[Federal Register Volume 62, Number 232 (Wednesday, December 3, 1997)]
[Rules and Regulations]
[Pages 63837-63847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31674]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 255

[Docket OST-96-1639]
RIN 2105-AC56


Fair Displays of Airline Services in Computer Reservations 
Systems (CRSs)

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Final rule.

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SUMMARY: The Department is adopting two rules to further ensure that 
travel agents using computer reservations systems (CRSs) can obtain a 
fair and complete display of airline services. One rule will require 
each CRS to offer one display that lists flights without giving all on-
line connections a preference over interline connections; the other 
rule will bar systems from creating displays that neither use elapsed 
time as a significant factor in selecting flights from the data base 
nor give single-plane flights a preference over connecting services in 
ranking flights. The Department believes that these rules are necessary 
to promote airline competition and ensure that travel agents and 
consumers can obtain a reasonable display of airline services. The 
Department is not now adopting

[[Page 63838]]

another display requirement that it had proposed--a requirement that 
any display offered by a system be based on criteria rationally related 
to consumer preferences--and will instead consider that proposal 
further as part of the Department's overall reexamination of its CRS 
rules. The Department is acting on the basis of informal complaints 
made by Frontier Airlines, Alaska Airlines, and Midwest Express 
Airlines.

DATES: These rules are effective February 2, 1998.

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

SUPPLEMENTARY INFORMATION: Airline travellers in the United States 
usually buy airline services through travel agencies, and travel agents 
almost always use a CRS to determine what airline services and fares 
are available and to make bookings. When a travel agent asks a CRS to 
show what services are available in a particular city-pair market, the 
system will display a listing of such services created according to the 
system's editing and ranking criteria for displays. Each of the CRSs 
operating in the United States is entirely or predominantly owned by 
one or more airlines or airline affiliates that would have the ability 
and incentive to use the systems to prejudice the competitive position 
of other airlines if the systems were not regulated. A prime method for 
prejudicing competition would be the use of display criteria that gave 
the services operated by the owner airline or airlines a higher display 
position than the position given competing airline services, even if 
the latter better met the consumer's travel needs. Since travel agents 
are more likely to book a flight when it has a better display position, 
display bias causes the airlines benefited by the bias to obtain more 
bookings than would be obtained if the display were neutral. To prevent 
the systems' airline owners from injuring airline competition through 
display bias (and other misuses of the systems), we adopted rules 
prohibiting display bias and other harmful CRS practices. 14 CFR part 
255.
    Our rules on display bias do not prohibit all potentially unfair 
and deceptive display practices, although they do specifically prohibit 
ranking and editing displays on the basis of carrier identity and 
impose certain other requirements on displays in order to limit the 
potential for bias. 14 CFR 255.4. When we last reexamined our CRS 
rules, there then seemed to be no need to engage in stricter regulation 
of displays. More recent experience indicates that further regulation 
is necessary. We therefore issued a notice of proposed rulemaking in 
this proceeding which proposed three additional display rules: a rule 
requiring each system to offer at least one display that did not give 
on-line connections a preference over interline connections, a rule 
requiring each display to be rationally related to consumer 
preferences, and a rule requiring each system to either give single-
plane flights (such as one-stop flights) a display preference over 
connecting flights or to use elapsed time as a substantial element in 
the selection of flights from the database (for convenience, we will 
refer to these proposals respectively as the ``on-line preference 
rule'', the ``consumer preference rule'', and the ``elapsed time 
rule''). 61 FR 42208 (August 14, 1996).
    After considering the comments on our proposal, we have determined 
to adopt the on-line preference and elapsed time rules but to consider 
the consumer preference rule further in our upcoming reexamination of 
the CRS rules, a proceeding begun by our publication of an advance 
notice of proposed rulemaking, 62 FR 47606 (September 10, 1997). 
Although we are not adopting the consumer preference rule now, that 
does not mean that systems may create unfair or deceptive displays as 
long as they comply with our rules' existing requirements. We have the 
authority under 49 U.S.C. 41712 to take enforcement action against 
unfair and deceptive practices in the marketing of airline 
transportation, including deceptive CRS displays, whether or not we 
adopt the proposed consumer preference rule. As we stated in the notice 
of proposed rulemaking, ``Other CRS editing and ranking abuses, if not 
covered by the rule, could be pursued in an enforcement context under 
the general prohibition against unfair and deceptive practices and 
unfair methods of competition in 49 U.S.C. 41712.'' 61 FR at 42215.
    In this proceeding we are relying in part on the findings published 
in our 1991-1992 rulemaking, 57 FR 43780 (September 22, 1992) and 56 FR 
12586 (March 26, 1991); the findings made in the earlier rulemaking 
conducted by the Civil Aeronautics Board, the agency that had been 
responsible for airline CRS issues; and on our staff's last study of 
the CRS business, Airline Marketing Practices: Travel Agencies, 
Frequent-Flyer Programs, and Computer Reservation Systems, prepared by 
the Secretary's Task Force on Competition in the Domestic Airline 
Industry (February 1990) (``Marketing Practices''). That study and our 
rulemaking notices present a detailed analysis of CRS operations and 
their impact on airline competition and consumers. We are also relying 
on the pleadings filed in Docket 48671 in connection with Galileo's use 
of its exemption authority to change the displays of single-plane 
flights in its Apollo CRS in a way that assertedly benefits the 
interests of Galileo's principal owners, United Air Lines and US 
Airways, at the expense of competing airlines like Alaska Airlines and 
Midwest Express Airlines, and misleads travel agents using the Apollo 
system and their customers.

Legal Authority for Adopting the Proposed Rules

    We are adopting these rules, like our other CRS rules, under our 
statutory authority to prohibit unfair methods of competition and 
unfair or deceptive practices in the sale of air transportation. 49 
U.S.C. 41712, formerly section 411 of the Federal Aviation Act 
(codified then as 49 U.S.C. 1381). We may adopt rules regulating CRS 
displays under both parts of the authority granted by 49 U.S.C. 41712, 
that is, in order to eliminate practices that prejudice airline 
competition and practices that are likely to mislead consumers and 
their travel agents.
    The statute, modelled on section 5 of the Federal Trade Commission 
Act, 15 U.S.C. 45, allows us to define practices that do not violate 
the antitrust laws as unfair methods of competition if they violate the 
spirit of the antitrust laws. The statute also gives us broad authority 
to prohibit deceptive practices in the sale of air transportation. We 
may prohibit practices that in our judgment tend to deceive a 
significant number of consumers without proof of actual deception, as 
the Seventh Circuit held in affirming the Civil Aeronautics Board's 
original CRS rules. United Air Lines, 766 F.2d 1107, 1113 (7th Cir. 
1985).
    We are adopting additional display rules in order to prevent travel 
agency customers from being deceived and to keep the airlines 
controlling the systems from using their control over CRS displays to 
unreasonably prejudice the competitive position of other airlines. The 
rules will strengthen airline competition by ensuring that CRS displays 
provide a reasonable and fair ranking of airline services. When a CRS 
offers a display that ranks airline services deceptively or unfairly 
for the benefit of its airline owners, the CRS makes it more difficult 
for airlines to compete on the basis of price and service with the 
airlines controlling the

[[Page 63839]]

system. The revenue loss estimates provided by Alaska and Midwest 
Express with respect to Apollo's changed displays, if accurate, suggest 
that an unreasonable and unfair display can cause substantial damage to 
competing airlines. 61 FR at 42212.
    When consumers book airline flights on the basis of information 
provided by an unfair or deceptive display of airline services, they 
are likely to book inferior airline services because the display has 
hidden services that would better meet their travel needs. Our notice 
of proposed rulemaking discussed in particular how Apollo's treatment 
of single-plane flights has the potential to have that effect. 61 FR at 
42212-42213. Our statute gives us the authority to prohibit conduct 
which has the potential to cause this kind of consumer deception.

The CRS Industry and CRS Displays

    As we explained in the notice of proposed rulemaking, we have 
imposed regulations on CRSs because of their predominant role in the 
marketing of airline services. Travel agencies sell about seventy 
percent of all airline tickets, and travel agents almost always use a 
CRS to investigate airline service options for their customers and to 
make bookings. Each travel agency office, moreover, usually relies 
entirely or predominantly on one CRS. 61 FR at 42209; 57 FR at 43782-
43783.
    Each of the four CRSs operating in the United States is 
predominantly owned by one or more airlines or airline affiliates 
(airlines that directly or indirectly hold CRS ownership interests are 
referred to as ``vendor airlines''). The parent corporation of American 
Airlines owns the largest system, Sabre. Apollo, the second largest 
system, is operated by Galileo International, which is owned by United 
Air Lines, US Airways, Air Canada, and several European airlines. Both 
Sabre and Galileo have some public shareholders. Worldspan is owned by 
Delta Air Lines, Northwest Airlines, Trans World Airlines, and Abacus, 
a group of Asian airlines. System One is controlled by Amadeus, a major 
European CRS firm, in which Continental Air Lines has an ownership 
interest. 61 FR at 42209.
    Many different airline service options are available in most 
markets. In addition, each screen in the display can only display 
around seven lines of information. If a travel agent wants to see 
additional service options, the agent must call up additional screens 
of information. As a result, a system must have some method for editing 
and ranking airline flights in constructing its displays. A system's 
choices of editing and ranking practices are important to airline 
competition, because a flight's display position affects the number of 
bookings made on the flight. Travel agents are more likely to book a 
flight when it has a higher display position and are most likely to 
book the first flight listed. The first flight in a display is booked 
more frequently in part because it is likely to be the flight that best 
meets the customer's needs, but, as the airlines owning the systems 
have long known, the flight will also be booked more often merely 
because of its better display position. 61 FR at 42209.
    Because CRSs are essential for airline marketing, the airlines 
owning each system have an incentive to use it to prejudice the 
competitive position of rival airlines. Giving their own flights a 
better display position than the flights operated by competing airlines 
would be an effective method of distorting airline competition if there 
were no CRS rules. Thus, before CRS displays were regulated, each of 
the airline-owned systems biased its displays in favor of the owner 
airline. Consumers obviously suffer when a system hides or eliminates 
information on potentially attractive service options. 61 FR at 42209.
    An airline that ``participates'' in a system--that is, that 
contracts with the system to make its flights saleable through the 
system--has little, if any, ability to cause the system to display its 
flights on a non-discriminatory basis. With a few exceptions, Southwest 
Airlines being the main one, all airlines must participate in each 
system in order to avoid losing a significant share of the bookings 
made by the travel agencies using that system. Each system in effect 
has a monopoly over electronic access to the great majority of its 
travel agency subscribers. 57 FR at 43783-43784.
    Finally, while travel agencies have the right under our rules to 
use third-party software to create more useful displays for their 
employees and customers, relatively few agencies appear to be modifying 
the displays provided by their CRSs. As a result, the system's choice 
of editing and ranking criteria is likely to establish the display seen 
by most travel agents. 61 FR at 42215.

Regulatory Background

    The Civil Aeronautics Board (``the Board'') adopted the original 
CRS rules in large part to prevent display bias. The Board determined 
that rules on display bias were necessary because travel agencies and 
their customers could neither prevent the systems from offering biased 
displays nor offset the effect of bias. The airlines participating in a 
system also did not have the power to keep the systems from biasing 
their displays. 49 FR 32540, 32543-32544, 32547-32548 (August 15, 
1984).
    The Board's principal rule against display bias prohibited each 
system from using carrier identity as a factor for editing and ranking 
airline services. Although the Board did not prescribe general editing 
and ranking criteria for CRS displays, the Board adopted several 
specific rules governing CRS displays in order to reduce each system's 
ability to create displays that would favor its airline owner or 
owners. These rules included requirements to use a minimum number of 
connect points in constructing displays of connecting services for any 
market. Section 255.4, adopted at 49 FR 32540.
    Several of the airlines controlling CRSs responded to the Board's 
rules by finding new ways of improving the display position of their 
own flights at the expense of the flights of competing airlines. In 
particular, since the Board's rules applied only to each system's 
principal display, not to other displays offered by a CRS, some systems 
created biased secondary displays in order to regain the benefits of 
display bias. The Department later obtained each system's agreement not 
to offer biased secondary displays. Marketing Practices at 81-82.
    The Board's prohibition of carrier-specific display criteria, 
however, did not prevent a system from giving its airline owners' 
flights a better display position by choosing facially-neutral display 
criteria that matched the predominant characteristics of their airline 
operations. A system's use of such criteria would benefit other 
airlines that had similar operating strategies, but it would harm those 
airlines that chose different strategies. 61 FR at 42209-42210, citing 
the Justice Department's Comments on the Advanced Notice of Proposed 
Rulemaking. Nonetheless, the systems' choices of such criteria would 
not necessarily harm consumers or prejudice airline competition.
    At the beginning of the 1990s we held a rulemaking to reexamine the 
Board's rules. 57 FR 43780 (September 22, 1992) and 56 FR 12586 (March 
26, 1991). We readopted them with several changes designed to promote 
competition in the airline and CRS businesses, including some changes 
strengthening the rules on CRS displays, although we did not adopt 
other changes proposed by commenters. We rejected arguments that we did 
not need to regulate CRS displays, including the argument that the 
systems' competition for travel agency subscribers would prevent 
display bias. 56 FR at 12602. And we pointed out how display criteria 
could

[[Page 63840]]

affect airline bookings by noting that American's request to reduce the 
use of elapsed time by other systems as a ranking factor could be 
explained by internal documents showing that the use of elapsed time 
tended to give American's flights a poorer display position. 56 FR at 
12610-12611.
    We did adopt additional rules where systems used display criteria 
that injured competition and consumers. Thus we amended the rules to 
prohibit biased secondary displays. 57 FR at 43802. We also adopted 
additional rules governing the display of connecting services. Some 
systems had arbitrarily limited the number of connect points that non-
owner airlines could designate and imposed unreasonable and burdensome 
procedural requirements on requests to add connect points in 
constructing displays of connecting services. Our new rules prohibited 
such practices and increased the number of connect points that had to 
be used in displaying services in individual markets. We also 
reaffirmed each system's obligation to use non-discriminatory criteria 
for selecting connect points for displays. 56 FR at 12612-12613; 57 FR 
at 43807-43808.
    In other areas we determined that the systems' practices did not 
appear to be causing substantial competitive harm and on that basis 
concluded that additional display rules were unnecessary. 56 FR at 
12609; 57 FR at 43803. We recognized, as the Department of Justice 
pointed out, that vendors could be choosing seemingly neutral display 
criteria to improve the display position of their own flights. The 
systems' choice of display criteria nonetheless did not seem to be 
distorting competition. 56 FR at 12609; 57 FR at 43803. We also 
believed that the systems' competition for travel agency subscribers 
appeared to make additional display regulation unnecessary, since 
travel agency demands seemed to cause vendors to offer alternative 
displays. 57 FR at 43803. We did not propose or adopt a rule 
prescribing the ranking and editing criteria that must be used in CRS 
displays, in part for these reasons, in part because we doubted that 
there was a single best way for displaying airline services. 56 FR at 
12609; 57 FR at 43803.
    After considering whether to bar systems from giving on-line 
connections a preference over interline connections, we determined not 
to take such action. We noted, on the one hand, that travellers 
generally preferred on-line service, so the preference was consistent 
with consumer demands. On the other hand, the systems' use of the 
preference could overstate travellers' usual preference for on-line 
service. The on-line preference additionally appeared to place smaller 
airlines at a competitive disadvantage. 56 FR at 12609-12610. However, 
no U.S. airline asked us to prohibit the preference, and Alaska 
Airlines filed comments supporting it. 57 FR at 43804. At that time, 
however, all of the systems had at least one display that did not use 
an on-line preference, and Sabre had no display that used an on-line 
preference. 57 FR at 43803.
    Finally, we declined to adopt the proposal by the Orient Airlines 
Association that we require each system to demonstrate that its ranking 
and editing criteria met consumer demands. We thought that that 
specific proposal was unwise, since it could require us to review and 
second-guess system decisions on display criteria. We also considered 
the proposal unnecessary, since it ``would be unlikely to lead to 
significant changes in the vendors' display algorithms.'' 57 FR at 
43803. But, while we chose not to require vendors to demonstrate that 
they were basing their algorithms on consumer preferences, we expressly 
stated that the vendors would not have unlimited discretion to select 
display criteria. An airline dissatisfied with a vendor's algorithm 
could complain to us. 57 FR at 43803.

The Origins of Our Proposed Display Rules

    We proposed the new display rules in this proceeding primarily in 
response to two informal complaints, one about the systems' on-line 
preference and the other about Apollo's treatment of single-plane 
flights.
    Frontier Airlines had complained that Apollo gave an unreasonable 
preference to on-line connections. Frontier additionally charged that 
Apollo's treatment of connections between code-sharing partners (two 
airlines using one airline's code for both airlines' service) as on-
line connections worsened the impact of the preference. The on-line 
preference injured Frontier's ability to compete in Denver markets 
where Frontier offered jet service in competition with a commuter 
airline operating under United's code and using turboprop aircraft, for 
Apollo treated connections between the commuter airline and United at 
Denver, United's hub, as on-line connections, while connections between 
Frontier and United at Denver were treated as interline connections and 
given a lower display position. Since United was the hub airline at 
Denver and thus provided most of the service beyond Denver, the display 
position of connections between Frontier and United under the on-line 
preference made it harder for Frontier to compete for travellers using 
Denver as a connecting point on their journeys. The connections between 
Frontier and United received such a low display position that many 
travel agents (and their customers) allegedly did not learn of 
Frontier's services. 61 FR at 42211-42212.
    The other complaint--made by Alaska Airlines, Midwest Express 
Airlines, and the American Society of Travel Agents (``ASTA''), the 
largest travel agent trade association--concerned Apollo's treatment of 
single-plane flights. They complained that Apollo's displays made it 
harder to find single-plane flights that were superior to connecting 
services given a better display position by Apollo. This benefited the 
hub-and-spoke operations of Apollo's major U.S. owners, United and US 
Airways, at the expense of airlines like Alaska Airlines and Midwest 
Express Airlines that did not operate a hub-and-spoke route system. As 
we explained in detail in our notice of proposed rulemaking, the Apollo 
displays had that effect because they relied heavily on displacement 
time (the time difference between the traveller's requested departure 
time and the departure time of the flight being displayed) in ranking 
flights. 61 FR at 42212-42213.
    We discussed several examples of Apollo displays that showed that 
Apollo's algorithm harmed airline competition and consumers by causing 
displays to list relatively inconvenient connecting services before 
more attractive single-plane flights. 61 FR at 42213. In addition, we 
pointed out that ASTA, the largest travel agency trade association, 
alleged that the Apollo displays ``make it harder for travel agents to 
find flights meeting the priority goals of air travel consumers.'' 
ASTA, moreover, stated that it had ``never heard or seen an argument 
that would overcome the consumer benefits of one-stop single-plane 
service over on-line connections and * * * only a compelling reason 
(which is difficult to imagine) would warrant displacing such superior 
services in favor of on-line connections of longer elapsed time.'' 
According to ASTA, ``[t]ravel agents should not have to search through 
five screens of information to find a one-stop single plane service 
with superior elapsed times to intervening connections,'' and ``[t]his 
waste of time is a disservice to agents and their clients with no 
apparent offsetting benefit.'' Furthermore, when single-plane flights 
receive the poor display position cited in Alaska's examples, ``the 
existence of

[[Page 63841]]

the one-stop flight may not become known to the agent at all.'' ASTA 
Reply (December 19, 1994) at 2-3, Docket 48671, quoted at 61 FR 42213.
    We found Galileo's defense of the displays unpersuasive. Galileo 
argued that travel agents would be hurt if all single-plane flights 
were listed before all connecting services, because an agent must then 
scroll through the complete listing of single-plane flights before 
seeing any connecting services, even though few, if any, of the single-
plane flights leave at the time desired by the agency customer. Galileo 
had provided no evidence that travel agents had complained when its 
displays listed all single-plane flights before displaying any 
connections, and in any event few markets have many single-plane 
flights. Order 94-8-5 at 16, cited at 61 FR 42213.
    The Apollo displays therefore appeared to conflict with consumer 
preferences, since travellers tend to prefer the single-plane flights 
because they typically require less travel time than connecting 
services and because they avoid the inconveniences and risks of missed 
connections and lost baggage that can arise when travellers use 
connecting services. 61 FR at 42212. The displays also appeared to 
prejudice airline competition. Alaska thus estimated that it could lose 
$15 million in potential revenues each year as a result of the new 
Apollo displays, while Midwest Express estimated that its annual 
revenue losses would equal several million dollars. See Order 94-8-5 
(August 3, 1994) at 17. Although we issued an order questioning the 
fairness of the displays, Order 94-8-5 (August 3, 1994), Galileo chose 
not to eliminate the features that generated the complaints from Alaska 
and others. 61 FR at 42212-42213.

Our Rulemaking Proposals

    Galileo's conduct suggested to us that travel agent and consumer 
desires did not adequately check unreasonable CRS displays, thus 
allowing systems to create displays serving the interests of their 
airline owners while possibly denying the system's users reasonable 
displays of airline services. 61 FR at 42211. In addition to the 
concerns raised by Apollo's current displays, it seemed possible that 
other systems might adopt similar displays. We therefore decided to 
consider changing the CRS display rules to give non-vendor airlines 
(and travel agents) a greater assurance that they can obtain displays 
of airline services that are neither unfair nor deceptive.
    We did not intend, however, to limit each system's ability to offer 
different displays to travel agents, since travel agents were likely to 
disagree on the factors that should be emphasized in editing and 
ranking airline services, in part because different travel agency 
customers would have different travel preferences, nor did we intend to 
tightly regulate CRS algorithms. 61 FR at 42213-42214.
    We proposed the on-line preference rule, the consumer preference 
rule, and the elapsed time rule because we tentatively found that those 
rules would promote airline competition and enable travel agents and 
their customers to obtain fairer displays of airline services and that 
the proposals would not unduly burden the systems.

Rule Requiring a Display Without an On-Line Preference

    Our proposed requirement that each system offer a display without 
an on-line preference would eliminate the ability of one of the large 
airlines owning a CRS to force the system to use an on-line preference 
in all displays of domestic airline services. This change should 
benefit airlines like Frontier that depend more on obtaining interline 
passengers. While one of the two displays offered by Apollo for 
services within North America did not have an on-line preference, the 
combination of that display's downgrading of single-plane flights and 
its heavy reliance on displacement time as the basis for selecting 
flights from the data base made the display difficult to use. Our 
proposed rule would require Sabre to recreate a display without an on-
line preference for services within North America, since all of Sabre's 
current displays for such services used an on-line preference (at the 
time of our last rulemaking, none of Sabre's displays had an on-line 
preference, as noted above). 61 FR at 42214.
    We recognized that an on-line preference was usually consistent 
with the preferences of many travellers, but we pointed out that it 
also benefited the airlines with CRS ownership interests. Each of those 
U.S. airlines was among the largest U.S. airlines and operated a hub-
and-spoke route system--each operated a large number of flights 
connecting over a hub and relatively few point-to-point flights that do 
not either depart from or arrive at a hub. An airline operating a hub-
and-spoke route system has little interest in capturing interline 
traffic, since its route structure and flight schedules are designed to 
keep travellers on its own connecting flights when nonstop and single-
plane flights are unavailable. Such an airline benefits from CRS 
displays that show on-line connections before interline connections. 61 
FR at 42211-42212.
    The on-line preference could harm consumers in some cases, even 
though consumers usually prefer on-line connections. The on-line 
preference makes it harder for travel agents to find interline 
connections, which sometimes may offer the best service for consumers. 
For example, many consumers might find Frontier's faster jet service 
more attractive than the service offered by United's commuter airline 
affiliate. 61 FR at 42212.
    In addition, as we discussed in our last rulemaking, the systems' 
on-line preferences may well overstate the attractiveness of on-line 
connections. Even without an on-line preference, on-line connections 
should normally appear before interline connections in a display that 
uses elapsed time as a principal ranking factor, because the airline 
offering on-line connecting service usually coordinates the flight 
arrival and departure times to minimize layover time at the 
intermediate airport. 56 FR at 12609. Since on-line connections do not 
necessarily offer the best service, however, the systems' use of 
algorithms that always give on-line connections a preference over 
interline connections will at times interfere with a travel agent's 
ability to find the best service for the agent's customers.

The Consumer Preference Rule

    Our second rule proposal--the consumer preference rule--would 
require each system's display criteria to be rationally related to 
consumer preferences. We expected that such a rule would keep systems 
from offering unjustifiable displays. That would help both smaller 
airlines like Alaska and Midwest Express, which could not influence 
system decisions on displays, and consumers and their travel agents, 
who would no longer find it unreasonably difficult to see the best 
airline service. We expected that the rule would force Apollo to change 
its algorithms, for Apollo's current displays appeared to be contrary 
to the proposed rule's requirements. 61 FR at 42214.
    We did not intend to engage in a detailed regulation of CRS 
displays if we adopted this proposed requirement. We expected to take 
enforcement action only when a system was using an algorithm that was 
likely to mislead a significant number of consumers by causing services 
that would best meet their travel needs to be displayed after 
significantly inferior services and if the display's criteria appeared 
designed to improve the display position of the services of the 
system's airline owners. We doubted that we would consider

[[Page 63842]]

complaints that a display violated this proposed rule if the system 
could show that its display criteria were consistent with the 
preferences of a substantial portion of travellers. 61 FR at 42214.

Elapsed Time Rule

    As an alternative to, or in addition to, the consumer preference 
rule, we also proposed a rule specifically prohibiting the kinds of 
unfair displays created by Apollo's algorithm. That rule would prohibit 
an algorithm that neither used elapsed time as a significant factor in 
selecting service options from the database nor gave single-plane 
flights a preference over connections in ranking services in displays. 
In proposing this rule, we noted that adopting such a limited rule 
could be reasonable, since we had only received specific complaints 
about Apollo's editing and ranking criteria. We expected that this rule 
would require Apollo to change its displays, since its current displays 
do not use elapsed time as a factor in selecting flights from the 
database yet give single-plane flights no preference over connecting 
services. If Apollo used elapsed time as a significant factor in 
selecting flights from the database, single-plane flights would usually 
receive a better display position since such flights generally require 
less travel time than connecting services. This proposal accordingly 
would no longer cause connecting services to be given a better display 
position over single-plane flights requiring substantially less travel 
time. 61 FR at 42215.

Comments

    In their comments Sabre, American, Galileo, Apollo Travel Services, 
United, Worldspan, Delta, TWA, and AAA opposed the proposals, primarily 
on the ground that further regulation of CRS displays is assertedly 
unnecessary. These parties generally argued that systems responded to 
subscriber demands in constructing their displays and could not offer a 
display that travel agents considered bad. Several of these parties 
additionally contended that no further CRS rules should be adopted 
until we complete our pending study of the CRS business. United and 
Apollo Travel Services argued that Apollo's treatment of single-plane 
services was reasonable.
    Continental supported the on-line preference and consumer 
preference rules, and Amadeus supported the latter proposal. Alaska 
supported a rule requiring systems to list all single-plane flights 
before connecting services and to use elapsed time in ranking flights; 
Alaska also supported the consumer preference rule. Midwest Express 
agreed with Alaska that we should require single-plane flights to be 
displayed before connecting services, and it supported the elapsed time 
rule. Reno supported the on-line preference rule and argued that we 
should require systems to use elapsed time in ranking flights. Frontier 
believed that our proposals are inadequate, and it urged us to regulate 
display practices relating to code-sharing, for example, by requiring 
systems to treat connections between code-share partners as interline 
connections.

The Need To Regulate CRS Displays

    For the reasons given below, we have determined to adopt the on-
line preference rule and the elapsed time rule while deferring action 
on the consumer preference rule. Before explaining our basis for these 
specific decisions, we will discuss the overall objections made by some 
commenters to the rule proposals.
    Several of the parties opposing our proposals contend that no 
additional regulation of CRS displays is necessary. They argue in 
particular that market forces--the demands of travel agencies for 
displays that allow them to respond efficiently and accurately to 
customer information requests--make it unnecessary and even 
counterproductive for us to impose new rules on displays.
    We disagree with these contentions. As noted above, we found in our 
last rulemaking that the systems' competition for travel agency 
subscribers did not eliminate the need for display rules. 56 FR at 
12602. No one has given us evidence refuting that finding. Despite the 
systems' competition with each other for subscribers, the systems tend 
to select display criteria that benefit the interests of their airline 
owners. The Apollo algorithms exemplify that. As explained in our 
notice of proposed rulemaking, Apollo has created displays that often 
show less convenient connecting services before more desirable single-
plane flights. Apollo has never offered a satisfactory justification 
for these displays. The displays, moreover, seem to provide no 
offsetting advantages for travel agents and their customers. They do, 
however, provide obvious benefits for Apollo's owner airlines. If 
market forces determined the nature of CRS displays, as argued by the 
parties opposing our proposals, we doubt that Apollo would offer such 
displays. ASTA, after all, has continuously supported the complaints by 
Alaska, Midwest Express, and others about the Apollo displays.
    Furthermore, the parties opposing our proposals have not presented 
a detailed analysis showing that subscriber demands have influenced CRS 
algorithms. While systems offer more than one display as a result of 
travel agency demands, the commenters opposing our proposals cited no 
other instances where a system changed its displays as a result of 
travel agency desires.
    Even if subscriber demands at times influence CRS display choices, 
the systems nonetheless appear to have a significant ability to ignore 
them. Furthermore, even if travel agents were satisfied with the 
displays offered by the systems, their customers and non-vendor 
airlines suffer when systems offer displays that do not enable travel 
agents to efficiently find the best service for travellers.
    We also note that the parties opposing the proposals have not 
denied that display position affects travel agent bookings and that the 
airlines owning the systems (directly or indirectly) have an incentive 
to use displays to benefit their own services. We note in that regard 
that the stronger opposition to our display rule current proposals has 
come not from the systems but from their airline owners.
    American and United contend that industry developments have 
eliminated the need for more CRS regulation. They claim that airlines 
and consumers now have other options for the electronic communication 
of information and booking transactions, primarily the Internet. 
American Comments at 2-3; United Reply at 17.
    We recognize, of course, that the Internet has given airlines new 
ways to communicate with consumers that bypass CRSs and travel agents, 
but, as American notes, relatively few consumers currently book airline 
travel through the Internet. American Comments at 2. As long as travel 
agencies remain the predominant method by which travellers obtain 
information on airline services and book seats, CRS regulation will 
remain essential for airline competition and ensuring that consumers 
receive accurate and fair advice on available service options. While 
travel agents can access airline information through Internet sites, as 
United claims, we believe that the greater efficiency of using CRSs 
will cause travel agents to continue relying on CRSs as the tool for 
giving customers information on the services offered by airlines in a 
market. We note, moreover, that some of the Internet booking services 
cited by American, such as the Microsoft website, use a CRS for 
providing

[[Page 63843]]

information and transaction capabilities to consumers. The impact of 
the Internet, however, is an issue that we intend to consider in detail 
in our upcoming examination of the CRS rules. 62 FR at 47610.
    American also cites the rise of low-fare airlines that have by-
passed CRS participation. American Comments at 3. In general, however, 
the low-fare airlines seem to have decided that CRS participation is 
necessary, as shown by the recent decisions of Western Pacific and 
ValuJet to distribute their services through CRSs and the earlier 
decisions by Frontier and Reno to use CRSs for distribution. 62 FR at 
47608.
    Sabre, citing the public's ownership of twenty percent of its 
stock, alleges that rules are unnecessary since it is no longer owned 
entirely by one airline. Sabre Comments at 4. We disagree. AMR, 
American's parent corporation, continues to own eighty percent of 
Sabre's stock and obviously has the ability to control Sabre's 
operations, subject to Sabre's obligations to its public shareholders.
    Some parties opposing further display regulation additionally claim 
that our proposals represent a radical departure from our past policy 
of keeping our hands off CRS displays. According to them, in all 
earlier rulemakings we refused to engage in detailed regulation of CRS 
displays since we recognized that overseeing displays was unnecessary 
and likely to cause harm. See, e.g., United Comments at 4-5. We think 
that these commenters have mischaracterized our past decisions on CRS 
displays.
    We have, of course, been cautious about regulating CRS displays, 
since regulations can be burdensome and counter-productive. But a major 
predicate for our decision against adopting additional rules in our 
last major CRS rulemaking was our determination that the systems' 
choice of display criteria did not appear to be causing significant 
competitive harm. 57 FR at 43802, 43803. We have always recognized that 
the airlines controlling the systems have the incentive and some 
ability to create displays that favor their own services at the expense 
of competing services. 57 FR at 43802. We have also adopted specific 
display rules when that appeared necessary to prevent systems from 
offering misleading displays, such as our rule imposing detailed rules 
on the systems' choice of connecting points in constructing displays. 
Our recent experience with Apollo's displays suggests that the systems 
can and will adopt displays that cause competitive harm when doing so 
benefits their airline affiliates.

The Need To Act on the Display Proposals

    We think that the record shows that the on-line preference and 
elapsed time rules should be adopted now to prevent on-going harm to 
consumers and airline competition. This is particularly true since 
Galileo ignored our past suggestion to create a more reasonable display 
and has resisted all complaints from airlines and travel agents about 
the current Apollo displays.
    Several of the opponents argue, however, that we should delay a 
decision on our display proposals until the completion of our CRS study 
and our forthcoming reexamination of the CRS rules. Sabre Comments at 
1-2; Delta Comments at 2-4. Their arguments in favor of delay are 
unpersuasive.
    First, the record in this proceeding is adequate to enable us to 
make a final decision on the two rules we are adopting here. All of the 
parties have had an ample opportunity to address the issues in this 
proceeding by filing comments and reply comments on our notice of 
proposed rulemaking. Thus there is no need for us to delay our decision 
here until the completion of our CRS study.
    Furthermore, deferring a decision on the on-line preference and 
elapsed time rules until the completion of the study and the major 
rulemaking would lead to a significant delay in remedying the 
competitive and consumer injury being addressed by these rules. We have 
decided to defer consideration of the consumer preference rule, but our 
immediate concerns with CRS displays should be resolved through the 
adoption of the on-line preference and elapsed time rules, thus making 
a final decision on the consumer preference rule less urgent. We are 
just beginning the reexamination of the CRS rules, and that proceeding 
will take substantial time to complete, as did our last major 
reexamination of the CRS rules. Midwest Express points out, moreover, 
that three years have passed since we originally questioned the 
fairness of the Apollo displays and that Galileo has not eliminated 
their problems. Midwest Express Comments at 12. This makes any further 
delay in resolving this issue unreasonable to the airlines and travel 
agents harmed by the display practices at issue.

The Need for Rules

    Several parties contend that the notice of proposed rulemaking 
presents no case for adopting additional rules applicable to all 
systems, since the notice focuses on problems created by Apollo's 
current displays. Since there seems to be no apparent dissatisfaction 
with any other system's displays, these commenters contend that we 
should not adopt new rules covering all of the systems. In their view, 
we should take enforcement action against Galileo to compel it to 
correct its displays. Delta Comments at 8-9; TWA Comments at 3.
    While our notice focused on the apparent problems with the Apollo 
displays, we noted the possibility that other systems might adopt 
algorithms that produce similarly misleading displays. We think that 
this potential for unreasonable displays is sufficient to justify the 
adoption of the additional rules creating unambiguous standards in 
these areas. We do not believe that we must wait until additional 
abuses occur before we can adopt rules. Cf. GTE Service Corp. v. FCC, 
474 F.2d 724, 731-732 (2d Cir. 1973); Mt. Mansfield Television, Inc. v. 
FCC, 442 F.2d 470, 486-487 (2d Cir. 1971). And at this time the only 
system whose displays of services within North America all include an 
on-line preference is Sabre. We also note that the two rules will 
apparently affect only Sabre and Apollo, and Sabre will incur only the 
relatively small expense of recreating a display of North American 
services that, like Sabre's existing display of overseas services, has 
no on-line preference (by ``overseas'' in this rule we mean services 
not entirely within North America, such as transatlantic and 
transpacific services). Finally, the adoption of the elapsed time rule 
should promptly eliminate the problems with Apollo's displays, given 
the terms of the rule and the statements made in this proceeding by 
Galileo and United.

The Adoption of the On-Line Preference Rule

    We have determined to adopt the first of our three proposals, the 
rule requiring each system to offer a display without an on-line 
preference. We are not requiring the display without the on-line 
preference to be the default display or the primary display, although 
it must be at least as easy to use as every other display offered by a 
system.
    While consumers usually prefer on-line service, there are 
situations where interline connections may better meet a consumer's 
travel needs. In addition, the on-line preference gives an advantage to 
the hub-and-spoke services operated by larger airlines over the 
services of smaller airlines that have less extensive route systems. 
The on-line preference may also overstate consumer preferences for on-
line

[[Page 63844]]

service. These problems will be alleviated if each system must offer a 
display without an on-line preference as an option for travel agents.
    Our notice of proposed rulemaking described how the on-line 
preference makes it more difficult for consumers and their travel 
agents to learn about connections between United and Frontier's jet 
service, since the preference causes the connections between United and 
the service offered by United's code-sharing partners to receive a 
better display position. 61 FR at 42211-42212. Reno Air's comments 
provide additional examples where the on-line preference causes systems 
to give a lower display position to services that would better meet 
consumer needs than the on-line connections given a better display 
position. Reno, for example, stated that a traveller seeking to fly 
from Newark to Reno after 12:30 p.m. would see an Apollo display 
listing seventeen on-line connections before a connection between an 
American flight and a Reno flight, yet that connection arrives earlier 
than any of the on-line connecting services listed above it in the 
display and arrives more than four hours earlier than nine of them. 
Reno Comments at 3.
    The cost of implementing this rule will be small. The only system 
that will have to create a new display is Sabre, which estimates the 
cost of doing so at $120,000. Sabre Comments at 5. We note, however, 
that the rule will only require Sabre to conform its display of 
services within North America with its display of overseas services, 
since the latter has no on-line preference. In addition, as noted 
above, Sabre previously offered displays without an on-line preference 
for North American services. 61 FR at 42210-42211.
    We are not persuaded by the arguments against this rule. In 
particular, we think the adoption of this rule is consistent with the 
usual preference of travellers for on-line service. As we have 
explained, on-line connections should tend to receive a better display 
position than interline connections, since the airline operating the 
on-line connections normally coordinates the schedules to provide for 
more efficient service and shorter layovers for passengers. 61 FR at 
42212. See also Reno Comments at 2. If, on the other hand, an on-line 
connection does not offer these advantages, as shown by Reno's 
examples, then we see no reason why every display offered by a system 
should give the on-line connection a better display position if there 
are interline connections offering more convenient arrival times and 
shorter layovers for travellers.
    We also disagree with Sabre's argument that we should not adopt 
this rule since Sabre assertedly would offer a display without an on-
line preference if travel agencies demanded it. Sabre Comments at 5. 
The systems, however, have never adopted display algorithms in response 
only to travel agency demands and instead tend to choose display 
criteria that benefit the system's airline owner or affiliate. Given 
the display shortcomings that can result from the on-line preference, 
notwithstanding consumer preferences for on-line service, we think the 
requirement to offer a display without an on-line preference is 
necessary to ensure that travel agents can access more useful displays 
and to better enable airlines to compete on service and price.

Deferral of Consumer Preference Rule

    We have decided at this time to defer acting on the proposed rule 
that would require display criteria to be rationally related to 
consumer preferences. A number of parties, including some non-vendor 
airlines, asserted that this proposal was too vague to be useful. See, 
e.g., Sabre Comments at 6-7; American Comments at 5-7; Galileo Comments 
at 3-6; United Comments at 15-16; Delta Comments at 14-15; AAA Comments 
at 3-4; Midwest Express Comments at 2. On the other hand, ASTA, one 
system, and some airlines supported it. Amadeus Comments at 2-3; Alaska 
Comments at 2; Continental Comments at 2-3.
    We have determined that the proposal would better be considered as 
part of our overall reexamination of the rules. We also believe that 
the most serious current display problem--Apollo's treatment of single-
plane services--should be eliminated by our adoption of the elapsed 
time rule. Thus there appears to be no immediate need to act on this 
proposal. We do intend, however, to consider the proposal further in 
the upcoming rulemaking, so no one should construe our deferral as a 
decision to abandon it. In that rulemaking we can consider 
modifications to the proposal that may potentially make it more 
effective and enforceable. In addition, even without the rule, we may 
still take action against anticompetitive or deceptive displays under 
our authority to prohibit unfair and deceptive practices in the 
marketing of airline transportation.

The Elapsed Time Rule

    We are adopting the rule requiring systems to give single-plane 
flights a preference over connecting services if they do not make 
substantial use of elapsed time in selecting flight options from the 
database. We proposed this rule as an alternative to the consumer 
preference rule, since it would provide clearer standards for displays 
and eliminate the problems caused by Apollo's current displays. 61 FR 
at 42215.
    Galileo and United state that our adoption of this proposal will 
substantially alleviate the dissatisfaction with Apollo's current 
displays. Galileo Comments at 6-7; United Comments at 3, 14. United 
thus states, ``United is confident that an adjustment of the Apollo 
display algorithm to incorporate elapsed time as a factor in selecting 
flights from the database will fully resolve the situations discussed 
in the Notice where the Department tentatively finds that the current 
algorithm produces unreasonable results.'' United Comments at 14.
    United and Apollo Travel Services have tried to defend the Apollo 
displays. Their arguments are unconvincing. United relied primarily on 
the argument that single-plane flights are not invariably faster than 
connecting services and cited numerous examples of markets where there 
are some connecting services requiring less travel time than some 
single-plane flights. United Comments at 10-12; United Reply. While we 
assume that United's examples are accurate, in general single-plane 
flights should have a shorter elapsed travel time than connecting 
services. Furthermore, the examples of Apollo displays discussed in our 
notice of proposed rulemaking show that all too often Apollo gives a 
better display position to connecting services that require much more 
travel time than competing single-plane flights. 61 FR at 42213. Many 
other examples of similarly unreasonable Apollo displays exist. Alaska 
Comments at 7-10; Midwest Express Comments at 7-9; Reno Comments at 4-
5.
    United's argument, moreover, wrongly ignores the other advantages 
offered consumers by single-plane flights--a reduced risk of lost 
luggage and the elimination of the possibility of missed connections. 
Alaska Comments at 3. Furthermore, even if United's position is 
correct, our rule is consistent with it, since the rule encourages 
systems to make greater use of elapsed time in creating their displays.
    United also argues that the Apollo algorithm can give travel agents 
notice on the first screens that additional airlines serve a market. 
United Comments at 7-9, citing our example of the Orange County-Seattle 
market. United's claim is unreasonable. Apollo's display of Orange 
County-Seattle

[[Page 63845]]

services gives a high display position to America West's connecting 
service, whose connection between an Orange County-Phoenix flight and a 
Phoenix-Seattle flight would enable a traveller to reach Seattle from 
Orange County. America West's connecting services benefit from the 
weight given displacement time in constructing the display. Other 
airlines, unlike America West, offer single-plane service in the 
market. The better display position given connecting services like 
those offered by America West causes the single-plane flights to be 
given a poorer position, even though they are likely to be preferred by 
most travellers. Few travellers would be interested in learning about 
America West's service in the market, when the single-plane flights 
offer a more convenient and faster way to reach Seattle. Moreover, in 
other cases the Apollo algorithm keeps travel agents from learning that 
an airline serves a market (and does so with single-plane flights that 
are often more convenient). Midwest Express Reply at 7, n. 4.
    United also tried to defend the Apollo algorithm on the basis that 
the algorithm takes into account displacement time, a factor allegedly 
important to travellers because departure time is a major consideration 
in selecting service. United Comments at 8. We think United has 
overstated the importance of displacement time. See Reno Comments at 4. 
More importantly, the Apollo algorithm gives too little weight to 
elapsed time, a factor that it is usually more important to travellers. 
See, e.g., Amadeus Comments at 6. And, as shown, ASTA, the travel 
agents' major trade association, has repeatedly complained that 
Apollo's current displays provide misleading and poor rankings of 
airline services. Though United claimed that ASTA's opinion is entitled 
to less weight than AAA's position, United Reply at 2, n. 1, we 
disagree, and in any event AAA did not even allege that Apollo's 
current displays are reasonable or useful.
    Equally unpersuasive is Apollo Travel Services' claim that the 
Apollo displays cannot cause problems because travel agents can easily 
obtain an alternative display with a few keystrokes. Apollo Travel 
Services Comments at 7. Travel agents, as we have repeatedly noted, are 
often pressed for time and therefore unwilling to take additional steps 
to obtain better displays. See, e.g., 57 FR at 43786; Marketing 
Practices at 69.
    American and Sabre contend that this rule will be too vague, since 
it requires systems to use elapsed time as a ``significant factor'' in 
selecting flights from the database if single-plane flights are not 
given a preference over connecting flights in displays. American 
Comments at 8-9; Sabre Comments at 8. This objection is not substantial 
enough to defeat our proposal, since the rule will give systems some 
guidance. We are reluctant to be more precise, since that would be 
contrary to our long-standing wish to avoid regulating ranking and 
editing criteria in detail.
    TWA objected to the proposal on the ground that Apollo allegedly 
does not have integrated displays and thus would not be covered by the 
rule. TWA Comments at 7. TWA has overlooked the definition of 
integrated displays given in our rules, 14 CFR 255.3. While we 
sometimes use the term ``integrated display'' to refer to displays that 
do not show all services within a category of services, such as non-
stop flights, before another category of services, such as connecting 
flights, in this instance we are using the definition already given by 
the rules.
    Alaska and Midwest Express asked us to modify our proposal so that 
it would require systems to always place single-plane flights above 
connecting services. Alaska Comments at 1; Midwest Express Comments at 
1-2. We proposed to give systems the option either of displaying all 
single-plane flights before connections or of using elapsed time as a 
significant factor in selecting flights from the database. We did not 
propose a rule requiring systems to always give a better display 
position to single-plane flights. In addition, we have not received 
complaints about a Sabre display that does not give single-plane 
flights a preference over connecting flights; that display uses elapsed 
time in selecting flights from the database. United also observes that 
some single-plane flights are routed in a manner which does not give 
travellers convenient service. United Comments at 12, citing an Alaska 
San Diego-Seattle-Portland flight. However, if Alaska and others wish 
us to address this matter further in our overall reexamination of the 
rules, we will, of course, consider their comments.
    Despite the objection of one commenter, we believe this rule is 
consistent with the systems' agreement not to rank nonstop flights on 
the basis of elapsed time, since the use of that factor had encouraged 
airlines to submit unrealistic flight schedules to the systems. See 56 
FR at 12610. We have not prohibited the use of elapsed time in ranking 
connecting services, and we do not believe our rule will undermine the 
systems' agreement on the ranking of nonstop flights. Our concern in 
adopting this rule involves displays that sometimes list more 
convenient single-plane flights after less convenient connecting 
services.
    Finally, United has proposed revising the language of the proposed 
rule so that it imposes an affirmative obligation on systems. United 
Comments at 15. We think that proposal is reasonable, so we will adopt 
it. As used in the revised language, ``or'' means ``or'' and ``and''.

Alternatives to Rulemaking

    We explained in our notice of proposed rulemaking that consumers, 
travel agencies, and non-vendor airlines could not avoid the harm 
caused by displays that injure consumers and airline competition. 
Travel agents could only overcome Apollo's predetermined ranking of 
airline services either by taking the time to search through multiple 
screens or by requesting with additional keystrokes a display that 
lists single-plane flights before connecting services, but this 
additional work will be unattractive for many agents due to the time 
pressures of their job. Indeed, vendor airlines have an incentive to 
create displays giving their flights a better display position 
precisely because they know that travel agents often will not override 
the system's primary ranking of airline flights. Travel agencies also 
have little ability to switch systems if they become dissatisfied with 
the poor displays offered by the system they are currently using. 61 FR 
at 42215.
    Travel agency customers have no independent ability to offset the 
harm caused by unreasonable CRS displays. They rely on the travel agent 
to tell them what services are available and do not usually see the 
display used by the agent. Since few agency offices use more than one 
system, travellers have no ability to ask the agent to use a different 
system. Ibid.
    Similarly, non-vendor airlines have little control over an agent's 
use of CRS displays and no bargaining leverage with any system over 
display algorithms. Ibid.
    While some of the commenters challenged these points, as discussed 
above, we are not persuaded by their objections. Among other things, we 
do not believe that the use of the Internet by consumers (and travel 
agents) is widespread enough to substantially reduce the impact of CRS 
practices on airline competition and the quality of information given 
consumers on airline service options. Moreover, many Internet sites use 
a CRS as a booking engine.

Rules Suggested by the Parties

    Several of the parties suggested other rules. Frontier, for 
example, argues that we should require major airlines to

[[Page 63846]]

code-share and offer joint fares on a non-discriminatory basis with 
other airlines at their hubs, that we should require elapsed time to be 
the basis for ranking flights, or that we should prohibit code-sharing. 
Frontier Comments at 5. Amadeus (supported by Continental) urges us to 
regulate the displays offered by on-line computer services and Internet 
sites. Amadeus Comments at 8-15. Reno alleges that other CRS practices, 
such as high booking fees, injure airline competition. Reno Comments at 
6-7.
    We may adopt only the rules proposed by our notice of proposed 
rulemaking, so we could not adopt any of these suggested additional 
changes without first issuing a new notice of proposed rulemaking. 
Since we have begun a proceeding for the overall reexamination of our 
CRS rules, including the display rules, we think that the parties' 
additional proposals would best be considered in that proceeding. We 
note, moreover, that the advance notice specifically asks parties to 
comment on the Internet issue raised by Amadeus and the booking fee 
issue raised by Reno. 62 FR at 47610.

Regulatory Assessment

    The two rules we are adopting are a significant regulatory action 
under section 3(f) of Executive Order 12866 and have been reviewed by 
the Office of Management and Budget under that order. Executive Order 
12866 requires each executive agency to prepare an assessment of costs 
and benefits under section 6(a)(3) of that order. The rules are also 
significant under the regulatory policies and procedures of the 
Department of Transportation, 44 FR 11034.
    We tentatively found that the proposed rules would benefit 
consumers, travel agents, and non-vendor airlines and that they would 
not impose significant costs on the systems. We asked commenters to 
give us more detailed information on the costs and benefits of the 
proposed rules. 61 FR at 42216.
    The two rules that we are adopting should benefit airline 
competition and consumers. They will provide airlines a greater 
opportunity to obtain passengers on the basis of the quality of their 
service and their fares by reducing the possibility that unreasonable 
CRS display positions will determine the number of bookings received by 
an airline. In addition, the rules should make travel agency operations 
more efficient by enabling travel agents to find the best service with 
less work. The rules will benefit consumers by making it more likely 
that travel agencies will recommend more convenient airline service. By 
promoting airline competition, the rules will produce additional 
savings and other benefits for consumers.
    The Department does not have enough information to enable it to 
quantify the potential benefits of the rule. However, giving travel 
agents and their customers a better ability to find the best available 
airline service can result in substantial consumer savings, as the 
Justice Department noted in its comments in our last CRS rulemaking. 56 
FR 12606. Moreover, Alaska and Midwest Express have estimated that 
Apollo's display reduces their revenues by millions of dollars each 
year. If their estimates are valid, Apollo's current displays are also 
causing many travellers to take connecting services instead of one-stop 
flights that may be more convenient.
    While we expect the two rules to provide significant benefits, we 
do not expect them to impose significant costs on the systems. The only 
system that provided an estimate on its programming expenses is Sabre, 
which states that the required creation of a display without an on-line 
preference will cost it $120,000. Sabre, however, until recently 
offered a display of North American services without an on-line 
preference; our rule will only require it to use the same criteria on 
this point as its displays of overseas services, which have no on-line 
preference. Galileo did not estimate the cost of the programming 
changes needed to comply with the elapsed time rule. We doubt that its 
reprogramming costs will be significant.
    The Department does not believe that there are any alternatives to 
this proposed rule which would accomplish the goal of giving each 
participating carrier a greater opportunity to have its services fairly 
displayed in CRSs. These rules do not impose unfunded mandates or 
requirements that will have any impact on the quality of the human 
environment.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et seq., was 
enacted by Congress to ensure that small entities are not unnecessarily 
and disproportionately burdened by government regulations. The act 
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.
    In our notice of proposed rulemaking we stated the reasons for 
proposing the additional CRS display rules and the objectives and legal 
basis for those proposals. We tentatively found that the proposals 
would give smaller airlines a better opportunity to obtain a fair 
display position in CRSs and thereby enable them to obtain more 
bookings and compete more successfully with larger airlines. We also 
determined that the proposals would benefit smaller travel agencies by 
making it easier for them to serve their customers more efficiently and 
to give them better advice on airline service options.
    Several commenters submitted their views on the proposed rules' 
impact on small business entities. We considered their comments in 
deciding whether to make our proposals final.
    We have determined to make final our tentative findings that the 
rule proposals would benefit smaller airlines and travel agencies. As 
explained earlier, the proposed rules will give smaller airlines a 
better opportunity to compete and will make it easier for travel 
agencies to serve their customers.
    Our rules contain no direct reporting, record-keeping, or other 
compliance requirements that would affect small entities. There are no 
other federal rules that duplicate, overlap, or conflict with our 
proposed rules.
    The Department certifies under section 605(b) of the Regulatory 
Flexibility Act (5 U.S.C. et seq.) that this regulation will not have a 
significant economic impact on a substantial number of small entities. 
The rule will enable travel agencies to operate more efficiently and 
will give smaller airlines a greater assurance that their services will 
be fairly displayed by the systems, as explained above. The rule will 
impose no requirements on smaller airlines or travel agencies and will 
not other wise increase their costs.

Paperwork Reduction Act

    This proposal contains no collection-of-information requirements 
subject to the Paperwork Reduction Act, P.L. No. 96-511, 44 U.S.C. 
Chapter 35.
    The rules we are adopting 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 12812, we have determined that the rules do not have 
sufficient federalism implications to warrant preparation of a 
Federalism Assessment.

[[Page 63847]]

List of Subjects in 14 CFR Part 255

    Air carriers, Antitrust, Reporting and recordkeeping requirements.

    Accordingly, the Department of Transportation amends 14 CFR Part 
255, Carrier-owned Computer Reservations Systems, as follows:

PART 255--[AMENDED]

    1. The authority citation for part 255 is revised to read as 
follows:

    Authority: 49 U.S.C. 40101, 40102, 40105, 40113, 41712, 
recodifying 49 U.S.C. 1301, 1302, 1324, 1381, 1502 (1992 ed.).

    2. Section 255.4(a) is revised to read as follows:


Sec. 255.4  Display of information.

    (a) All systems shall provide at least one integrated display that 
includes the schedules, fares, rules and availability of all 
participating carriers in accordance with the provisions of this 
section. This display shall be at least as useful for subscribers, in 
terms of functions or enhancements offered and the ease with which such 
functions or enhancements can be performed or implemented, as any other 
displays maintained by the system vendor. No system shall make 
available to subscribers any integrated display unless that display 
complies with the requirements of this section.
    (1) Each system must offer an integrated display that uses the same 
editing and ranking criteria for both on-line and interline connections 
and does not give on-line connections a system-imposed preference over 
interline connections. This display shall be at least as useful for 
subscribers, in terms of functions or enhancements offered and the ease 
with which such functions or enhancements can be performed or 
implemented, as any other display maintained by the system vendor.
    (2) Each integrated display offered by a system must either use 
elapsed time as a significant factor in selecting service options from 
the database or give single-plane flights a preference over connecting 
services in ranking services in displays.
* * * * *
    Issued in Washington, DC on November 26, 1997.
Rodney E. Slater,
Secretary of Transportation.
[FR Doc. 97-31674 Filed 12-2-97; 8:45 am]
BILLING CODE 4910-62-P