Order 2012-5-29

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 30th day of May, 2012

ORDER EXPANDING EXEMPTION

Under the “flex fares” 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 periodically, and also on an exceptional basis in response to unexpected events 

producing widespread significant changes to normal fares.

1

 

By Order 2006-12-24, Docket OST 2006-26409, served January 2, 2007, 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 Common Aviation Area. 2

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

flex fares 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, and 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

 

 Dockets OST-2011-0053

 OST-2011-0054

 OST-2011-0055

 OST-2011-0056

 OST-2011-0063

 OST-2011-0064

 OST-2011-0069
-2-

Docket OST-2011-0053

TC31 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

TC31 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 excursion 

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

Docket OST-2011-0055

TC123 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

TC123 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

TC3 (except within/to/from South West 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 Pacific4. Flex 

fares would be established for first, business and economy 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 IATA 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 applications, 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 exemptions 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 applications is consistent with the 

public interest, for the reasons stated in Orders 2008-7-4 and 2010-5-5. The flex fare 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 updates to the fares, as well as 

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

between carriers, and the process is open to participation by non-IATA carriers. We believe that 

under the system proposed, there is much less risk that the flex fares process, or the resulting 

IATA interline fares, will have a significant spillover effect on individual airline 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-2011-0053, 2011-0054, 2011-0055, 2011-0056, 

2011-0063, 2011-0064 and 2011-0069, as set 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, Lebanon, 

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, Seychelles, 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 

Appendixes 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 IATA members, provided that the resolutions and amendments 

thereto are limited to the establishment 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 (between the Republic of Korea, Malaysia and the USA); TC123 North, Mid, South 

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

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

West 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 Republic 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 become effective and become 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 she will review this 

order on her 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-2011-0053

Reso IATA 

No. No. Title Expiry

R-1 002 TC31 North & Central Pacific (except between the Indefinite

Republic of Korea, Malaysia and the USA)

R-2 017c Construction Rules for Fare Components Indefinite

R-3 111nn TC31 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 & CentralPacific (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, Caribbean, Mexico, Central America, South

America
Appendix B

Docket OST-2011-0054

Reso IATA 

No. No. Title Expiry

R-1 002 TC31 North & Central Pacific between the Republic Indefinite

of Korea, Malaysia and the USA Amending Resolution

R-2 111nn TC31 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 Economy Class Flex Fares between the Republic of Indefinite

Korea, Malaysia and the USA

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

the USA
Appendix 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 Fares 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 AT
Appendix D

Docket OST-2011-0056

Reso IATA 

No. No. Title Expiry

R-1 002 TC123 North Atlantic Amending Resolution between Indefinite

the 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 Flex 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 AT
Appendix 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 TC3 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 within South East Indefinite

Asia, Within South Asian Subcontinent, South

East Asia-South Asian Subcontinent, between 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

West Pacific, between the Republic of Korea, 

Malaysia and Guam, Northern Mariana Islands)

(Amending)
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 Guam, 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 Indefinite

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 Indefinite
ACTION: IATA Agreements - Expanding Flex Fares 

Exemption Dockets OST-2011-0053, 2011-0054, 

2011-0055, 2011-0056, 2011-0063, 2011-0064 and OST 2011-0069

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.

Attachments

Della E. Davis, X-43

(202) 366-2432