Order 2014-2-16

Served: February 21, 2014

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 21st

 day of February, 2014

ORDER EXPANDING EXEMPTION

By application filed with the Department on April 26, 2013, the International Air Transport 

Association (IATA) requests that the Department grant IATA and its member airlines an exemption 

from Condition #2, one of the existing conditions imposed upon its traffic conference system as part 

of the Department’s continued approval of its “Provisions for the Conduct of the IATA Traffic 

Conferences” (bylaws). The condition requires that the U.S. air carrier members of IATA submit to 

the Department for appropriate action all recommended practices, agreements and resolutions 

adopted by IATA and each of its conferences and permanent conference committees. IATA is 

seeking further expansion of the exemption granted for establishing passenger Flex Fares.

By Order 2012-4-18, served April 13, 2012, the Department granted an expanded exemption from 

Condition #2, designed to facilitate prompt implementation of routine but essential standard-setting 

and interline coordination agreements without antitrust immunity, while preserving public notice and 

regulatory options. 

Order 2012-4-18 established a three-tiered system for the filing and implementation of IATA 

agreements. The first tier includes all traffic conference agreements except those included in tiers 

two and three. IATA may declare Tier 1 agreements effective 30 days after filing unless the 

Department extends the review period for another 60 days. The second tier consists of agreements in 

specific subject areas, listed in Order 2012-4-18, in Appendix B, that the Department wishes to 

review on a case-by-case basis before implementation. After review the Department may approve, 

disapprove, or exempt each Tier 2 agreement. The third tier consists of recommended practices, 

agreements or resolutions that IATA still wishes to file with the Department for approval and 

antitrust immunity under sections 41308 and 41309 of 49 U.S.C. All such third tier filings would 

have to await Department’s review and appropriate action before implementation.

Agreement Adopted by the Traffic 

Conference of the International Air 

Transport Association

 

 Docket OST-2013-0098
-2-

Under the Flex Fares mechanism, 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 the interline premium may

be amended through the E-Tariffs process, an internet platform operated by IATA. Essentially, 

the new IATA mechanism was originally designed by IATA to comply with the European 

Commission’s denial of a block exemption for tariff coordination from European Union

competition law. Specifically, the mechanism eliminates consultations among carriers, whether 

through face-to-face meetings, mail votes, or other means of direct communication, for the 

periodic establishment of fares for interline travel within the European Common Aviation Area 

(ECAA) and between the ECAA and other countries. The mechanism was subsequently 

extended to other international markets including routes to/from the United States. The 

Department’s orders exempted from our agreement-filing condition the new resolutions, future 

amendments to those resolutions, and fares generated under the resolutions, provided that the 

resolutions and amendments thereto were limited to the establishment of fares for travel within 

the areas covered by the respective exemption applications.

IATA has filed an additional application to broaden the scope of the exemption for Flex Fares 

resolutions: 1

Traffic Conference (TC) Area 12 via Area 3 Pacific2. Flex Fares would be established for first, 

business/intermediate, and economy class fares, with an interline premium of 15 percent; 

traditional IATA interline fare resolutions would be rescinded and the associated fares deleted.

We will grant the expanded exemption as requested, under the same conditions. We find that 

exempting Flex Fares in the U.S. markets included in this application is consistent with the 

public interest, for the reasons stated in Orders 2008-7-4, 2010-5-5, 2011-8-1 and 2012-5-29. 

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 

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

believe that under this system, there is minimal 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.

 1

 Application filed April 26, 2013, IATA Memo PTC12 via TC3 0001. 2 IATA defines Traffic Conference Area 1 as all of the North and South American Continents and adjacent islands, 

Greenland, Bermuda, the West Indies and Islands of the Caribbean, the Hawaiian Islands (including Midway and 

Palmyra), Traffic Conference Area 2 as consisting of all of Europe (including that part of the Russian Federation 

west of the Urals) and adjacent islands, Iceland, the Azores, all of Africa and adjacent Islands, Ascension Island, that 

part of Asia lying west of and including Iran, and Traffic Conference 3 as consisting of all of Asia and adjacent 

Islands, except the portion included in Area 2, all of the East Indies, Australia, New Zealand and adjacent Islands, 

and the Islands of the Pacific Ocean except those included in Area 1. Area “TC12” covers transportation between 

Area 1 and Area 2.
-3-

ACCORDINGLY, 

Pursuant to the authority duly delegated under the Department’s Regulations, 385.13(a)(4):

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

Appendix 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 in the TC12 via TC3 Pacific area.

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 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 

Reso IATA 

No. No. Title Expiry

R-1 015v Add-Ons (Except in USA/US Territories) Indefinite

R-2 111pa TC12 via TC3 PA Flex Fares Indefinite

R-3 046pa TC12 via TC3 PA Intermediate/Business Class Flex Indefinite

Fares

R-4 056pa TC12 via TC3 PA First Class Flex Fares Indefinite

R-5 066pa TC12 via TC3 PA Economy Class Flex Fares Indefinite