[Federal Register Volume 71, Number 34 (Tuesday, February 21, 2006)]
[Rules and Regulations]
[Pages 8800-8802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1550]



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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 256

[Docket No. OST-2005-20826]
RIN 2105-AD44


Display of Joint Operations in Carrier-Owned Computer 
Reservations Systems Regulations (Part 256)

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Final rule.

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SUMMARY: The Department is eliminating its rule that currently 
prohibits each airline that owns, controls, or operates a computer 
reservations system (``CRS'' or ``system'') from denying system access 
to two or more carriers whose flights share a single designator code 
and discriminating against any carrier because the carrier uses the 
same designator code as another carrier. The Department has determined 
that this rule is no longer necessary. This action is consistent with 
the Department's decision at the end of 2003 to eliminate its 
comprehensive rules governing system operations, 14 CFR part 255.

DATES: This rule is effective March 23, 2006.

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

Electronic Access

    You can view and download this document by going to the Web site of 
the Department's Docket Management System (http://dms.dot.gov/). On 
that page, click on ``search.'' On the next page, type in the last five 
digits of the docket number shown on the first page of this document. 
Then click on ``search.'' An electronic copy of this document also may 
be downloaded by using a computer, modem, and suitable communications 
software from the Government Printing Office's Electronic Bulletin 
Board Service at (202) 512-1661. Internet users may reach the Office of 
the Federal Register's home page at: http://www.nara.gov/fedreg and the 
Government Printing Office's database at: http://www.access.gpo.gov/nara/ index.html.

SUPPLEMENTARY INFORMATION:

A. Background

    Travel agents rely on airline computer reservations systems 
(``CRSs'' or ``the systems'') to obtain information on airline flights 
and fares, to book airline seats, and to issue tickets (although the 
systems now are also commonly called global distribution systems, or 
GDSs, we are referring to them as CRSs for purposes of this 
rulemaking). See, e.g., 67 FR 69366, 69370 (November 15, 2002). Each 
system provides information and booking capabilities on each airline 
that has agreed to make their services saleable through the system and 
to pay the fees required for participation. Until recent years, almost 
every airline obtained the large majority of its revenues from bookings 
made by travel agents using one of the systems. Each system was 
originally developed by an airline, and one or more airlines controlled 
each system until recently.
    We have had two sets of CRS rules. The principal set of rules, 14 
CFR part 255, set forth comprehensive requirements that governed the 
systems' relationships with their airline and travel agency customers 
until we terminated the rules in 2004. 69 FR 976 (January 7, 2004). 
Those rules covered any system that was owned or marketed by an airline 
or airline affiliate. 14 CFR 255.2. The other set, 14 CFR part 256, 
concerned the systems' treatment of airlines that share the same two-
symbol designator code, the code used by the systems and other sources 
of airline information to identify the airline offering the seats being 
sold (the codes for America West and Alaska Airlines, for example, are 
HP and AS). These rules bar airlines that own, control, or operate a 
system from denying access to that system to two or more airlines whose 
flights share a single designator code and from discriminating against 
any airline because that airline uses the same designator code as 
another airline.
    The Civil Aeronautics Board (``the Board''), the agency then 
responsible for the economic regulation of the airline industry, 
adopted both the comprehensive rules (Part 255) and the rules governing 
the treatment of code-sharing airlines (Part 256) in the same year, 
1984, on the basis of a common economic and competitive analysis. 49 FR 
12675 (March 30, 1984) (Part 256); 49 FR 32540 (August 15, 1984) (Part 
255). The Board adopted the CRS regulations due to the systems' 
important role in the distribution of airline tickets and the systems' 
ownership by airlines, and we readopted the comprehensive rules in 1992 
for the same reason. Like the Board, we based our readoption of the 
rules on 49 U.S.C. 41712, originally section 411 of the Federal 
Aviation Act, which authorized us (and earlier the Board) to prohibit 
unfair and deceptive practices and unfair methods of competition in the 
distribution of airline tickets.

B. Our Proposal to Eliminate the Rules on the Treatment of Code-Sharing 
Airlines and the Comments on That Proposal

    When we again reexamined the need for the comprehensive rules in 
our most recent rulemaking, we concluded that they had become 
unnecessary, and we terminated all of them by July 31, 2004. 69 FR 976, 
977 (January 7, 2004). Our decision that industry developments had 
ended the need to maintain the comprehensive rules suggested that we no 
longer had a basis for maintaining the rules on the systems' treatment 
of code-sharing airlines, Part 256. We began this rulemaking to examine 
whether the rules governing the treatment of code-sharing airlines 
remained necessary. 70 FR 16990 (April 4, 2005). We proposed to 
terminate those rules as well. We believed that those rules, like the 
comprehensive rules, had become unnecessary, primarily because the 
increasing importance of the Internet in airline distribution was 
reducing the systems' market power over airlines and because U.S. 
airlines had divested all of their CRS ownership interests. One of the 
systems, Amadeus, is owned in part by three European airlines, but it 
also has substantial public ownership, and its airline owners should 
have no incentive to prejudice airline competition within the United 
States. In addition, because these rules cover only airlines that own, 
control, or operate a system, and do not cover systems not owned, 
controlled, or operated by airlines, Amadeus had become the only system 
subject to these rules. Maintaining these rules seemed illogical when 
they did not cover the three largest systems operating within the 
United States. Finally, we tentatively found that the systems were 
unlikely to deny access to code-sharing airlines, or to discriminate 
against them, because code-sharing had become a widespread practice and 
travel agents would probably be unwilling to use systems that did not 
display airline services marketed under code-share arrangements. 70 FR 
16992-16993.
    The only two firms filing comments, Delta Air Lines and Amadeus 
Global Travel Distribution, support our proposal. Delta agrees with our 
findings that the rules have become unnecessary due to the U.S. 
airlines' divestiture of their system ownership interests and the ready 
access to airline information on the Internet for travel agents and 
consumers. Delta also cites the policy goal of relying on free market 
forces rather than regulation to obtain

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transportation policy goals. Amadeus supports our finding that no 
system is likely to discriminate against airlines that code-share, 
because travel agents and consumers can easily obtain information and 
book code-share services through the Internet. Amadeus further agrees 
with our reasoning that the rules are irrational, because they exclude 
the three other systems from their coverage. Amadeus, however, does not 
agree that the ending of the systems' ownership by U.S. airlines by 
itself would have made CRS regulation unnecessary if the airline 
distribution business had not changed as it has.

C. The Final Rule

    This final rule eliminates the rules governing the treatment of 
code-sharing airlines by systems owned, controlled, or operated by 
airlines because those rules are no longer necessary. As shown, the 
commenters agree that the rules should be eliminated and generally 
agree with our reasoning. Changes in the airline distribution business, 
particularly the growth of the Internet, and in the systems' ownership 
have made these rules unnecessary, just as those changes made the 
comprehensive rules unnecessary. Moreover, as we explained in our 
notice, systems are unlikely to engage in the conduct prohibited by the 
rules, which in any event cover only one of the four systems operating 
in the United States.
    As we stated in our final rule terminating the comprehensive rules, 
we will take appropriate investigative, enforcement, or regulatory 
action against a system that apparently engages in unfair and deceptive 
practices or unfair methods of competition. 69 FR 977. We may take such 
action even if we do not have rules specifically regulating system 
practices. 69 FR 978. We determined, moreover, that each system is a 
ticket agent subject to our jurisdiction to prevent unfair and 
deceptive practices and unfair methods of competition in the airline 
and airline marketing businesses. 69 FR 995-998. The Court of Appeals 
has affirmed that determination. Sabre, Inc. v. Department of 
Transportation, D.C. Cir. No. 04-1073 (decided November 22, 2005).

Regulatory Process Matters

Regulatory Assessment and Unfunded Mandates Reform Act Assessment

1. Unfunded Mandates Reform Act Assessment
    The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, 
requires Federal agencies to prepare a written assessment of the costs, 
benefits, and other effects of proposed or final rules that include a 
Federal or private mandate likely to result in the expenditures by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of more than $100 million annually.
    This rule will not result in expenditures by the private sector or 
by State, local, or tribal governments because we are eliminating the 
rules. In addition, no such government operates a system or airline 
that is or has been subject to our regulations.
2. Regulatory Assessment
    Executive Order 12866, Regulatory Planning and Review (58 FR 51735, 
October 4, 1993), defines a significant regulatory action as one that 
is likely to result in a rule that may have an annual effect on the 
economy of $100 million or more, or that may adversely affect, in a 
material way, the economy, a sector of the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities. Regulatory actions are 
also considered significant if they are likely to create a serious 
inconsistency or interfere with the actions taken or planned by another 
agency, if they establish novel policy issues, or if they materially 
alter the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of the recipients of such 
programs.
    The Department's Regulatory Policies and Procedures (44 FR 11034, 
February 26, 1979) outline similar definitions and requirements with 
the goal of simplifying and improving the quality of the Department's 
regulatory process. They state that a rule will be significant if it is 
likely to generate much public interest.
    We believed that our proposed regulation was a significant 
regulatory action under the Executive Order, because CRS rules have 
long been a subject of public controversy. Our notice of proposed 
rulemaking set forth our tentative assessment of the likely costs and 
benefits for our proposal and invited comments on that assessment. The 
proposal was reviewed by the Office of Management and Budget under the 
Executive Order.
    Our preliminary economic analysis sought to estimate the potential 
economic and competitive consequences of our proposed rules on computer 
reservations systems, airlines, and travel agencies and to evaluate the 
rules' benefits for the industry and the travelling public. We believed 
that the elimination of the rules should not harm airlines, travel 
agencies, or consumers, or have a material effect on firms in the 
airline or airline distribution businesses or on consumers. We reasoned 
that the industry conditions that originally caused the Civil 
Aeronautics Board to adopt the rules barring discrimination against 
code-sharing airlines no longer existed. No system is owned by a U.S. 
airline or airline affiliate, and no system should have an incentive to 
discriminate against code-share services. Because the Internet has 
given travel agents and consumers new sources of readily-available 
information on airline services and has created new channels for 
airlines for distributing their services, airlines are gaining more 
bargaining leverage with the systems. 70 FR 16993-16994.
    We requested interested persons to provide us with detailed 
information on the potential consequences of our proposal, including 
its benefits, costs, and economic and competitive impacts. 70 FR 16994. 
No one has submitted comments on our tentative regulatory assessment, 
so we are making it final. The Office of Management and Budget has 
reviewed this rule under the Executive Order.

Initial Regulatory Flexibility Statement

    Congress enacted the Regulatory Flexibility Act of 1980, 5 U.S.C. 
601 et seq., to ensure that small entities are not unnecessarily and 
disproportionately burdened by government regulations. The statute 
requires agencies to review proposed regulations that may have a 
significant economic impact on a substantial number of small entities. 
For purposes of this rule, small entities include smaller U.S. and 
foreign airlines and smaller travel agencies.
    Our notice of proposed rulemaking set forth the reasons for our 
rule proposal and its objectives and legal basis. We tentatively found 
that our proposed termination of the rules would not have a significant 
economic impact on a substantial number of small business entities. The 
rules impose obligations only on airlines that own, control, or operate 
a system, and none of the airlines that now own, or have owned, a 
system has been a small entity. While the rules could indirectly affect 
smaller airlines and travel agencies, which are small entities, because 
they may affect how code-share services are displayed in the systems 
used by travel agents, we tentatively found that eliminating the rules 
should have no significant impact on smaller airlines or travel 
agencies. The rules cover only one of the four systems operating in the 
United States, Amadeus, which has the smallest market share in the 
United States. No system would likely discriminate

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against airlines that code-share, or deny access to airlines that code-
share, because code-sharing has become a widespread practice since the 
Board adopted the rules and travel agents and airlines should have some 
ability to keep systems from discriminating against code-share 
services. 70 FR 16994. We invited interested persons to submit comments 
on these findings under the Regulatory Flexibility Act. No one 
submitted comments on our reasoning.
    The Regulatory Flexibility Act requires us to publish a final 
regulatory flexibility analysis that considers such matters as the 
impact of a rule on small entities if the rule would have ``a 
significant economic impact on a substantial number of small 
entities.'' 5 U.S.C. 605(b). For the reasons stated above, I certify 
that the elimination of our rule on the treatment of code-share 
operations will not have a significant economic impact on a substantial 
number of small entities. No final regulatory flexibility analysis is 
therefore required for this action.
    Our final rule contains no direct reporting, recordkeeping, or 
other compliance requirements that would affect small entities. There 
are no other federal rules that duplicate, overlap, or conflict with 
our proposed rules.
Assistance for Small Entities
    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996, Public Law 104-121, we want to assist small 
entities in understanding the proposed rule so that they can better 
evaluate its effects on them and participate in the rulemaking. If the 
final rule would affect your small business, organization, or 
governmental jurisdiction and you have questions concerning its 
provisions or options for compliance, please consult Thomas Ray at 
(202) 366-4731.

Paperwork Reduction Act

    The final rule contains no collection-of-information requirements 
subject to the Paperwork Reduction Act, Public Law 96-511, 44 U.S.C. 
Chapter 35. See 57 FR at 43834.

Federalism Implications

    Our final rule will have no substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, in accordance with Executive 
Order 13132, dated August 4, 1999, we have determined that it does not 
present sufficient federalism implications to warrant consultations 
with State and local governments.

Taking of Private Property

    This rule will not effect a taking of private property or otherwise 
have taking implications under Executive Order 12630, Government 
Actions and Interference with Constitutionally Protected Property 
Rights.

Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Heath Risks and Safety Risks. This rule 
does not concern an environmental risk to health or risk to safety that 
may disproportionately affect children.

Consultation and Coordination With Tribal Governments

    This rule will not have tribal implications, will not impose 
substantial direct compliance costs on Indian tribal governments, and 
will not preempt tribal law. Therefore, it is exempt from the 
consultation requirements of Executive Order 13175. No tribal 
implications were identified during the comment period.

Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that this is not classified as 
a ``significant energy action'' under that order because it is a 
``significant regulatory action'' under Executive Order 12866 and it 
would not have a significant adverse effect on the supply, 
distribution, or use of energy.

Environment

    This rule will have no significant impact on the environment.

List of Subjects in 14 CFR Part 256

    Air carriers, Antitrust.

PART 256--[REMOVED AND RESERVED]

0
Accordingly the Department removes and reserves 14 CFR part 256.

    Issued in Washington, DC, on February 8, 2006.
Norman Y. Mineta,
Secretary of Transportation.
[FR Doc. 06-1550 Filed 2-17-06; 8:45 am]
BILLING CODE 4910-62-P