Order 20 1 2

- 5

- 29

Served: May 30, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Action on IATA Agreement

Issued by the Department of Transportation

on the 30 th day of May, 20 1 2

ORDER EXPANDING EXEMPTION

Under t he “ f lex f ares ” mechanism

, the International Air Transport Association (IATA)

establishes interline fares by computing an average of IATA carriers’ market fares for each city

pair, based on certain criteria, and then adding an “interline premium.” The flex fares are

recomputed periodica lly, and also on an exceptional basis in response to unexpected events

producing widespread significant changes to normal fares

. 1

By Order 200 6

- 12

- 2 4, Docket OST 2006

- 26409, served J anuary 2 , 200 7

, the Department granted

exemptions from condition # 2 imposed by Order 68

- 7

- 55 on the Procedures for the Conduct of

the IATA Traffic Conferences, to the extent that IATA need not file flex fares agreements

covering flex fare markets within the European Comm on Aviation Area. 2

IATA has since filed additional application s to further broaden the scope of the exemption for

f lex f ares resolutions : 3

1 IATA developed the flex fares mechanism in response to the Department’s Order 2007

- 3

- 23, Docket OST 2006

- 25307, which disapproved IATA’s traditional mechanism of setting interline fares in face

- to

- face meetings among

competitors.

2 IATA defines the ECAA to include European Union member states, Switzerland, Norway, Iceland and

Liechtenstein.

3 IATA applications filed with the Department on March 17, 2011, IATA memoranda PTC31 N&C 0516, 0518 &

0528; PTC31 N&C 0517 and 0529; PTC31 N & C 0518/PTC123 0472, a nd 0481; PTC31 N & C 0518/PTC 123

0474, 0472 and 0841; PTC123 0473 and 0482; March 23, 2011 PTC3 1389, 1390, 1391, 1412 and 1422; PTC3 1393

and 1423; and March 29, 2011, PTC23 0458/ 0454, 0449/0447, 0450/0448, and PTC23 AFR

- TC3/PTC 31 N & C

0452. Amendment of exemption under 49 U.S.C.

40109 from the conditions of CAB Order

68

- 7

- 55 for Passenger Tariff Coordinating

Conference Action Docket s OST

- 20 11

- 00 5 3

OST

- 2011

- 00 5 4

OST

- 201 1

- 0055

OST

- 2011

- 0056

OST

- 2011

- 0063

OST

- 2011

- 0064

OST

- 2011

- 0069- 2

-

Docket OST

- 2011

- 0053

TC 3 1 North and Central Pacific (except between the Republic of Korea, Malaysia and the USA)

. Flex fares would be established for first, business and economy class normal fares and for

excursion discount fares, with an interline premium of 15 percent.

Docket OST

- 2011

- 0054

TC 3 1 North and Central Pacific (between the Republic of Korea, Malaysia and the USA)

. Flex

fares would be established for first, business and economy class normal fares and for excursi on

discount fares, and “APEX” fares

, with an interline premium of 15 percent

.

Docket OST

- 2011

- 0055

TC1 23 North, Mid, South Atlantic (except between the USA

, the Republic of Korea and

Malaysia)

. Flex fares would be established for first, business and economy class normal fares

and for excursion discount fares, with an interline premium of 15 percent

.

Docket OST

- 2011

- 0056

TC1 23 North Atlantic (between the USA

, the Republic of Korea and Malaysia)

. Flex fares

would be established for first, business and economy class normal fares and for excursion

discount fares, with an interline premium of 15 percent

.

Docket OST

- 2011

- 0063

TC 3 (except within/to/from South West Pacific, between the Republic of Kor ea, Malaysia and

Guam, Northern Mariana Islands), between Japan, Korea and South West Pacific

, within South

West P acific, between South Asian Subcontinent, South East Asia and South West Pacific 4

. Flex

fares would be established for first, business and eco nomy class normal fares and for excursion

discount fares, and “PEX” fares with an interline premium of 15 percent

.

Docket OST

- 2011

- 0064

TC3 between the Republic of Korea, Malaysia and Guam, Northern Mariana Islands.

Flex fares would be established for first, business and economy class normal fares and for

excursion discount fares, with an interline premium of 15 percent

.

4 IA TA defines the “South West Pacific” as the area composed of American Samoa, Australia, Cook Islands, Fiji,

French Polynesia, Kiribati, Nauru, New Caledonia, New Zealand, Niue, Norfolk Island, Papua New Guinea, Samoa,

Solomon Islands, Tonga, Tuvalu, Vanuatu , Wallis and Futuna Islands. IATA defines “South East Asia” as the area

composed of Brunei Darussalam, Cambodia, China, Christmas Island, Cocos (Keeling) Islands, Guam, Hong Kong,

Indonesia, Kazakhstan, Kyrgyzstan, Lao People’s Democratic Republic, Macau, Malaysia, Marshall Islands,

Micronesia, Mongolia, Myanmar, Northern Mariana Islands (includes Mariana Islands except Guam), Palau,

Philippines, Russian Federation (East of the Urals), Singapore, Taiwan/Province of China, Tajikistan, Thailand,

Turkmenistan , Uzbekistan, Vietnam. IATA defines “South Asian Subcontinent” as Afghanistan, Bangladesh,

Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.- 3

-

Docket OST

- 2011

- 0069

TC23 between the Middle East, Africa , and TC3 (except South West Pacific )

. 5 Flex fares would

be established for first, business and economy class normal fares and for excursion discount

fares, with an interline premium of 15 percent

.

In its application s , IATA states that broadening the exemption for non

- U.S. markets is justified

by substantially the same reasons the Department relied on in Order 2006

- 12

- 24 granting the

original exemption and subsequent orders OST 2007

- 9

- 16, 2008

- 4

- 45, 2008

- 7

- 24, 2008

- 11

- 20

, and 2009

- 10

- 9 expanding the exemption

. In U.S. markets, IATA states that broadening the

exemption for U.S. markets is justified by substantially the same reason as those set for in Orders

OST 2008

- 7

- 4 and 2010

- 5

- 5.

We will grant the expanded exemption s as requested, under the same conditions. IATA fares for

travel between non

- U.S. markets typically present no public interest concerns involving U.S.

passengers under U.S. aviation policy or U.S. antitrust laws to justify our review of agreements

limited to such travel. We find that an expansion of the Flex Fare mechanism to include IATA

interline fares for travel in the additional non

- U.S. markets is consistent with the public interest

for the reasons stated in Order 2006

- 12

- 24.

We also find that exempting the U.S. markets included in the applic ation s is consistent with the

public interest, for the reasons stated in Order s 2008

- 7

- 4 and 2010

- 5

- 5 . The f lex f are system is a

mechanistic, computer

- driven process that involves no direct contact between carriers. It

produces IATA interline fares based on adjusted averages of market fares, rather than

negotiations among competitors. The annual and exceptional update s to the fares, as well as

amendments to the methodology or the interline premium, likewise involve no direct contracts

between carriers, a nd the process is open to participation by non

- IATA carriers. We believe that

under the system proposed, there is much less risk that the f lex f ares process, or the resulting

IATA interline fares, will have a significant spillover effect on individual air line prices. In

addition, there is no reason to believe that non

- IATA interline fares will cease to be widely

available.

Pursuant to the authority duly assigned under the Department’s Regulations, 49 CFR 1.54(b)(1):

We find that the agreements in Docket OST

- 20 11

- 00 5 3 , 2011

- 0054, 2011

- 0055, 2011

- 0056,

2011

- 0063, 2011

- 0064 and 2011

- 00 69 , as s et forth in the attached Appendixes , should be

granted an exemption from filing with the Department for prior approval under condition #2

imposed on IATA bylaws.

5 IATA defines “Middle East ” as Bahrain, Egypt, Iran/Islamic Republic of, Iraq, Israel, Jordan, Kuwait, L ebanon,

Oman, Qatar, Saudi Arabia, Sudan, Syrian Arab Emirates, and Yemen. IATA defines ” Africa ” as Angola, Benin,

Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo,

Cote d’lvoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea

- Bissau,

Kenya, Lesotho, Liberia, Libyan Arab Jamahiriya, Madagascar, Malawi, Mali, Mauritania, Mayotte, Mozambique,

Namibia, Niger, Nigeria, Reunion, Rwanda, Sao Tome and Principe, Senegal, Se ychelles, Sierra Leone, Somalia,

South Africa, Swaziland, Tanzania/United Republic, Togo, Uganda, Zaire, Zambia, Zimbabwe.- 4

-

ACCORDINGLY,

1

. We exempt the Passenger Tariff Coordinating Conference resolutions identified in the

Appendix es to this order, amendments to them , and fares generated under the resolutions, from

condition #2 imposed on IATA ’ s Procedures for the Conduct of the IATA Traffic Conferences,

Agreement 1175, as amended by Order 68

- 7

- 55, to the extent that IATA need not file the

resolutions for review and approval by the Department prior to a declaration of effectiveness by

IATA and implementation by IAT A members, provided that the resolutions and amendments

thereto are limited to the establish ment of fares for travel between TC31 North and Central

Pacific (except between the Republic of Korea, Malaysia and the USA); TC31 North and Central

Pacific (betwee n the Republic of Korea, Malaysia and the USA); TC123 North, Mid, South

Atlantic (except between USA and the Republic of Ko rea and Malaysia); TC123 North Atlantic

(between the USA

, the Republic of Korea and Malaysia ) ; TC3 (except within/to/from South

Wes t Pacific, between the Republic of Korea, Malaysia and Guam, Northern Mariana Islands)

, between Japan, Korea and South West Pacific, within South West Pacific, between South Asian

Subcontinent, South East Asia and South West Pacific ; TC3 between the Republ ic of Korea,

Malaysia and Guam, Northern Mariana Islands; and TC23 between the Middle East, Africa and

TC3 (except South West Pacific).

2

. This exemption may be revoked in whole or in part, at any time; and

3

. This Order will be served on the International Air Transport Association.

Persons entitled to petition the Department for review of this order, under 14 CFR 385.30, may

file such petitions within seven days after the date of service of this order.

This order shall be come effective and b ecome the action of the Department of Transportation

upon expiration of the above period, unless within such period a petition for review is filed or the

Assistant Secretary for Aviation and International Affairs gives notice that s he will review this

orde r on h er own motion.

By:

Paul L. Gretch

Director, Office of International Aviation

(SEAL)

An electronic version of this document is available on the World Wide Web at:

http://www.regulations.gov/Appendix A

Docket OST

- 20 11

- 00 5 3

Reso IATA

No. No. Title Expiry

R

- 1 002 TC 3 1 North & Central Pacific (except between the In definite

Republic of Korea, Malaysia and the USA)

R

- 2 017c Construction Rules for Fare Components Indefinite

R

- 3 111nn TC 3 1 North & Central Pacific Flex Fares

- Governing Indefinite

Resolution

R

- 4 046nn Intermediate/Business Class Flex Fares North & Central Indefinite

Pacific (except between the Republic of Korea, Malaysia

and the USA)

R

- 5 056nn First Class Flex Fares North & Central Pacific (except Indefinite

between the Republic of Korea, Malaysia and the USA)

R

- 6 066nn Economy Class Flex Fares North & Central Pacific Indefinite

(except between the Republic of Korea, Malaysia and

the USA)

R

- 7 071zn Excursion Flex Fares from the Republic of Korea to Indefinite

Canada, Ca ribbean, Mexico, Central America, South

AmericaAppendix B

Docket OST

- 2011

- 005 4

Reso IATA

No. No. Title Expiry

R

- 1 002 TC 3 1 North & Central Pacific between the Republic Indefinite

of Korea, Malaysia and the USA Amending Resolution

R

- 2 111nn TC 3 1 North & Central Pacific Flex Fares

- Governing Indefinite

Resolution

R

- 3 046nn Intermediate/Business Class Flex Fares between the Indefinite

Republic of Korea, Malaysia and the USA

R

- 4 056nn First Class Flex Fares between the Republic of Korea, Indefinite

Malaysia and the USA

R

- 5 066nn Econ omy Class Flex Fares between the Republic of Indefinite

Korea, Malaysia and the USA

R

- 6 071zn Excursion Flex Fares fr om the Republic of Korea, to 31 March 2012

the USAAppendix C

Docket OST

- 2011

- 0055

Reso IATA

No. No. Title Expiry

R

- 1 002 TC123 Amending Resolution Indefinite

R

- 2 111at TC123 Flex Fares (except between the USA

, Indefinite

the Republic of Korea and Malaysia)

R

- 3 046at Intermediate/Business Class Flex Fares TC123 31 March 2012

(except between the USA

, the Republic of

Korea and Malaysia) via AT

R

- 4 056at First Class Flex Fa res TC123 (except between the 31 March 2012

USA, the Republic of Korea and Malaysia) via

AT

R

- 5 066at Economy Class Flex Fares TC123 (except between 31 March 2012

the USA

, the Republic of Korea and Malaysia) via

AT

R

- 6 071at Excursion Flex Fares from the Republic of Korea to 31 March 2012

Mid Atlantic, South Atlantic via ATAppendix D

Docket OST

- 2011

- 0056

Reso IATA

No. No. Title Expiry

R

- 1 002 TC123 North Atlantic Amending Resolution between Indefinite

t h e USA and the Republic of Korea and Malaysia

R

- 2 111at TC123 Flex Fares between the USA and the Republic Indefinite

of Korea and Malaysia

R

- 3 046at Intermediate/Business Class Flex Fares between the 31 March 2012

USA and the Republic of Korea and Malaysia via AT

R

- 4 056at First Class Fle x Fares between the USA, the 31 March 2012

Republic of Korea and Malaysia via AT

R

- 5 066at Economy Class Flex Fares between the USA

, 31 March 2012

the Republic of Korea and Malaysia via ATAppendix E

Docket OST

- 2011

- 0063

Reso IATA

No. No. Title Expiry

R

- 1 002 TC 3 (except within/to/from South West Pacific) Indefinite

Amending Resolution

R

- 2 111rr TC3 Flex Fares (except within/to/from South Indefinite

West Pacific)

– Governing Resolution

R

- 3 045rr TC3 Intermediate/Business Class Flex Fares Indefinite

(except within/to/from South West Pacific)

R

- 4 055rr T C3 First Class Flex Fares (except within/to/from Indefinite

South West Pacific)

R

- 5 065rr TC3 Economy Class Flex Fares (except within/to / Indefinite

from South West Pacific)

R

- 6 071ry TC3 Excursion Flex Fares w ithin South East Indefinite

Asia, Within South Asian Subcontinent, South

East Asia

- South Asian Subcontinent, b etween Korea

and South East Asia, South Asian Subcontinent

R

- 7 071zy TC3 Excursion Fares from South East Asia, India 31 March 2013

to Japan

R

- 8 074ry TC3 PEX Flex Fares from Korea to Japan 31 March 2012

Mail Vote Resolution

R

- 1 111hk TC3 Flex Fares between Japan, Korea and South Indefinite

West Pacific (Amending)

R

- 2 111hi TC3 Flex Fares within South West Pacific, between Indefinite

South Asian Subcontinent, South East Asia and

South West Pacific (Amending)

R

- 3 111rr TC3 Flex Fares TC3 (except within/to/from South Indefinite

We st Pacific, between the Republic of Korea,

Malaysia and Guam, Northern Mariana Islands)

(Amend ing)Appendix F

Docket OST

- 2011

- 0064

Reso IATA

No. No. Title Expiry

R

- 1 002 TC3 between the Republic of Korea, Malaysia and Indefinite

Guam, Northern Mariana Islands

– Amending

Resolution (New)

R

- 2 111rr TC3 between the Republic of Korea, Malaysia and Indefinite

Guam, Northern Mariana Islands Flex Fares

– Governing Resolution (New)

R

- 3 045rr TC3 Intermediate/Business Class Flex Fares Indefinite

Between the Republic of Korea, Malaysia and

Guam, Northern Mariana Islands (New)

R

- 4 055rr TC3 First Class Flex Fares between the Republic Indefinite

of Korea, Malaysia and Guam, Northern Mariana

Islands (New)

R

- 5 065rr TC3 Economy Class Flex Fares between the Republic Indefinite

of Korea, Malaysia and Gu am, Northern Mariana

Islands (New)

R

- 6 071ry TC3 Excursion Flex Fares between the Republic of Indefinite

Korea, Malaysia and Guam, Northern Mariana Islands

(New)Appendix G

Docket OST

- 2011

- 0069

Reso IATA

No. No. Title Expiry

R

- 1 002 TC23 between Middle East, Africa and TC3 Indefinite

Rescinding Resolution

R

- 2 002tt TC23 Flex Fares Amending Resolution between Inde finite

Middle East and TC3

R

- 3 111tt TC23 Middle East, Africa

- TC3 Flex Fares Governing Indefinite

Resolution

R

- 4 046tt Intermediate/Business Class Flex Fares Middle East, Indefinite

Africa

- TC3

R

- 5 056tt First Class Flex Fares Middle East, Africa

- TC3 Indefinite

R

- 6 066tt Economy Class Flex Fares Middle East, Africa

- Indefinite

TC3

R

- 7 071ty Excursion Flex Fares Middle East, Africa

- TC3 IndefiniteACTION : IATA Agreement s

- Expand ing Flex Fares

Exemption Docket s OST

- 20 11

- 00 53, 2011

- 0054,

2011

- 0055, 2011

- 0056, 2011

- 0063, 2011

- 0064 and OST 2011

- 00 69

Paul L. Gretch

Director, Office of International Aviation, X

- 40

Renee Wright

Program Manager, Dockets Operations, M

- 30

Please issue the attached order.

NOTE TO DOCKETS: Please serve and post immediately.

Attachment s

Della E. Davis, X

- 43

(202) 366

- 2432