BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Mike Borsetti, Third-party Complainant



### v. American Airlines, Inc. 

### ) ) ) 

### ) ) ) ) Docket DOT-OST-2015-0087

ANSWER OF AMERICAN AIRLINES, INC. Communications with respectto this document should be addressed to: HowardKass Vice President- Regulatory Affairs AMERICAN AIRLINES, INC. 1101 17th Street, N.W. Washington, D.C. 20036 Alec Bramlett Managing Director Legal and Government Affairs AMERICAN AIRLINES, INC. MD 5675, P.O. Box 619616 DFW Airport, Texas 76261

Dated: May 22,2015 RobertP. Silverberg SILVERBERG GOLDMAN, LLP 1101 30th Street, N.W. Suite 300 Washington, D.C. 20007 Tel: (202) 944-3300 E-mail: rsilverberg@sgbdc.com Attorneys for AMERICAN AIRLINES, INC.BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Mike Borsetti, ) ) ) 

### ) ) ) ) Third-party Complainant DocketDOT-OST -2015-0087 v. American Airlines, Inc. ANSWER OF AMERICAN AIRLINES, 

### INC. American Airlines, Inc. ("American") hereby answers the third-party complaint filed by Mike Borsetti ("Mr. Borsetti" or "Complainant") seeking American to (i) reformat its form ofeticket confirmation and receipt and (ii) make refunds to Mr. Borsetti and other award travel customers ofany foreign taxes imposed by Japan, Italy and the United Kingdom and collectedby American at rates above those established by law and to cease any alleged over-collections. Americanhereby denies thatits form ofe-ticket confirmation and receipt is inconsistent with section 399.83 ofthe DOT Statements ofGeneral Policy (14 C.P.R. §399.83) as alleged. With respect to the allegations thatAmerican is not correctly collecting the Italy or United Kingdom imposed taxes or fees for awardtravel by children under 12 years ofage, Americanhas determined that for frequent flyer program (AAdvantage) tickets only, a computer programming issue appears to have possibly resulted in the collection ofthe full amount ofsuch• taxes imposedby the United Kingdom even though passengers under the age of 12 are exempt from paymentofthe U.K. Air PassengerDuty ("APD") iftraveling inthe lowest class ofservice, but only with respect to travel commencing after May 1, 2015. Prior to this date, children 2 years oryounger were exempt from the tax provided they were not allocated a separate seat beforeboarding the aircraft.Answer ofAmerican Airlines, Inc. Page 2 of 11 In the case ofthe Italian Embarkation Tax, children below 2 years ofage are exempt from the tax andthe amount ofthe tax is discounted by 50% for children between the age of2 and 12, and therefore passengers under age 12 traveling on award tickets mayhave paidthe higher tax. No similar over-collections occurred in connection with award travel from Japan as the provisions ofthe Japan Government Passenger Services Facilities Charge (coded as "SW") allowing for a child discount does not apply to award travel on American. In connection with its inquiry into this matter, American believes that any over collection offoreign taxes occurred in very narrow circumstances. Specifically, ifan over collection occurred it would have been in connection with children traveling from Italy on award tickets as

revenue ticketed passengers were properly charged. In the case ofthe U.K. APD, the over collection that mayhave occurred is only with respect to children 2 years oryounger traveling on award tickets, and since May 1, 2015, children between 2 and 11 years ofage butonly ifthe award ticketwas for transportation in the "lowest class oftravel." Accordingly, American reasonably believes that the number ofimpactedpassengers will be low. American has started the process to make any necessary computerprogramming changes to bring its relevant fee collection criteria based on the age ofthe passenger and class ofservice in line with taxing authority rules in Italy and the United Kingdom and to do so as promptly as possible. American is also creating a process to identify passengers thatwill betraveling on award tickets that may have inadvertently been charged more than the applicable Italian Embarkation Tax orthe U.K. AirPassenger Duty and to issue to any such passengers an appropriate refund. Further, American is researching its records regarding child passengers who have already traveled on award tickets from Italy and the United Kingdom to determine ifit over collected the Italian Embarkation Tax orthe U.K. Air PassengerDuty, and to the extentAnswer ofAmericanAirlines, Inc. Page 3 of 11 American's records identify any such over collections, it will determine the best wayto initiate a refund ofthe excess taxes. Underthe circumstances where American will makethe necessary programming changes and issue refunds, no purpose wouldbe servedby instituting a formal enforcementproceeding as remedial actions are already being taken bythe carrier.' Accordingly, American respectfully requests for the reasons set forth belowthat the Department dismiss the complaint in whole and issue an order so stating in accordance with §302.406(a)(2). 

### I. American's e-Ticket Confirmation and Receipt Is Not Inconsistent With Any DOT Regulation As noted, the Borsetti complaintraises two distinct issues, the first beingthe claim that the form ofAmerican's "eTicket& Receipt Confirmation" ("Receipt") is inconsistent with §399.83 ofDOT's Statements ofGeneral Policy (14 C.F.R. §399.83) because the document "omit[s] critical information aboutthe ticketpurchased." Complaint, p. 1.2 Mr. Borsetti claims thatthe omission ofthe information he deems important causes consumerharm. Complaint, p. 

### 2. Section 399.83 states as follows: § 399.83 Unfair or deceptive practice ofair carrier, foreign air carrier, orticket agent in orally confirming to prospectivepassengerreserved space on scheduled flights. Itis the policy ofthe Board to considerthe practice ofan air carrier, foreign air carrier, orticket agent, ofstating to a prospective passengerbytelephone or other

1The Department should note that withrespect to all tickets presented for transportation, no over-collection offoreign government fees has everbenefited American as the Company remitted all ofthe fees collected from its passengers with the understanding that itwas correctly collecting such levies. 2 The Complaint alleges thatthe Receipt lacks the fare basis and ticket designator for each segment; the fare calculation line which contains information on stopover limitations, the amount andtype ofsurcharges levied, and whether a higher intermediatepoint fare was paid; informationregarding endorsement andrestriction annotations; thebreakdown oftaxes, fees and carrier-imposed charges; the date and place ofissue; and ticket validity dates.Answer ofAmerican Airlines, Inc. Page4 of 11

means ofcommunication that a reservation ofspace on a scheduled flight in air transportation is confirmedbefore a passenger has received a ticket specifYing thereon his confirmed reserved space, to be anunfair or deceptive practice and an unfair method ofcompetition in air transportation orthe sale thereofwithin the meaning ofsection 411 ofthe Act, unless the tariffofthe particular air carrier or foreign air carrier provides for confirmation ofreserved space bythe means so used. Therule, which dates backto action taken bythe Civil Aeronautics Board ("CAB") in 1973, requires by its clear andunambiguous terms that it would be anunfair or deceptive practice and anunfair method ofcompetition were a carrierto state to a customer that space on a scheduled flight was confirmedpriorto the time the passenger actually receives the ticket for travel indicating that space has been confirmed. Recognizing thatthe cleartext ofthe Policy Statement does not supporthis complaint, Mr. Borsetti argues in footnote 1that the "only reasonable interpretation" ofthis section ofthe DOT's Statements ofGeneral Policy is thatthe rule requires the carrier to provide each customer a "complete copy ofthe electronic ticket record" as stored in the carrier's electronic reservations system. In fact, the rule, whether it was being interpreted in 1973 when first adopted, or in 2015, simply cannotbe read toputthe gloss

on it as does the Complainant. Thepurpose ofthe rule, as explained by the CAB when it adopted the policy statement (first applicable to U.S. air carriers and subsequently to foreign air carriers), is to protect the public against air carriers and their agents from representing that a reservation for future travel has been confirmed when, in fact, it has not, andto extend theremedy ofdenied boarding compensation to those holding reservations that were confirmed in any manner provided for in the carrier's tariff. Thehistory and purpose ofthe rule have absolutely nothing to do with theAnswer ofAmerican Airlines, Inc. Page 5 of 11 information a carrier must provide a customer when issuing an e-ticket confirmation. 39 Fed. Reg. 38095 (Oct. 29, 1974)? Without debate, there are certain DOT rules that mandate the display offares and other required information, including all applicable taxes and carrier-imposed fees as found in §399.84(a) and the requirementto display required baggage fees and other optional fees as required by §399.85. There is no requirement, however, that carrier-issued receipts contain the information Mr. Borsetti claims is mandated by his tortured interpretation of§399.83.4 Indeed, his suggestion that carriers 

### must, not 

### may, provide a "breakdown oftaxes, fees and 'carrierimposed charges'" is contrary to §399.84(a) that expressly makes it mandatory that the total ticket price be shown in ads and quoted in fair displays on carrier websites. Although the rule also allows for fares to bebroken down into their constituent parts ifa carrier chooses to provide this information, such additional fare displays must, by rule, be less prominentthan the display ofthe total price including all taxes, fees and carrier-imposed charges. 5 The Borsetti position requiring thatthe breakdown ofthe fare and its components be detailed is contrary to §399.84(a).

3 Indeed, as §399.83 was adopted in the early 1970's, the CAB could neverhave contemplated that tickets wouldbe capable ofbeing issued directly to customers by electronic means. 4 When DOT last amended the so-called "full fare rule" as partofthe SecondFinal Rule on Enhancing Airline Passenger Protections (76 Fed. Reg. 23166 (April25, 2011)), it also put into effect numerous additional consumer disclosure requirements, including requirements related to e-ticket confirmations. Ifthe Departmenthad wanted to mandate the specific data elements that mustbe contained inane-ticket confirmation orreceipt as those listed in the Complaint on page 2, it could easily have done so, butdid not. Any attempt to shoehorn the Complainant's wish list ofadditional and mandatory data points to be contained in every receipt into a reading ofthe requirements of§399.83 must fail. 5 Section 399.84(a) states: Although charges included within the single total price listed 

### (e.g., government taxes) maybe stated separately orthrough links or "pop ups" onwebsites that display the total price, such charges may notbe false or misleading, may notbe displayed prominently, may notbe presented in the same or larger size as the total price, and must provideAnswer ofAmerican Airlines, Inc. Page 6 ofll Theproceduralpathway for addressing the concerns ofthe Complainant as itrelates to post-purchase disclosures is to file a request for initiation ofa rulemaking proceeding in accordance with §302.16 ("Petitions for rulemaking") and notby initiating individual third-party enforcement action. Ifa rulemaking petition were to be filed bythe Complainant, and ifthe Department were to find theposition ofMr. Borsetti compelling, then DOT can exercise its discretion and institute a rulemaking proceeding,bearing in mind that aspects ofthe information Mr. Borsetti insists mustbe disclosed has already been determined by the Departmentto be optional. 

### II. The Reduced Japan Government Passenger Services Facilities Charge Does Not Apply To American Award Travel The Complainant alleges that American did not correctly collectthe Japan Government Passenger Services Facilities Charge (coded as SW) for children between the ages of2-11 when using AAdvantage award miles. Complaint, p. 3. According to the Complainant, the Japan Passenger Services Facilities Charge applicable to international travel for children between the years of2-11 is 50% less than the adult charge. While the Complainant is partially correct, the determination ofwhether the 50% discount applies is not only basedupon the age ofthetraveler, butrequires the child to be traveling on a "child fare ticket." Ifnot, the full rate ofthe Passenger Services Facilities Charge is applicable and is to be collected bythe carrier. American's local tax counsel in Japan has confirmed to the Company that the issue ofticket classification is a matter leftto the discretion ofthe air carrier. In the case ofaward travel, andunlike the availability in certain markets ofchild fares that are lower than adult fares, there is no lesser mileage redemption rate offered for children

costinformation on a perpassengerbasis that accurately reflects the cost ofthe item covered by the charge. §399.84(a).Answer ofAmerican Airlines, Inc. Page 7 ofll traveling on AAdvantage award miles. Hence, American does not classify an AAdvantage award ticket as a "child fare ticket" and consequently American collects, as it must, the full Japan Passenger Services Facilities Charge when passengers ofany age travel on an award ticket and when presented for travel remits the full amount ofthe charge to the proper governmental authorities. Accordingly, American denies it over-collected the Japan Passenger Services Facilities Charge when issuing the award travel documents to the Complainant's child as alleged in paragraphs 12 and 13.c. ofthe Complaint and therefore American urges this aspect ofthe Complaintbe dismissed withprejudice.6 

### III. The Italian Embarkation Tax The Complainantis correct innoting the applicability ofthe Italian Embarkation Tax imposed bythe Government ofItaly. Americanhas been collecting and remitting the correct amount ofthe embarkation tax for children traveling on revenue tickets, meaning that the tax is completely waived for children 2 years ofage and under, and for children between 2 and 12 years ofage a 50% reduction ofthe tax is applicable. American has also determined that the tax discount or waiver based on the age ofthe passenger would apply to children traveling on an award ticket in the same manner itwould apply to a child traveling on a revenue ticket. To the extent American mayhave inadvertently collected the incorrect amount ofthe Embarkation Tax when passengers redeem miles for award travel, the sums collected were nonetheless remitted in full to the taxing authorities whenthe

6 Although the Complaint does not specifically call out whetherthe booking described in paragraph 12 ofthe Complaint was for award travel (as is clear from a reading ofparagraph 13.c.), American has determined based on the ticketnumberprovided by the Complainant (but redacted from the public version ofthe Complaint) that the transportation document was issued in connection with award travel.Answer ofAmerican Airlines, Inc. Page 8 ofll award ticket was presented for transportation and, hence, American received no benefit even ifit inadvertently imposed a tax on child travel that was higher than Italy mandated. Americanbelieves the root cause ofthe tax calculation issue was an AA.com computer programthat did not distinguish between adult passengers and child passengers traveling on award tickets departing airports in Italy. The Embarkation Tax was correctly collected, in the lower amounts, when a passengerpurchased a revenue ticket (assuming the bookingpassenger correctly selected the correctpassengertype during the AA.com booking process). American has started the process to reprogram the AA.com software to take into accountthe age ofthe prospectivepassenger whether ornotthey are traveling on a revenue ticket or an award ticket.7 American is also creating a process to identify passengers that will be traveling on award tickets that may have inadvertently been charged more than the applicable Italian Embarkation Tax and to issue to any such passengers an appropriate refund. Further, as noted, American is researching its records regarding child passengers who have already traveled on award tickets from Italy to determine ifit over collected the Italian Embarkation Tax, and to the extent American's records identify any such over collections, it will determine the best wayto initiate a refund ofthe excess taxes. 8 

### IV. United Kingdom Air Passenger Duty Inparagraph 16 ofthe Complaint, Mr. Borsetti, although nothaving actually purchased a ticket, claims that a search for economy class travel using award miles from Londonto Los

7 In accordance with TSA requirements, Americanrequests the full names ofall passengers and their dates ofbirth. However, the date ofbirth information supplied to TSA is separate from the AA.compricing module that calculates fares and applicable taxes. Nor is the AA.com computer currently setup to utilize the customer-supplied passengertype (by age) information for award ticketed passengers when calculating thetaxes and fees applicable to such award travel. 8 American will issue any refunds as may be warranted to Mr. Borsetti based on an analysis of the award tickets for travel from Italy described in the Complaint.Answer ofAmerican Airlines, Inc. Page 9 of 11 Angeles quotes the same amount oftotal taxes and fees for two adults as it does for one adult and

one child (age 2-11). As noted, the tax in question is the United Kingdom Air Passenger Duty ("APD") applicable to international departures from U.K. airports. Infants under 2 years ofage and not allocated a separate seat are exempt from payment ofthe APD. Excise Notice 550 §3.1.2 (February 27, 2015). With respect to departures from the U.K. on or after May 1, 2015, children under 12 years ofage are likewise exempt from payment ofthe APD, butonly iftravel is in the "lowest class oftravel." 

### !d. American has confirmed that children less than 12 years ofage traveling on revenue tickets from the U.K. to the U.S. after May 1, 2015 are not charged the APD, provided they are booked in the lowest class oftravel. However, as the AA.com website for award travel (but not

revenue travel) is not currently programmed in such a way as to distinguish for U.K. tax calculation purposes the prospectivepassengerby age, American appears to be currently collecting the APD for all award passengers departing the U.K. irrespective oftheir age. Therefore, there is a very small subset ofpassengers younger than 12 years ofage departing on American from U.K. airports and traveling in the lowest class ofservice having redeemed award miles since May 1, 2015 that mayhave been charged the APD. In response to the very recent change in the APD regulations, American has started the process ofreprogramming its computers to recognize the age and class ofservice ofthe award traveler departing the U.K. and to apply the APD exemption for those under 12 years ofage as has been accomplished when a

revenue booking is made. Further, as noted above, a process is being developed to identify passengers thatwill be traveling on award tickets in order to issue to them any appropriate refund. As also noted above, American is researching its records regarding child passengers who have already traveled on award tickets from the U.K. to determine ifit over collected the APD,Answer ofAmerican Airlines, Inc. Page 10 ofll and to the extent American's records identifY any such over collections, it will determine the best way to initiate a refund ofthe excess taxes. Given the remedial steps being taken byAmerican to address the APD collection issue, the DOTneed not and should not take any further action in response to the Complaint. 

### V. Conclusion While the Complaint ofMr. Borsetti raises an issue with respect to the collection of certain local departure type taxes on award tickets issued to children, American has demonstrated that, contrary to the claims ofthe Complainant, American is properly collecting and remitting the Japanese Passenger Services Facilities Charge applicable to award passengers. With respectto Italy and U.K. departure fees, American is taking steps to reprogram its computers to be able to distinguish the ages ofaward travelers and collect or notthe applicable departure taxbased on the age ofthe passenger and, in the case ofthe U.K. APD, the class ofservice. Going forward, and until the computers can be reprogrammed, any such inadvertent over-collection from passengers who will be traveling on award tickets will be identified byAmerican and issued a refund. Further, as noted, American is researching its records regarding child passengers who have already traveled on award tickets from Italy and the U.K. to determine ifit over collected the Italian Embarkation Tax orthe U.K. APD, and to the extent American's records identifY any such over collections, it will determine the best way to initiate a refund ofthe excess taxes. Finally, American believes that any overcollection offoreign taxes that may have occurred was only in very narrow circumstances 

### (i.e., children traveling from Italy on award tickets and, in the case ofthe U.K. APD, children traveling from the U.K. on award tickets, but only since this pastMay 1, 2015 whenthe expanded exemption went into effect and only iftheAnswer ofAmerican Airlines, Inc. Page 11 of 11 award ticket was for transportation inthe "lowest class oftravel"). Accordingly, American anticipates that the number ofimpacted passengers will be low. WHEREFORE, for all ofthereasons set forth above, American Airlines, Inc. respectfully requests the Department dismiss the complaint 

### in DocketDOT-OST-2015-0087 in accordance with Rule 406(a)(2). Respectfully submitted, SILVERBERG GOLDMAN, L.L.P. Attorneys for AMERICAN AIRLINES, 

### INC.

Dated: May 22, 2015CERTIFICATE OF SERVICE I hereby certifY that I have on this 22nd day ofMay 2015, served a copy ofthe foregoing Answer ofAmerican Airlines, Inc. by e-mail upon the following persons: Mike Borsetti 101 California Street Suite 4100 San Francisco, CA 94

### U 1 mike@borsetti.com BlaneWorkie Assistant General Counsel for Aviation Enforcement & Proceedings U.S. Department ofTransportation blane.workie@dot.gov Kimberly Graber Branch Chief Consumer Protection and Competition Law Aviation Enforcement & Proceedings U.S. Department ofTransportation kimberly.graber@dot.gov Charles E. Smith SeniorTrial Attorney Office ofthe General Counsel U.S. Department ofTransportation charles.smith@dot.gov