayed until August 25, 1999. The effective date of the 
rule adding 14 CFR part 258, published at 64 FR 12854 on March 15, 
1999, is delayed until August 25, 1999.
    Comment Date: Comments on further delaying the effective date of 
these rules, or particular provisions of these rules, must be received 
by July 30, 1999 for consideration to be assured. Comments received 
after that date will be considered to the extent practicable. If the 
Department decides to further delay the effective date of these rules, 
or particular provisions of these rules, it will publish a document in 
the Federal Register announcing the new effective date.

ADDRESSES: Comments may be submitted by one of the following methods:
    (1) By mail to the Docket Management Facility (OST-95-179, OST-95-
623, OST-95-177), U.S. Department of Transportation, Room PL-401, 400 
Seventh St. SW, Washington, DC 20590-0001.
    (2) By hand delivery to room PL-401 on the Plaza level of the 
Nassif Building, 400 Seventh St. SW, Washington, DC, between 9 a.m. and 
5 p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    (3) By fax to Docket Management Facility at 202-366-2251.
    (4) Electronically through the Web Site for the Docket Management 
System at http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: Betsy L. Wolf, Senior Trial Attorney, 
Office of Aviation Enforcement and Proceedings (202-366-9359), Office 
of the General Counsel, U.S. Department of Transportation, 400 Seventh 
Street, SW, Washington, DC 20590.

SUPPLEMENTARY INFORMATION:

Background

    On March 15, 1999, the Department issued two new rules under 49 
U.S.C. 41712, our authority to prohibit unfair and deceptive practices 
and unfair methods of competition. These rules will protect consumers 
of air transportation in two ways: by ensuring that they are told what 
kind of service they are considering before they decide to buy it and 
by giving them written information that will help them avoid confusion 
and other mishaps in the course of their transportation. Among other 
things, the Code-Share Rule requires air carriers involved in code-
sharing arrangements or long-term wet leases to identify these 
arrangements in the written or electronic schedule information they 
provide to the public, in the Official Airline Guide (``OAG'') and 
comparable publications, and in CRSs with an asterisk or comparable 
mark and to disclose the transporting carrier's corporate name and any 
other name under which the service is held out to the public. The rule 
also requires air carriers and ticket agents to disclose this same 
information orally to prospective passengers before booking 
transportation, and it requires these sellers to provide this 
information in a written notice once a consumer has booked a flight 
involving a code-share arrangement or a long-term wet lease.\1\ The 
Change-of-Gauge rule has

[[Page 38112]]

comparable requirements for service with one flight number that 
requires a change of aircraft en route. For many if not most carriers 
and for all ticket agents, the ability to comply fully with these 
requirements hinges on the ability of the CRSs both to display all of 
the relevant information and to print it as the required written 
notice.
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    \1\ In the interest of clarity and brevity, in the remainder of 
this notice, we refer in most instances to the disclosures that the 
Code-Share Rule specifically requires and that are not specifically 
required under existing law or policy--namely, disclosure of the 
transporting carrier's corporate name and any other name under which 
a code-share or long-term wet-lease service is held out to the 
public--as ``the new code-share and long-term wet-lease 
disclosures.''
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Requests for Postponement

    On April 29, 1999, American Airlines, Inc., American Eagle 
Airlines, Inc., and Executive Airlines, inc. d/b/a American Eagle 
(collectively, ``American'') requested a waiver of the Code-Share Rule 
until October 15, 1999 for disclosure of Executive's corporate name. 
American is in the process of merging Executive into AMR Corporation, 
American's parent company. When the merger is complete, Executive will 
surrender its certificate of public convenience and necessity and 
conduct all further operations as American Eagle. American expects to 
complete the merger by October 15 and asked for a waiver in order to 
avoid the time and expense of reprogramming software to comply with the 
rule in the short time remaining before then after the rule takes 
effect. Under these circumstances, we agree with American that 
compliance with the rule would be unreasonably burdensome, so we grant 
its petition with regard to Executive.
    On May 4, Midwest Express Airlines requested a 90-day extension of 
the effective dates of both rules, claiming that the CRS enhancements 
that it has ordered from SABRE will not be ready by July 13. Similarly, 
on May 24, the Air Transport Association of America, Inc. (``ATA'') 
filed a petition asking the Department to postpone the rules' effective 
date until March 15, 2000. ATA stated that its member carriers and the 
CRSs have been working to reprogram and reconfigure their various 
information systems to be able to comply with both rules by July 13, 
but they have found this task, which requires coordination among all 
affected entities, more complex and time-consuming than they had 
anticipated. ATA stated that these efforts are coinciding unavoidably 
with the industry's commitment of considerable information services 
resources to ``pressing Y2K needs.'' With Y2K commanding the highest 
priority, ATA reported that ``many industry information services are 
planning to `lock down' their systems early in the fourth quarter of 
1999 and until after leap year day 2000.''
    ATA's petition drew supporting answers from the OAG, Aeropostal 
Alas de Venezuela, C.A., The SABRE Group, and EDS. The SABRE Group, 
which operates the SABRE CRS, stated that SABRE also serves as the 
internal reservation system of over 50 domestic and international 
carriers. Claiming that SABRE, like every other technology system, is 
``working diligently to avoid any problems associated with the [Y2K] 
issue,'' The SABRE Group confirmed that SABRE intends to impose a 
freeze, during which it will permit no new implementations of any kind, 
from November 1, 1999, to early in March of 2000. EDS, which operates 
the SHARES computer systems to provide hosting services to multiple 
domestic and international air carriers, states that it will be 
imposing a similar freeze from November 1, 1999, through the end of 
January.
    On June 14, the United States Tour Operators Association, Inc. 
(``USTOA'') filed a petition asking not only for an extension of both 
rules' effective date until March 15, 2000, in support of ATA's 
petition, but also for a grace period for tour operators of another six 
months--i.e., until September 15, 2000. USTOA agreed with ATA that much 
work remains to be done by the air carriers and CRSs before the former 
will be able to comply with the rules and that Y2K issues should take 
top priority. USTOA stated that tour operators use CRSs as a source of 
information for their own ```front-end information systems','' which 
``are extensive and complex because they include functionality to book 
air, along with hotel, rental car, airport transfers, dining, 
sightseeing activities, compute total retail price, print out itinerary 
and pay vendors.'' According to USTOA, tour operators will need to 
reprogram these front-end information systems in order to comply with 
both rules, and this endeavor will in turn entail ``knowing the 
specifications set by the originators of the information--the airlines 
and CRSs.'' USTOA requested an additional six-month grace period for 
tour operators to reprogram their own systems.
    On June 25, four foreign carriers, AVIATECA, S.A., LACSA Airlines, 
TACA International Airlines, S.A., and NICARAGUENSE DE AVIACION, 
requested an extension of the rules' effective date until March 15, 
2000. These carriers are multi-hosted in SABRE, which, as noted, has 
announced that it will not be able to provide the requisite 
enhancements to enable these carriers to comply with the rules as of 
July 13.\2\
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    \2\ On May 25, Aer Lingus Limited (``Aer Lingus'') requested a 
temporary waiver of the Code-Share Rule until October 31, 1999, for 
reasons unrelated to the issues raised by the other parties. We have 
disposed of Aer Lingus's request elsewhere.
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The Department's Concerns

    We recognize that it is critical that information systems in the 
air transportation industry be prepared to continue functioning 
normally through the end of the 20th century and into the 21st. The 
Department has actively sought to avoid imposing any substantial 
information burdens on the industry that would interfere with its 
ability to become Y2K-compliant. In fact, when we adopted the two rules 
at issue here in March, all information available to us indicated that 
the CRSs and major airline reservations systems were or would be Y2K 
compliant. We had attempted to gauge the rules' effect on Y2K 
compliance by reviewing statements from Annual Reports, 10-K and 10-Q 
Statements filed with the Securities and Exchange Commission, news 
reports, press releases, and other documents of the four CRSs, the nine 
largest U.S. air carriers, and other relevant entities. While 
recognizing that there could be no guarantees, we found that most 
entities expected to be Y2K compliant on time and had made contingency 
plans to use in the event that they are not. We concluded that the 
public interest would best be served by issuing the rules in March and 
making them effective in July rather than waiting until next year, 
because the need for effective disclosure has been pressing and is 
likely to increase as air carriers' relationships and operations grow 
ever more complex. See 64 Fed. Reg. 12838, 12850-12851 (March 15, 1999) 
(Code-Share Rule) and 64 Fed. Reg. 12854, 12859 (March 15, 1999) 
(Change-of-Gauge Rule).
    Because of the rules' implications for consumer welfare and because 
the technological problems suggested by the parties do not apply to all 
parts of the new rules, we concluded initially that the public interest 
would not be served by extending the effective date for both rules in 
their entirety until March 15, 2000. Without more detailed and concrete 
information from the parties, however, we could not make an informed 
decision on which parts of the rules might have to be postponed or for 
how long. We believed that Y2K compliance might no longer be an issue 
for the entire industry; we knew that sellers and providers of air 
transportation could comply with some parts of the rule without any 
reprogramming by the CRSs. The rules do add several new disclosure 
requirements, including requiring ticket agents as well as air carriers 
to provide

[[Page 38113]]

both oral and written notice of code-sharing arrangements and change-
of-gauge services, but they also retain and consolidate existing 
disclosure requirements that already apply to air carriers.\3\ Several 
of the new requirements do require reprogramming on the part of the 
CRSs: the new code-share and long-term wet-lease disclosures in 
schedules, the OAGs, and the CRSs, these same disclosures via oral 
notice to consumers before booking transportation, these same 
disclosures via written notice to purchasers, and a generic written 
notice of change-of-gauge services to purchasers. CRS reprogramming 
does not come into play for the Code-Share Rule's advertising 
requirement. Furthermore, CRS listings already indicate code-share 
services and change-of-gauge services, so travel agents are able now to 
comply with existing oral disclosure requirements that apply only to 
air carriers.\4\
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    \3\ The Department's policy on airline designator code-sharing, 
14 CFR Sec. 399.88, requires air carriers to give reasonable and 
timely disclosure of code-sharing arrangements by identifying them 
in schedules given to the public, the OAG, and CRSs, by disclosing 
them in discussions with consumers, and by providing frequent, 
periodic notice of them in advertisements. The Department's orders 
approving code-sharing arrangements involving foreign air carriers 
apply these same requirements to the foreign carriers. See, e.g., 
Order 94-5-31. As for change-of-gauge service, the Department's CRS 
rules, 14 CFR Sec. 255.4(b)(2), require that CRS displays give 
notice of any flight that involves a change of aircraft en route, 
and we require as a matter of policy that carriers give consumers 
notice of aircraft changes for change-of-gauge flights. See Order 
89-1-31 at 5.
    \4\ USTOA's members are not able at present to comply with these 
requirements, as discussed below.
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Additional Information from Interested Parties

    Because of our need to resolve these issues quickly and craft a 
solution that both accommodates legitimate Y2K concerns and allows only 
those delays to the rules' consumer benefits that are unavoidable, we 
met with interested parties at the Department on Tuesday, June 29.\5\ 
Those in attendance gave us more detailed information than the parties 
had provided in their pleadings on how Y2K compliance issues relate to 
compliance with the rules, on why CRSs cannot be reprogrammed to allow 
all parties to comply with the new rules in their entirety by July 13, 
and on why the parties need until March of next year (and, in the case 
of USTOA, an additional six months) to be ready to comply. The 
following five paragraphs contain the gist of this information.
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    \5\ Specifically, the Acting Assistant Secretary for Aviation 
and International Affairs, the General Counsel, and Department staff 
met with representatives from ATA, American, Continental, Delta, 
Midwest Express, Northwest, TWA, US Airways, Aeropostal, Canadian, 
OAG, and SABRE.
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    First, for air carriers and ticket agents to comply with the rules' 
new requirements, the CRSs must be reprogrammed (1) to allow carriers 
to input the new code-share and long-term wet-lease disclosures, (2) to 
display all of this information on screens viewed by travel agents, and 
(3) to print both these new disclosures and the generic written 
disclosure required for change-of-gauge services. Additionally, OAG 
must make changes to be able to assimilate and list all of the new 
information from air carriers, and carriers themselves have 
reprogramming work to do to be able, among other things, to provide 
written notice of code-share services, long-term wet leases, and 
change-of-gauge services at airports when this notice is not sent to 
passengers earlier along with a ticket or itinerary. USTOA's members 
sell tour packages, mostly through travel agents but in some cases 
directly to the public; they cannot begin to reprogram their own front-
end information systems until after the CRSs have completed their 
reprogramming.
    Second, the CRSs cannot accomplish all of the reprogramming they 
must do by July 13.\6\ To ingest, process, display, and dispense all of 
the additional information the new rules require, the CRSs must more 
than double the size of their existing data fields, from 19 characters 
to 39 characters. This task requires massive reprogramming, consuming 
considerable resources for considerable amounts of time, and is further 
complicated by the need for a standard, industry-wide solution.
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    \6\ Although only SABRE has commented on the record and sent 
representatives to the meeting, the parties confirmed that the other 
CRSs are situated similarly.
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    Third, the CRSs, the other information systems, and the carriers 
initially failed to apprehend the enormity of the task before them. 
Meanwhile, as Y2K looms ever larger, the information systems are all 
imposing freezes on new implementations from November through at least 
the beginning of next year. They will use the initial months of these 
freezes to arrange things so that they can quickly identify, analyze, 
and fix any problems that may arise during the transition to the next 
century. They do not have unlimited resources. Therefore, not only can 
they not possibly finish the reprogramming required by the Code-Share 
and Change-of-Gauge Rules by July 13, but they deem it highly unlikely 
that they will be able to finish, test, and implement this 
reprogramming before their freezes commence in November even though 
they will continue their good-faith efforts.
    Fourth, while the reprogramming necessary for the new code-share 
and long-term wet-lease disclosures plus the generic written notice of 
change-of-gauge services constitute the barrier to compliance with both 
new rules in their entirety by July 13, CRS displays do already 
indicate code-share service and identify the transporting carrier, and 
they do already indicate change-of-gauge service. Virtually all travel 
agents now use CRSs to book transportation and issue tickets. 
Therefore, with the exception of USTOA's members discussed below, 
ticket agents \7\ should already be able to comply with the oral 
disclosure requirements currently in effect for air carriers and 
foreign air carriers.
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    \7\ As a technical matter, both rules apply to ticket agents as 
that term is defined in 49 U.S.C. 40102 (40): a ticket agent is ``a 
person (except an air carrier, a foreign air carrier, or an employee 
of an air carrier or foreign air carrier) that as a principal or 
agent sells, offers for sale, negotiates for, or holds itself out as 
selling, providing, or arranging for, air transportation.'' Thus, 
all travel agents are ticket agents, but not all ticket agents are 
travel agents.
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    Fifth, USTOA's members are tour operators. They do most of their 
business through travel agents, but they do have some direct dealings 
with consumers. Unlike conventional travel agents, they use their own 
front-end systems rather than CRSs, as noted. Not only will they need 
six months after the CRSs are reprogrammed to reprogram their own 
systems to display and process all of the information required for 
compliance with the two rules, as also noted, but unlike the CRSs, 
these systems do not currently indicate code-share service, identify 
the transporting carrier, or indicate change-of-gauge service. 
Therefore, unlike conventional travel agents, USTOA's members are not 
already able to comply with the oral disclosure requirements currently 
in effect for carriers.

Disposition

    On the one hand, the parties have satisfied us that they cannot 
comply with the two rules in their entirety by July 13 and will not be 
able to comply before the information systems' freezes on 
implementation take effect in November. Moreover, we must continue to 
take care not to impose information burdens on the industry that could 
interfere with Y2K compliance. On the other hand, the rules will give 
consumers information that is of critical importance to them in making 
informed decisions about their travel purchases and in avoiding 
problems during travel.

[[Page 38114]]

Compliance with some parts of the rules does not require any CRS 
reprogramming. For example, travel agents, who still sell most air 
transportation, are in a position to begin providing some of this 
information by complying with the oral disclosure portions of the rules 
that already apply to carriers. We have therefore tentatively decided 
to dispose of the requests for postponement by granting them only 
insofar as necessary--i.e., by only postponing the effective date until 
March 15, 2000, for those parts of the rules with which carriers and 
ticket agents cannot fully comply until the CRSs have completed their 
reprogramming, as specified below. To this end, we are postponing the 
effective date of both rules until August 25, 1999, and giving 
interested parties fifteen days to submit comments on our tentative 
findings and the actions they contemplate. We will issue a final notice 
on or before August 25.
    Accordingly, this document postpones the effective date of the 
Code-Sharing Rule, 14 CFR part 257, the Change-of-Gauge Rule, 14 CFR 
part 258, and the removal of 14 CFR 399.88, until August 25, 1999.
    This document also invites comment on whether the effective date of 
certain parts of the rule should be further extended. In this regard, 
based on the petitions and public input received since parts 257 and 
258 were adopted, the Department believes that the effective date of 
the following parts of the Code-Share Rule should not be further 
postponed:

 Sec. 257.1  Purpose.
 Sec. 257.2  Applicability.
 Sec. 257.3  Definitions.
 Sec. 257.4  Unfair and deceptive practice.
 Sec. 257.5  Notice requirement.
    (b) Oral notice to prospective consumers, but only insofar as 
compliance with this section does not require reprogramming by 
CRSs.\8\
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    \8\In other words, carriers, which are currently required to 
disclose code-share and change-of-gauge services in discussions with 
consumers, would be required as of August 25 to make these 
disclosures before booking transportation, and the same requirements 
would apply to travel agents. The new code-share and long-term wet-
lease disclosures would not be required at this time.
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    (d) Advertising.

    Similarly, the Department believes the effective date of the 
following parts of the Change-of-Gauge Rule should not be further 
postponed:

 Sec. 258.1  Purpose.
 Sec. 258.2  Applicability.
 Sec. 258.3  Definitions.
 Sec. 258.4  Unfair and deceptive practice.
 Sec. 258.5  Notice requirement.
    (a) Notice in schedules.
    (b) Oral notice to prospective consumers.

    However, if the Department views are not altered by the comments we 
are inviting here, the Department will take further action by August 
25, 1999, to postpone the effective date of the following parts of the 
Code-Share Rule until March 15, 2000:

 Sec. 257.5  Notice requirement.
    (a) Notice in schedules.
    (b) Oral notice to prospective consumers, except as specified in 
paragraph (1).
    (c) Written notice.\9\

    \9\ It is our understanding that carriers are already complying 
with those parts of the schedule notice requirement that go beyond 
14 CFR 257.5(a) and the oral notice requirement imposes no new 
requirement on carriers.

    Similarly, we would postpone the effective date of the following 
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part of the Change-of-Gauge Rule until March 15, 2000:

 Sec. 257.5  Notice requirement.
    (c) Written notice.

    Finally, we believe that USTOA has shown good cause for the 
Department to refrain as a matter of discretion from enforcing both 
rules in their entirety against tour operators until six months after 
March 15, 2000.\10\
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    \10\ We tentatively find that imposing the same requirements on 
tour operators that those parts of the rules that are to take effect 
on August 25 will impose on travel agents would burden the tour 
operators excessively by forcing them to reprogram their front-end 
systems not once but twice.
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    In closing, we strongly encourage the CRSs and other information 
systems to proceed with their reprogramming efforts with all possible 
expedition. Any affected parties that can comply with the rules before 
they become effective should do so. For example, while we are 
tentatively agreeing to postpone the effective date of both rules' 
written notice requirements, we are aware that some carriers and some 
travel agents are already disclosing much of the required information 
in the itineraries they provide to passengers, and we encourage all 
sellers of air transportation to do so who have the capability.

Regulatory Analyses and Notices

    The Department has determined that this action is not an 
economically significant regulatory action under Executive Order 12866 
or the Department's Regulatory Policies and Procedures, and it has not 
been reviewed by the Office of Management and Budget. This rule is 
significant under the Department's Regulatory Policies and Procedures 
because of congressional and public interest. The rule does not impose 
unfunded mandates or requirements that will have any effect on the 
quality of the human environment. A summary of the regulatory analyses 
of the rules whose effective date is being extended here was published 
at 64 FR 12850-12851 and 12859, March 15, 1999. Also published there 
were discussions of the rules' effects on small businesses and their 
Federalism and Paperwork Reduction Act implications. Apart for the Y2K 
implications recently brought to light and addressed above, the 
determinations made previously are not significantly affected by the 
limited extensions of the effective date made and proposed here.

    Authority: 49 U.S.C. 41712.

    Issued in Washington, DC on July 9, 1999, under authority 
delegated by 49 CFR 1.56a(h)2.
A. Bradley Mims,
Acting Assistant Secretary for Aviation and International Affairs.
[FR Doc. 99-17963 Filed 7-14-99; 8:45 am]
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