Order 2011-8-1

 Served: August 4, 2011

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 1st day of August, 2011 

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 2008-7-4, served July 7, 2008, 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 fare agreements covering flex fares between 

U.S./Canada-Europe and U.S./Canada-Southwest Pacific markets.

2

IATA has now filed additional applications to broaden the scope of the exemption: (1) to 

establish flex fares in the TC1 Caribbean, Longhaul, and within South America areas;

3 and (2) to 

 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

 Order 2008-7-4, Dockets 2006-25307, 2007-28556, 28558, 28569, and 28570. 3 IATA defines “Caribbean” as between USA (excluding Puerto Rico and the US Virgin Islands) on the one hand 

and Bermuda, Bahamas, the Caribbean Islands, Guyana, Suriname, French Guiana on the other; between Canada 

and Mexico on the one hand and Bermuda, Bahamas, the Caribbean Islands (including Puerto Rico and the US 

Virgin Islands ), Guyana, Suriname, French Guiana on the other; within the area composed of Bermuda, Bahamas, 

the Caribbean Islands (including Puerto Rico and the US Virgin Islands); within the area composed of Bermuda, 

Bahamas, the Caribbean Islands (including Puerto Rico and the US Virgin Islands) on the one hand and Guyana, 

Suriname and French Guiana on the other. IATA defines “Longhaul” as between the USA, Canada, Mexico on the 

one hand and Central America and South America on the other; between Bermuda, Bahamas, the Caribbean Islands, 

Guyana, Suriname and French Guiana on the one hand and Central America and South America on the other; 

between Central America on the hand and South America on the other; and within Central America. IATA defines 

“Within South America” as within the area composed of Argentina, Bolivia, Brazil, Chile, Columbia, Ecuador, 

French Guiana, Guyana, Panama, Paraguay, Peru, Suriname, Uruguay and Venezuela.

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-2009-0073 and

 OST-2011-0015
-2-

remove discounts for children and infants from the first and business-class flex fares resolutions 

in those areas.

4

TC1 Caribbean, Longhaul, within-South America. Flex fares would be established for first, 

business and economy class normal fares and for excursion discount fares, with an interline 

premium of 20 percent. 

In its application, IATA states that broadening the exemption is justified by substantially the 

same reasons the Department relied on in Order 2006-12-24 granting the original exemption, and 

subsequent orders 2007-9-16, 2008-4-45, 2008-7-4, 2008-7-24, and 2008-11-20 expanding the 

exemption, where the Department found that fares for travel within these regions typically 

present no public interest concerns justifying pre-implementation review of agreements limited 

to such travel. 

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 application is consistent with the 

public interest, for the reasons stated in Order 2008-7-4. 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 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. Finally, charging the 

full flex fares for children and infants seated in first and business class is consistent with our 

policy of affording carriers wide latitude in pricing premium services.

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-2009-0073 and 2011-0015, 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.

 4

 Applications filed March 23, 2009, IATA memo PTC1 0391 and January 27, 2011, IATA memo PTC1 0395. 
-3-

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 in the Caribbean, Longhaul, and 

within-South America sub-areas of Traffic Conference 1;

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-2009-0073

Reso IATA 

No. No. Title Expiry

R-1 002 TC1 Amending Resolution between the Caribbean, Indefinite

Longhaul, within South America

R-2 111ee TC1 Flex Fares between the Caribbean, Longhaul, Indefinite

within South America

R-3 041ee TC1 Intermediate/Business Class Flex Fares Indefinite

between the Caribbean, Longhaul, within 

South America

R-4 051ee TC1 First Class Flex Fares between the Caribbean, Indefinite

Longhaul, within South America

R-5 061ee TC1 Economy Class Flex Fares between the Caribbean, Indefinite

Longhaul, within South America

R-6 070ef TC1 Excursion Flex Fares between the Caribbean, Indefinite

Longhaul, within South America
Appendix B

Docket OST-2011-0015

Reso IATA 

No. No. Title Expiry

R-1 041ee TC1 Intermediate/Business Class Flex Fares Indefinite

(Amending)

R-2 051ee TC1 First Class Flex Fares Indefinite

(Amending)