Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 63837

condition is not a result of repetitive

airplane operation; the potential of the

unsafe condition occurring is the same

on the first flight as it is for subsequent

flights. The compliance time of ‘‘30 days

after the effective date of this AD’’ will

not inadvertently ground airplanes and

would assure that all owners/operators

of the affected airplanes accomplish this

AD in a reasonable time period.

Cost Impact

The FAA estimates that 3,093

airplanes in the U.S. registry will be

affected by this AD, that it will take

approximately 1 workhour per airplane

to incorporate the required AFM

amendment, and that the average labor

rate is approximately $60 an hour. Since

an owner/operator who holds at least a

private pilot’s certificate can accomplish

this AD, as authorized by sections 43.7

and 43.9 of the Federal Aviation

Regulations (14 CFR 43.7 and 43.9), the

only cost impact upon the public is the

time it will take the affected airplane

owner/operators to amend the AFM or

POH.

Regulatory Impact

The regulations adopted herein will

not have 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 12612,

it is determined that this final rule does

not have sufficient federalism

implications to warrant the preparation

of a Federalism Assessment.

For the reasons discussed above, I

certify that this action (1) is not a

‘‘significant regulatory action’’ under

Executive Order 12866; (2) is not a

‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034, February 26, 1979); and (3)

will not have a significant economic

impact, positive or negative, on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act. A copy of the final

evaluation prepared for this action is

contained in the Rules Docket. A copy

of it may be obtained by contacting the

Rules Docket at the location provided

under the caption ADDRESSES.

List of Subjects in 14 CFR Part 39

Air transportation, Aircraft, Aviation

safety, Safety.

Adoption of the Amendment

Accordingly, pursuant to the

authority delegated to me by the

Administrator, the Federal Aviation

Administration amends part 39 of the

Federal Aviation Regulations (14 CFR

part 39) as follows:

PART 39—AIRWORTHINESS

DIRECTIVES

1. The authority citation for part 39

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40113, 44701.

§ 39.13 [Amended]

2. Section 39.13 is amended by

adding a new airworthiness directive

(AD) to read as follows:

97–25–03 Raytheon Aircraft Company:

Amendment 39–10226; Docket No. 97–

CE–20–AD.

Applicability: Models 65–90, 65–A90, 65–

A90–1, 65–A90–3, 65–A90–4, B90, C90,

C90(SE), C90A, C90B, E90, F90, H90, 99,

99A, A99, A99A, B99, C99, 100, A100,

A100A, A100C, B100, 200, 200C, 200CT,

200T, A200, A200C, A200CT, B200, B200C,

B200T, B200CT, 300, B300, B300C, 1900,

1900C, 1900D, and 2000 airplanes, all serial

numbers, certificated in any category.

Note 1: This AD applies to each airplane

identified in the preceding applicability

provision, regardless of whether it has been

modified, altered, or repaired in the area

subject to the requirements of this AD. For

airplanes that have been modified, altered, or

repaired so that the performance of the

requirements of this AD is affected, the

owner/operator must request approval for an

alternative method of compliance in

accordance with paragraph (e) of this AD.

The request should include an assessment of

the effect of the modification, alteration, or

repair on the unsafe condition addressed by

this AD; and, if the unsafe condition has not

been eliminated, the request should include

specific proposed actions to address it.

Compliance: Required within the next 30

days after the effective date of this AD, unless

already accomplished.

To prevent nose down pitch and a descent

rate leading to aircraft damage and injury to

personnel caused by the power levers being

positioned below the flight idle stop or the

power levers being lifted while the airplane

is in flight, accomplish the following:

(a) Amend the Limitations Section of the

airplane flight manual (AFM) by inserting the

following language:

Do not lift the power levers in flight.

Lifting the power levers in flight or moving

the power levers in flight below the flight

idle position could result in nose down pitch

and a descent rate leading to aircraft damage

and injury to personnel.

(b) This action may be accomplished by

incorporating a copy of this AD into the

Limitations Section of the AFM.

(c) Amending the AFM, as required by this

AD, may be performed by the owner/operator

holding at least a private pilot certificate as

authorized by section 43.7 of the Federal

Aviation Regulations (14 CFR 43.7), and must

be entered into the aircraft records showing

compliance with this AD in accordance with

section 43.9 of the Federal Aviation

Regulations (14 CFR 43.9).

(d) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

(e) An alternative method of compliance or

adjustment of the compliance time that

provides an equivalent level of safety may be

approved by the Manager, Wichita Aircraft

Certification Office (ACO), FAA, 1801

Airport Road, Wichita, Kansas. The request

shall be forwarded through an appropriate

FAA Maintenance Inspector, who may add

comments and then send it to the Manager,

Wichita ACO.

Note 2: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Wichita ACO.

(f) Information related to this AD may be

examined at the FAA, Central Region, Office

of the Regional Counsel, Room 1558, 601 E.

12th Street, Kansas City, Missouri 64106.

(g) This amendment (39–10226) becomes

effective on January 21, 1998.

Issued in Kansas City, Missouri, on

November 25, 1997.

Michael Gallagher,

Manager, Small Airplane Directorate, Aircraft

Certification Service.

[FR Doc. 97–31682 Filed 12–2–97; 8:45 am]

BILLING CODE 4910–13–U

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.

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
63838 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

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, FrequentFlyer 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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 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 carrierspecific 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
63840 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

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 nondiscriminatory 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 online 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 singleplane 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 codesharing 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-andspoke 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 online 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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 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 nonvendor 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 online 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 singleplane 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 online 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, online 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
63842 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

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 singleplane 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 nonvendor 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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 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 lowfare 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 online 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 online 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 online preference may also overstate

consumer preferences for on-line
63844 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

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 nonvendor 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 singleplane 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
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 63845

services gives a high display position to

America West’s connecting service,

whose connection between an Orange

County-Phoenix flight and a PhoenixSeattle 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 longstanding 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 singleplane 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 singleplane flights are routed in a manner

which does not give travellers

convenient service. United Comments at

12, citing an Alaska San Diego-SeattlePortland 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 singleplane 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
63846 Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations

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 nonvendor 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 collectionof-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.
Federal Register / Vol. 62, No. 232 / Wednesday, December 3, 1997 / Rules and Regulations 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:

§ 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 online and interline connections and does

not give on-line connections a systemimposed 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

EQUAL EMPLOYMENT OPPORTUNITY

COMMISSION

29 CFR Part 1614

Federal Sector Equal Employment

Opportunity

CFR Correction

In title 29 of the Code of Federal

Regulations, parts 900 to 1899, revised

as of July 1, 1997, on page 275, in

§ 1614.204, in paragraph (d)(1), in the

fourth line, ‘‘shall be’’ should read

‘‘shall not be’’.

BILLING CODE 1505–01–D

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 117

[CGD05–97–082]

RIN 2115–AE47

Drawbridge Operation Regulations;

New Jersey Intracoastal Waterway,

Manasquan River

AGENCY: Coast Guard, DOT.

ACTION: Notice of temporary deviation

from regulations.

SUMMARY: The Commander, Fifth Coast

Guard District has issued a temporary

deviation from the regulation governing

the operation of the Brielle Railroad

Bridge across the New Jersey

Intracoastal Waterway, Manasquan

River at mile 0.9, in Point Pleasant, New

Jersey. Beginning January 12 through

March 13, 1998, this deviation allows

the bridge to remain closed to

navigation between the hours of 8 a.m.

to 9:45 a.m.; 10 a.m. to 11:45 a.m.; 1

p.m. to 2 p.m.; and 2:15 p.m. to 3:30

p.m., Monday through Friday excluding

holidays. This closure is necessary to

facilitate extensive repairs and maintain

the bridge’s operational integrity while

still providing for the reasonable needs

of navigation.

DATES: The deviation is effective from 8

a.m. on January 12, 1998 until 3:30 p.m.

on March 13, 1998.

SUPPLEMENTARY INFORMATION: The

Brielle Railroad Bridge is owned and

operated by New Jersey Transit (NJ

Transit). On October 7, 1997, a letter

was forwarded to the Coast Guard by NJ

Transit requesting a temporary

deviation from the normal operation of

the bridge to implement extensive

repairs. Presently, the draw is required

to open on signal at all times. These

repairs entail replacement or

reinforcement of stringers, floor beams,

laterals and bearings. Removing the

existing rivets and installing bolts is a

major portion of the work. To perform

these repairs, and use equipment and

labor safety, maintaining the drawbridge

span in the closed position is needed

part of the time.

Discussions with marine interests

revealed that approximately four

commercial party vessels transit through

the bridge during the winter months.

However, these vessels normally depart

between the hours of 6 a.m. and 8 a.m.

Vessels engaged in half day transits

return around noon, with full day

transits returning at 6 p.m. Therefore,

these vessels are not expected to be

negatively impacted by the temporary

deviation.

From January 12 until March 13,

1998, this deviation allows the draw of

the Brielle Railroad Bridge to remain

closed to navigation between the hours

of 8 a.m. to 9:45 a.m.; 10 a.m. to 11:45

a.m.; 1 p.m. to 2 p.m.; and 2:15 p.m. to

3:30 p.m., Monday through Friday

excluding holidays.

Dated: November 12, 1997.

Roger T. Rufe, Jr.,

Vice Admiral, U.S. Coast Guard, Commander,

Fifth Coast Guard District.

[FR Doc. 97–31738 Filed 12–2–97; 8:45 am]

BILLING CODE 4910–14–M

DEPARTMENT OF DEFENSE

DEPARTMENT OF VETERANS

AFFAIRS

38 CFR Part 21

RIN 2900–AI94

Veterans Education: Increased

Allowances for the Educational

Assistance Test Program

AGENCIES: Department of Defense and

Department of Veterans Affairs.

ACTION: Final rule.

SUMMARY: The law provides that rates of

subsistence allowance and educational

assistance payable under the

Educational Assistance Test Program

shall be adjusted annually by the

Secretary of Defense based upon the

average actual cost of attendance at

public institutions of higher education

in the twelve-month period since the

rates were last adjusted. After

consultation with the Department of

Education, the Department of Defense

has concluded that the rates for the

1997–98 academic year should be

increased by 6% over the rates payable

for the 1996–97 academic year. The