13117915.2 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, DC.

Agreements Adopted by the International Air Transport Association Relating to the Traffic Conferences Docket OST-2010-___________

IATA’S APPLICATION FOR FURTHER EXEMPTION FROM CONDITION #2 The International Air Transport Associat ion (“IATA”) hereby requests that the Department grant IATA a further exemption fr om condition #2 most recently imposed by Order

68-7-55 on the Provisions for the Conduct of the IATA Traffic Conferences. The requested exemption is designed to facilitate prompt im plementation of routine but essential interline coordination agreements. It would reduce the resources now devoted by the Department to review of such agreements while fully satisfyi ng both the public’s and the Department’s need for

information on IATA Traffic Conf erences’ activities and providing for pre-effectiveness review and Department action in the case of agreements perceived by the Department to raise significant issues under 49 U.S.C. § 41309. Departmental re view, as appropriate, would supplement the central role of market forces and competition law in safeguarding the interests of U.S. passengers and shippers. Background Condition #2, as imposed by Order 68-7-55 (July 12, 1968) and affirmed by Order 85-5- 32 (May 6, 1985), provides:- 2 - 13117915.2 That the U.S. air carrier member s of IATA shall submit to the [Department] for appropriate act ion all recommended practices, agreements, and resolutions adopted by IATA and each of its conferences and permanent conference committees. The term “appropriate action” has been construed to mean either approval or exemption prior to being declared effective by IATA or implemented by its members. 1 Currently, IATA members reach a large numbe r of interline agreements within the Traffic Conferences (as appr oved by Order 2007-3-23 (March 30, 2007)). The time required for Department action, even on matters not involving significant policy issues, can be substantial, because the Department’s limited resources mu st respond to many other priorities. IATA submits that eliminating delay in implem enting non-controversial agreements, or noncontroversial amendments, as the Department has done in the past will be nefit the traveling and shipping public. The limited ex emption that IATA proposes is designed to reduce such delay while preserving the information flow the De partment requires to determine whether preeffectiveness review is appropr iate in the public interest. IATA’s Proposal Under the exemption that IATA proposes, IATA would continue to file agreements now addressed by Condition #2 (and related IATA documentation) adopted in IATA Traffic Conferences in a public docket ma intained by the Department at least 30 days prior to their intended effective date. The Depa rtment and interested parties would then have 30 days from the date of filing to review an agreement and, if th e Department deems it warranted, to advise IATA to submit the agreement for pre-effectiveness revi ew and action. If the Department so advises IATA, then IATA would submit the agreement for pre-effectiveness review and appropriate action (as it does today). If the Department does not give IATA such notice, then IATA would

1 U.S. air carrier members of IATA have given IATA a power-of-attorney to make such submissions on their behalf.- 3 - 13117915.2 be free to declare the agreement effec tive without further Department action. 2 IATA’s proposal also contemplates that the Department could ex tend the 30-day initial ex amination period and the limitation on declaration of effectiveness for up to 60 additional days by so notifying IATA prior to expiration of the original 30-day period. IATA recognizes that the Depa rtment has a public interest responsibility to review and act upon certain types of IATA resolutions and recommended practices that may significantly affect U.S. consumer and shipper interests. IATA has listed such re solutions and recommended practices in Attachment A to this Application an d is prepared to continue filing any amendments to, or substitutes for, these resolutions and recommended practices for review and appropriate action. DOT would retain authority to modify that list as future circumstances may warrant. IATA thus proposes that DOT further exem pt IATA from Condition #2, as follows: We now further exempt IATA from Condition #2 imposed on IATA’s Provisions for the Conduct of the IATA Traffic Conferences, Agreement 1175, as amended by Order 68-7-55, as follows: a. Except as provided in b. below, IATA shall file each recommended practice, agreement and resolution in a designated information docket at least 30 days before the date on which IATA seeks to declare such recomm ended practice, agreement or resolution effective. Such filings shall include the IATA minutes or meeting reports associated wi th such recommended practice, agreement or resolution. IATA is authorized to declare such recommended practice, agreement or resolution effective not less than 30 days after filing; provided , that such recommended practice, agreement or resolution sh all not be declared effective if the Department notifies IATA on or before the 30 th day after filing that either: (i) the Department requires not more than 60 additional days to review such recommended practice, agreement or resolution, in which case IATA shall defer declaration of effectiveness for the additional days requested by the Department;

2 Where IATA declares an agreement e ffective without pre-effectiveness Department action, that agreement will not be deemed to have been approved by the Department and will not enjoy immunity from application of the U.S. antitrust laws.- 4 - 13117915.2 or (ii) the Department, within th e initial 30-day f iling period or such additional period the Departme nt has requested, requires the recommended practice, agreement or resolution to be filed for appropriate action, in which case IATA shall not declare such recommended practice, agreemen t or resolution effective until appropriate action has been taken by the Department. b. All amendments or modificati ons to recommended practices, agreements and/or resolutions list ed in the Appendix to this Order and all new recommended practices, agreements and resolutions addressing substantially similar subj ects, shall continue to be filed for appropriate action. The Depa rtment may amend the Appendix, at its discretion, on written notice to IATA. c. IATA, at its discretion, may file any recommended practice, agreement or resolution for a pproval and antitrust immunity pursuant to Sections 41308 and 41309 of the Transportation Code but shall not declare any such recommended practice, agreement or resolution effective until the De partment shall have acted on IATA’s application. Reasons for Approving IATA’s Proposed Exemption When Condition #2 was originally imposed, the airline industry was comprehensively regulated under U.S. law and U.S. carriers were required to file for approval and consequent antitrust immunity all agreemen ts affecting foreign air tran sportation. The IATA Traffic

Conferences then addressed a br oad scope of issues, including rates and fares, governing both on-line and interline international air transporta tion. Condition #2 was thus appropriate for both legal and policy reasons. As airline deregulation has progressed in th e U.S. and liberalization has become an increasingly prevalent international norm, the burden imposed on IATA members and DOT resources by the universality of Condition #2 has often exceeded its regulatory benefit. As a legal matter, Section 41309 of the Transportation Code no longer mandates the filing of agreements and Section 41308 makes antitrust imm unity discretionary in most cases. IATA

Traffic Conferences have confined their activit ies to the facilitation and standardization of- 5 - 13117915.2 interline service and rarely require antitru st immunity for the implementation of new recommended practices and/or re solutions. Even in the competition law sensitive area of interlineable fares, IATA has moved to a mark et-based FlexFare system which it has made

effective without antitrust imm unity after Department Orders exempting FlexFare resolutions from Condition #2. See, e.g., Order 2006-12-24 (January 2, 2007), Order 2009-10-9 (October 22, 2009). Similarly, DOT recently exempted, on a worldwide basis, resolutions adopted by IATA’s passenger and cargo agency conferences. Order 2008-4-45 (May 5, 2008). Thus, given the applicability of antitrust and competition laws around the world, Condition #2 serves a continuing regula tory purpose only in thos e limited cases where it facilitates review of IATA recommended practices and/or resolution s that touch on signifi cant non-competition regulatory concerns or provide a vehicle for filings that IATA w ould otherwise choose to make

under Section 41309. In a series of Orders addressing the IATA Cargo and Passenger Services Conferences, the Department exempted modifications to spec ific groups of resolutions and recommended practices from Condition #2. Orders 2002-1- 15 (January 29, 2002); 2002-7-3 (July 1, 2002); 2003-6-15 (June 10, 2003); 2005-7-29 (July 20, 2 005) (Passenger); 2002-8-16 (Aug. 13, 2002); 2003-7-22 (July 18, 2003) and 2003-11-19 (November 17, 2003) (Cargo). Those exemptions have facilitated prompt enhancement of the interline system wit hout any countervailing detriment to consumer interests or regulatory ove rsight. Thus, IATA be lieves that it is timely and appropriate to further implement th e policy underlying those exemptions. IATA’s proposed further exemption from Condition #2 would continue to permit the Department and the traveling and shipping public to be fully informed of the work and proposed

actions of the IATA Traffic Conferences befo re any recommended practice, agreement or- 6 - 13117915.2 resolution is declared effective. It would lift the regulatory bu rden of the Department’s taking action, and the consequent effectiv eness delay, in cases where detail ed regulatory review is not required. At the same time, it would preserve filings for appropriate action on matte rs of known regulatory sensitivity as specifi cally listed in the Appendix or as designated by the Department

after initial review. WHEREFORE, IATA respectfully requests that the further exemption from Condition #2 proposed herein be granted.

Dated: May 3, 2010 Respectfully submitted,

Douglas Lavin Regional Vice Presiden t – North America International Air Transport Association IATA Washington 601 Pennsylvania Avenue, N.W. Suite 300 – North Building Washington, DC 20004

Bert W. Rein Bruce L. McDonald WILEY REIN LLP 1776 K Street, NW Washington, DC 20006 202.719.7000 Counsel for the International Air Transport Association13117915. 2 7 - 

### Attachment A

The following are subject areas where the Department has advised IATA that any recommended practice, agreement or resolution, or amendment thereto, should be filed for and receive appropriate DOT action before being de clared effective by IATA or implemented by

IATA members:

1. Flex Fares to or from the Unite d States or its territories.

2. Air Waybill – Conditions of contract (Resolution 600b).

3. Carriage concluded and evidenced by elec tronic means – Conditions of contract (Resolution 600i).

4. Acceptance and carriage of passengers requir ing special assistance (Resolution 700).

5. Ticket notices (Resolution 724).

6. Conditions of carriage for cargo (Recommended Practice 1601).

7. Cargo security (Recommended Practice 1630).

8. Carriage of cargo using electronic data interchange (Recommended Practice 1670).

9. General conditions of carriage (passe nger and baggage) (R ecommended Practice 1724).