Order 2010-5-5 

Served: May 7, 2010 

UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

. ^ WASHINGTON, D.C. 

Action on lATA Agreement 

Issued by the Department of Transportation 

on the 4* day of May, 2010 

Amendment of exemption under 49 U.S.C. 

40109 from the conditions of CAB Order 

68-7-55 for Passenger Tariff Coordinating 

Conference Action 

Docket OST-2009-0064 

ORDER 

Background 

By Order 2008-7-4, served July 7, 2008, Docket OST-2006-25307, the Department granted 

exemptions from condition #2 imposed by Order 68-7-55 on Procedures of the International Air 

Transport Association (lATA) for the Conduct of the lATA Traffic Conferences, to the extent 

that LATA need not file certain tariff conference resolutions for revievi^ and approval by the 

Department. The exempted agreements established a new "Flex Fares" mechanism for the 

establishment of lATA interline passenger fares for travel between the United States and the 

LATA "Europe" and "Southwest Pacific" sub-areas. lATA adopted the flex fares mechanism in 

response to the Departinent's Order 2007-3-23, Docket OST-2006-25307. In that order, we 

disapproved the lATA Provisions insofar as the Provisions authorized U.S. and foreign carriers 

to discuss and agree upon fares, rates, conditions of service, and price and rate applicability 

conditions, either directly or indirectly or through tariff conferences or other related means of 

information sharing, for passenger and cargo air services (i) between the United States and the 

European Union (together with Iceland, Norway, Switzerland and Liechtenstein); (ii) between the 

United States and the overseas territories of the member states of the European Union subject to 

an air services agreement between the United States and a member state; and (iii) between the 

United States and Australia. 

Under the Flex fares mechanism, lATA establishes interline fares by computing an average of 

LATA carriers' market fares for each city pair, based on certain criteria, and then adding an 

"interline premium." The flex fares are recomputed periodically, and the interline premium may 

be amended through the E-Tariffs process, an internet platform operated by LATA. Essentially, 

the new LATA mechanism was originally designed by LATA to comply with the European 

Commission's denial of a block exemption for tariff coordination from EU competition law, by 

eliminating consultations among carriers, through face-to-face meetings, mail votes, or other 

means of direct communication, for the periodic establishment of fares for interline fravel within 
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the European Common Aviation Area (ECAA) and between the ECAA and other countries.' 

The mechanism was subsequently extended to other markets. The Department's orders 

exempted the new resolutions from our agreement-filing condition, provided that the resolutions 

and amendments thereto were limited to the establishment of fares for travel within the areas 

covered by the respective exemption applications. 

LATA's application 

LATA has since filed an agreement with the Department under sections 41308 and 41309 of Title 

49 of the United States Code (the Code), and Part 303 of the Department's regulations (14 CFR 

Part 303) that would establish interline Flex Fares in the North/Mid/South Atlantic- Middle East^ 

and Africa^ sub-areas. The North Atlantic-Middle East and Afiica sub-areas include travel 

to/from the United States, while the Mid Atlantic and South Atlantic-Middle East and Afiica 

sub-area do not involve U.S. points. Although U.S. - Middle East and U.S. Afiica markets are 

not covered by our prohibition, in Order 2007-3-23, of traditional LATA tariff coordination, 

LATA is nevertheless engaged in a transition process to replace traditional tariff" coordination 

with flex fares worldwide. 

Under the Flex Fares scheme described in the application, LATA will establish interline first, 

business and economy-class normal fares, excursion fares, and "PEX" fares by computing an 

average of LATA carriers' oviTi fiilly-flexible market fares for each city pair, based on certain 

criteria, and adding an "interline premium" of 10 percent. The Flex Fares will be updated once 

annually, for travel on/after May 1. 

In its application, LATA states that granting an exemption is justified for substantially the same 

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

subsequent orders expanding the exemption, where the Department found that fares for fravel 

within these regions typically present no public interest concerns justifying pre-implementation 

review of agreements limited to such fravel. 

' By Order 2006-12-24, December 27, 2006, Docket OST-2006-26409, we exempted intra-ECAA Flex Fares from 

our filing and approval requirements. 

^ I ATA defines "Middle East" for passenger tariff purposes as consisting of Bahrain, Egypt, Iran (Islamic Republic 

of), Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Sudan, Syrian Arab Republic, United Arab 

Emirates, and Yemen (Republic of). 

^ lATA defines "Afiica" for passenger tariff purposes as consisting of Angola, Benin, Botswana, Burkina Faso, 

Burundi, Cameroon (Republic of). Cape Verde (Republic of), Central Afiican Republic, Chad, Comoros, Congo, 

Cote d'lvoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, 

Kenya, Lesotho, Liberia, Libya Arab Jamahiriya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, 

Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra 

Leone, Somalia, South Africa, Swaziland, Tanzania (United Republic of), Togo, Uganda, Uganda, Zambia, and 

Zimbabwe. 
Disposition 

We will grant the expanded exemption as requested, under the same conditions. lATA fares for 

travel between non-U.S. markets typically present no public interest concerns justifying our 

review of agreements limited to such fravel. We find that an expansion of the Flex Fare 

mechanism to include lATA interline fares for travel in the additional non-U.S. markets is 

consistent with the public interest for the reasons stated in Order 2006-12-24. 

We also find that exempting the U.S. markets included in the application is consistent with the 

public interest, for the reasons stated in Order 2008-7-4. The Flex system is a mechanistic, 

computer-driven process that involves no direct contact between carriers. It produces lATA 

interline fares based on adjusted averages of market fares, rather than negotiations among 

competitors. The annual and exceptional updates to the fares, as well as amendments to the 

methodology or the interline premium, likewise involve no direct contracts between carriers, 

and the process is open to participation by non-IATA carriers. We believe that under the system 

proposed, there is much less risk that the Flex Fares process, or the resulting LATA interline 

fares, will have a significant spillover effect on individual airline prices. In addition, there is no 

reason to believe that non-IATA interline fares will cease to be widely available. 

Pursuant to the authority duly assigned under the Department's Regulations, 49 CFR 1.54(b) (1): 

We find that the agreement in Docket OST-2009-0064, as set forth in the attached Appendix, 

should be granted an exemption from filing with the Department for prior approval under 

condition #2 imposed on lATA's bylaws. 

ACCORDINGLY, 

1. We exempt the Passenger Tariff Coordinating Conference resolutions identified in the 

Appendix to this order, amendments to them, and fares generated under the resolutions, from 

condition #2 imposed on LATA's Procedures for the Conduct of the LATA Traffic Conferences, 

Agreement 1175, as amended by Order 68-7-55, to the extent that lATA need not file the 

resolutions for review and approval by the Department prior to a declaration of effectiveness by 

lATA and implementation by lATA members, provided that the resolutions and amendments 

thereto are limited to the establishment of fares for travel within the North/Mid/South Atlantic -

Middle East and Africa sub-areas; 

2. This exemption may be revoked in whole or in part at any time; and 

3. This Order will be served on the International Air Transport Association. 

Persons entitled to petition the Department for review of the order, under 14 CFR 385.30, 

may file such petition within seven days after the date of service of this order. 
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This order shall become effective and become the action of the Department of Transportation 

upon expiration of the above period, unless within such period a petition for review is filed or the 

Assistant Secretary for Aviation and International Affairs gives notice that she will review this 

order on her own motion. 

By: 

(SEAL) 

Paul L. Gretch 

Director, Office of International Affairs 

An electronic version of this document is available on the World Wide Web at: 

http://www.resiilatiom.sov/ 
Appendix A 

Reso 

No. 

R-1 

R-2 

R-3 

R-4 

R-5 

lATA 

No. 

002 

lllpp 

44ppi 

054pp 

064pp 

Title 

TCI2 Amending Resolution between North/Mid/ 

South Atlantic and Middle East, Afiica 

TCI2 Flex Fares between North/Mid/South and 

Between Middle East, Africa 

TCI2 Intermediate/Business Class Flex Fares 

between North/Mid/South Atlantic and Middle 

East, Afiica 

TCI2 First Class Flex Fares between North/ 

Mid/South Atlantic and Middle East, Africa 

TCI2 Economy Class Flex Fares between North/ 

Mid/South Atlantic and Middle East, Africa 

Expiry 

Indefinite 

Indefinite 

Indefinite 

Indefinite 

Indefinite 

R-6 070pa TC12 Excursion Flex Fares between North/ 

Mid/South Atlantic and Middle East, Africa 

R-7 074pa TC 12 PEX Flex Fares between North/ 

Mid/South Atlantic and Middle East, Africa 

Indefinite 

Indefmite