Report on the application of Council Regulation (EEC) No 2299/89 on a code of conduct for computerised reservation systems (CRSs)
Date: 1997-07-09
Institutions: European Commission
Subjects: air transport, code of conduct, computer system, consumer information, reservation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 09.07.1997 
COM(97) 246 final 

97/0148 (SYN) 

REPORT ON THE APPLICATION OF COUNCIL REGULATION (EEC) 
NO.2299/89 ON A CODE OF CONDUCT FOR 
COMPUTERISED RESERVATION SYSTEMS (CRSs) 

PROPOSAL FOR A COUNCIL REGULATION (EC) 
AMENDING COUNCIL REGULATION (EEC) NO.2299/89 ON A 
CODE OF CONDUCT FOR COMPUTERISED RESERVATION SYSTEMS (CRSs) 

(presented  by the Commission) 

REPORT ON THE APPLICATION OF COUNCIL REGULATION (EEC) 
NO.2299/89 ON A CODE OF CONDUCT FOR 
COMPUTERISED RESERVATION SYSTEMS (CRSs) 

Contents 

I. 

Introduction 

II. 

Application of the code of conduct 

III.  Need for an amendment of the code of conduct 

I.  Introduction 

CRSs are an  important means of distributing  air  transport services, and therefore  can play  a  key 
role  in  increasing  competition  between  air  carriers.  They  provide  customers  with  immediate 
access to a wide range of  information  on carriers'  schedules and fares and offer  the possibility  to 
make  instantaneous  confirmed  bookings.  However,  CRSs  can  be  used  to  prevent  or  inhibit 
competition.  Firstly,  through  discriminatory  behaviour  in preventing  or  limiting  access  to  the 
CRS facilities  and secondly,  through  architectural  bias,  whereby  the CRS  is designed  to provide 
more  accurate  and  reliable  information  on  the  flights  of  the  carriers  owning  the  CRS  than  for 
their  competitors.  In addition,  in  the  EU,  the  CRS  market  is  highly  concentrated  to  the  extent 
that  in most Member  States a single CRS has a  market  share exceeding  80 %. Codes  of  conduct 
for  CRSs  have  been  developed  in  many  regions  of  the  world  to  regulate  the  operation  of  this 
particularly sensitive sector. 

The first  EU code of conduct  for  CRSs  ("code")  was adopted  by  the Council  on 24  July  1989, 
and  addressed  the main problem  areas  affecting  the CRS  market  that had  been  identified  at  that 
time.  The  code  was  subsequently  amended  by  Regulation  3089/93  which  was  adopted  by  the 
Council on 29 October  1993. The amendments  were  necessary  to clarify  existing provisions  and 
to  reflect  developments  in  the  industry  that  had  occurred  since  the  original  regulation  was 
adopted.  A  more  detailed  description  of  the  amendments  adopted  in  1993  and  of  their 
implementation  is given in the next section. 

This  present  document  has  been  prepared  pursuant  to  Article  23  of  the  amended  code  which 
states that  "The Council shall decide on the revision of this Regulation by 31 December  1997 on 
the  basis  of  a  Commission  proposal  to  be  submitted  by  31  March  1997,  accompanied  by  a 
report on the application of this Regulation".  The report on the application of the amended  code 
is set out  in Section  II of  this document.  In addition,  in the light of  the experience  gained  since 
the adoption of the amended  code  in  1993, and  in order that  the code will be able  to respond  to 
developments  in the sector  in the coming  years, proposals to make additional  amendments  to the 
code are set out in Sections  III and  IV. 

The  need  for  the  Code 
to  reflect  the  extensive  discussions  that  have  taken  place  between  the 
Commission  and  the  CRS  industry,  air  carriers  and  subscribers,  concerning  the basis  on  which 
CRSs charge for  their  services  together  with  the  rapid  developments  taking  place  in  distribution 
methods  e.g.  electronic  ticketing  and  the  Internet,  have  resulted  in  the  Commission  bringing 
forward  the proposal  for an amendment  to the code. 

3 

IL  Application of the code of conduct 

The amendments  made to the code  in  1993 were  necessary  to respond  to a  range of  specific 
problems  that  had  been  encountered  since  die  adoption  of  the  original  code  in  1989.  The 
principal amendments included,  firstly,  the need  to ensure that CRSs make equal  functionality 
available to all participating  carriers,  and,  in particular,  by  those CRSs which  share  common 
systems  with  their  parent  carriers.  In  this  respect,  the  code  requires  that  a  system  vendor's 
distribution  facilities  are  clearly  separated  from  the  internal  reservation  system  of  its  parent 
carriers. The effectiveness  of the arrangements put in place to achieve the separation of the two 
functions  is subject to verification  by  independent external audit.  Associated  with the technical 
requirements  for the separation of the distribution facilities of a system vendor from  the internal 
systems  of  its parent  carriers,  was a  requirement  for  a  system  vendor  to  be  established  as a 
separate entity from its parent carrier for legal purposes. 

Secondly, the code was extended to include non-scheduled services following the removal of the 
distinction between scheduled and  non-scheduled  services as a result of  the third  liberalisation 
package.  Thirdly,  the amended  code requires  parent  carriers and  their  subsidiaries  to provide 
other  CRSs,  with  equal  timeliness,  the  same  information  and  booking  possibilities  as  they 
provide  to their own CRS. This modification  was aimed principally  at  improving  competition 
between  CRSs  by  enabling  each  of  them  to  provide  fully  comprehensive  information  on 
schedules and availability.  Fourthly, rules were introduced  to limit the display of code share or 
other jointly  marketed  flights  to a  maximum  of  two options  in the principal  display.  Fifthly, 
access to personal and  marketing  data contained  in a CRS was also made subject  to external 
audit.  Finally,  a  number  of  amendments  to the rules  on charging  were  made to  improve  the 
transparency of the billing procedures. 

The principal  activities carried  out by the Commission  concerning  the application  of  the code 
provisions, and related activities, are set out below. 

II. 1  Waivers granted 

Article  2  of  the amending  Regulation  3089/93 provides  for  a  period  of  grace  of  six  months 
following the entry into force of the regulation before the  provision (Article 3(1)) requiring the 
establishment  of  separate  entities  for  the  system  vendor  and  its  parent  carrier(s)  applies. 
Furthermore,  it provides  that the Commission may grant an additional  12 months'  waiver  for 
objective reasons. 

The  creation  of  separate  entities  for  the  system  vendor  and  the  parent  carrier  raised  special 
difficulties  for one parent carrier and its CRS, which was an operational  division of  the airline 
itself.  The  Commission  accepted  that  the airline  should  be granted  a  waiver  of  12 months  in 
order  to  allow  it  to  establish  separate  legal  entities  to  be  responsible  for  CRS's  contractual 
relations with, on the one hand,  participating carriers and, on the other  hand,  subscribers. The 
waiver expired on 11 June 1995, by which date the various legal entities had been established. 

11.2  Complaints received 

The procedure  for  making complaints  to the Commission  in respect of alleged  infringements  of 
the code and  the Commission's  duties  to  initiate procedures  to terminate any  infringements,  are 
set  out  in  Article  11  of  the  code.  Since  the  entry  into  force  of  the  amended  code  on  11 
December  1993, some  twenty  two  complaints  from  air  carriers  and  CRSs  concerning  alleged 
infringements  of the code have been received. 

Of  the  complaints,  six  referred  to  alleged  discrimination  by  CRSs  in  favour  of  their  parent 
carriers.  Of  these,  three  concerned  CRSs  which  made  certain  functionalities  available  to  their 
parent  carriers  which  were  refused 
to  other  participating  carriers,  and  three  concerned 
favourable  treatment  given  to  the  parent  carriers  of  a  CRS  during  the  migration  phase  of  that 
CRS from  the former  multi-access type of  system  to the present  neutral  global core system.  All 
the complaints have been satisfactorily  resolved following  discussions with the parties  concerned 

The  next  most  frequent  cause  of  complaint  (four  cases  grouping  some  twenty  one  airlines) 
concerned  the alleged  incompatibility  of  CRSs  charging  policies  with  Article  10.1 of  the  code. 
Article  10.1  states  that  "Any  fee  charged  by  a  system  vendor  shall  be  non-discriminatory, 
reasonably  structured  and  reasonably  related  to  the  cost  of  the  service  provided  and  used  and 
shall,  in  particular,  be  the  same  for  the  same  level  of  service."  The  main  thrust  of  the 
complaints  was  that die combined  effects  of  the  incentives  granted  to subscribers  by  CRSs  and 
the  inadequacy  of  controls  on  the  validity  of  bookings  exercised  by  CRSs,  led  to  an  unequal 
distribution  of  CRS  costs  between  carriers  and  subscribers  contrary  to  tlie  requirements  of 
Article  10.1.  Given  the  dominant  role  played  by  CRSs  in  the  distribution  of  air  transport 
products  and  the statutory  obligation placed  on most  major  carriers  (as owners  of  CRSs)  which 
effectively  requires them  to participate  in CRSs,  a dissatisfied  carrier  cannot  refuse  to deal  with 
their CRS partners. 

The  issues  raised  in  die  complaints  were  both  varied  and  complex,  and  had  important 
commercial  consequences  for  carriers,  CRSs  and  subscribers.  With  a  view  to  allowing  a  full 
and  informed  discussion of  the  issues to take place,  die Commission  set  up  a  working  group  to 
examine  the present  charging  arrangements  and  to  consider  possible  alternative  arrangements. 
The group was assisted  in  its work by an external  firm  of consultants  (SH&E).  The  results  of  a 
study carried  out by  SH&E  were distributed  in August  1995, and  formed  the basis  for  further, 
more  informed,  discussions  of  the  working  group.  In  order  to  clarify  the  manner  in  which 
Article  10.1  is  to  be  applied  some  amendments  to  the  existing  code  provisions  are  being 
proposed to the Council. 

With  one  exception,  die  remaining  complaints  concerned  specific  problems  relating  to: 
the 
security  of  individual  passenger  data  (two  cases),  display  of  flights  (five  cases),  market  access 
(two cases),  unfair  contract  terms,  and  the conformity  of  ticketing  arrangements.  In  the  case of 
the security  of data,  it has  been  demonstrated  that  no breach  of  the rules  occurred.  Concerning 
the display  of  flights,  in two cases  the display  has been  modified  satisfactorily,  and  in  the  three 
remaining  cases  no  infringement  of  the  code  was  found  to  have  taken  place.  The  problems  of 
market  access  for  an  EU  CRS  in a  third  country,  and  of  a third  country  CRS  in  the  EU,  have 
been resolved.  In the final  two cases discussions are continuing  with the CRSs  concerned. 

The final  complaint concerned  the refusal  of  US based  CRSs to provide  non-US carriers  with 
marketing  data  relating  to  US domestic  traffic.  In accordance  with  the  US rules  for  CRSs  in 
force at the time, marketing  information  on US  domestic traffic  could only be provided  to US 
carriers. The US provision contrasted strongly with the EU code where no such discriminatory 
provision  exists,  and  therefore  in  the  EU,  system  vendors  are  required  to  make  marketing 
information available to all participating carriers regardless of nationality. However, Article 7 of 
the EU code provides that certain obligations of  the code applicable  to system  vendors  do not 
apply where reciprocal rights are not granted in third countries. The CRS Amadeus notified  the 
Commission of its intention to invoke die reciprocity provision of the code in order to terminate 
the sale of its marketing information to US air carriers. 

Given  the  gravity  of  the  discrimination  the  Commission  intervened  directly  with  the  US 
Department  of  Transport  (DOT)  with  a  view  to  persuading  it  to  modify  the  US  code  to 
eliminate  the  discriminatory  treatment.  As  a  result  of  the  discussions  that  subsequendy  took 
place between the Directorate  General  for  Transport,  ES A1,  and  the  US DOT,  an exemption 
was granted to US CRSs to enable them to sell  marketing data on US domestic traffic  to EU 
carriers. 

The  Commission  has  not  so  far  been  required  to  take  formal  decisions  in  respect  of  the 
complaints  it  has  received.  It  has  been  possible  to  resolve  complaints  within  a  limited  time 
through direct contact with the parties. 

II.3 

Other enforcement activities 

The  Commission  is  also  required  to  carry  out  assessments  of  the  adequacy  of  each  CRS's 
compliance  with  specific  code  requirements  concerning  security  of  data  and  the  non 
discriminatory  operation  of  a  CRS's  distribution  facilities.  These  assessments  are  foreseen  in 
Article 6.5 (adequacy of die safeguards on the availability of booking, marketing and sales data) 
and Article 2La (annual technical audit) 

II.3.a  Data Security (Article 6.5) 

Article  6.3  of  the  code  states  that  "a  system  vendor  shall  ensure  that  the  provisions  in 
paragraphs  1  and  2  [of  Article  6]  above  are  complied  with,  by  technical  means  and/or 
appropriate safeguards  regarding at least software,  in such a way that information  provided by 
or  created  for  air  carriers  can  in  no way  be accessed  by one or  more of  the parent  carriers 
except as permitted by tliis Article". Paragraphs  1  and 2 set out the detailed rules concerning the 
security of access to individual passenger booking data and the availability  of  marketing  data. 
The  system  vendor  is  required  to  make  a  description  of  the  technical  and  administrative 
measures ("security package") it has adopted available on request to all participating carriers and 
the  Commission.  Finally,  the  Commission  is required  to  assess  the  adequacy  of  the  security 

ESA - EFTA Surveillance Authority 

packages  and to decide  whether  the measures are sufficient  to provide  the safeguards  required 
by Article 6. 

The  security  packages  submitted  by  the  system  vendors  contained  a  considerable  volume  of 
complex  technical  information  on  the data security  access  policies  implemented  by  each CRS. 
The  Commission's  assessment  concentrated  on  the  following  aspects  of  the  packages  -  the 
system structure/architecture  including data bases and the main records  therein,  security  policy 
governing  access  to data including  the policy  governing  authorisation of  access  to users,  levels 
of  access,  awareness  of  safeguards  obligations  under  Code  of  Conduct,  technical  measures 
concerning  access  by  parent  carriers,  participating  carriers  and  subscribers.  Finally,  the 
assessment examined the conditions applicable to the provision of  marketing,  booking and sales 
data. 

As  part  of  its  on-going  monitoring  activities,  the  Commission  visited  a  number  of  CRS 
installations  and,  amongst other  matters,  verified  the accuracy  of  the  information  contained  in 
the security packages. 

On the basis of  the paper based description of  the system supplemented  by  the visits  to CRSs, 
the  Commission  was  satisfied  with  the  adequacy  of  the  information  provided  by  the  system 
vendors.  However,  prior  to  taking  a formal  decision  on the security  packages  as  required  by 
Article 6.5  of the code,  it cross-checked  the written description provided by the system vendor 
with the audit reports described in section II.3.b below. 

Formal decisions approving the adequacy of the safeguards were adopted by the Commission in 
September  1995 (four CRSs) and January  1996 (one CRS). 

II.3.b  Annual technical audit (Article 21 .a) 

Article 21.a.l  of  the code requires a system vendor to ensure that  "the technical  compliance  of 
its  CRS  with  Articles  4a  and  6  is  monitored  by  an  independent  auditor".  It  also  requires  a 
system  vendor  to  submit  a  copy  of  the  auditor's  report  on  his  inspection  and  findings  to  the 
Commission once a year. This provision of the code introduced in the review of  1993 represents 
the  first  time  that  die  technical  compliance  of  a  CRS  with  any  code  of  conduct  in  force 
throughout the world has been subject to statutory audit. 

In order  to  provide  guidance  to  the  system  vendors'  auditors  on  the  nature  and  extent  of  the 
audit checks  to be carried  out,  die Commission  appointed  a specialist  consultant  in the  field  of 
computer  auditing  and  established  a  working  group,  to  jointly  develop  a  set  of  CRS  audit 
guidelines.  The  audit  guidelines  defined  the  nature  and  scope  of  the  audit  checks  to  be  carried 
out  based  on  a  series  of  defined  control  objectives.  The  guidelines  were  published  in  October 
1994 and copies were also sent to all  Member  States directly.  The guidelines  were also  used  by 
the Commission's  services as a standard  against  which  the adequacy  of  the audit reports  were to 
be  judged.  Although  the  use  of  die  guidelines  is  not  mandatory,  the  CRSs'  auditors  have 
generally  used them as the basis for  the audits they have carried  out. 

7 

The  1994 audit  reports  of  die  five  CRSs  operating  in  the  European  Union  (Amadeus,  Galileo 
International,  GETS, SABRE and Worldspan)  were submitted  to the Commission  by  the end  of 
March  1995.  They  were  subsequently  examined  by  the  Commission,  and  for  two  of  the  five 
CRSs further  clarification  of control weaknesses  identified  by the auditors was required. 

The first  case concerned  die security of passenger  information  where the CRS  was  using  two of 
its  parent  carriers'  internal  ticketing  systems  for  issuing  tickets  on  behalf  of  all  carriers.  The 
CRS  does  not  have  its  own  ticketing  system  at  the present  time,  and  therefore  has  to  rely  on 
third parties  for  ticketing  functions.  The system vendor's auditor  was not able to verify  whether 
the  parent  carriers  were  excluded  from  having  access  to  the  data  transmitted  to  their  ticketing 
systems  by  the  CRS  for  die  purpose  of  issuing  tickets.  Although  the  terms  of  the  contractual 
arrangements  between  the  parties  generally  prohibited  such  access,  there  did  not  appear  to  be 
any  specific  technical  safeguards  in  force  to prevent  it.  As  a  result  of  discussions  between  the 
Commission  and  the  system  vendor,  it  was  agreed  that  special  audits  of  the  two  carriers' 
ticketing  functionalities  would be carried out. The results of these audits have demonstrated  that 
the safeguards  in place in each of the carriers  is adequate to ensure that no access to  confidential 
passenger data is possible by the carriers. 

In the other case,  it appeared  from  a pre-audit check carried out by the system vendor  itself  that 
employees  of  hosted  carriers  (carriers  whose  internal  reservation  systems  share  common 
facilities  with the CRS) had the possibility  to access  passenger details where the carrier  was  not 
involved  in the journey  and,  therefore,  had  no  legitimate  interest  in accessing  the  information. 
The system vendor  immediately  undertook  the necessary steps to correct the programming  logic 
that  controlled  access  to  passenger  data.  The  system  is  now  in  full  compliance  with  the 
provisions of Article 6 in tliis respect. 

The  Commission  is  satisfied  that  the  exhaustive  nature  of  the  checks  carried  out  during  the 
course  of  the  audit  of  all  CRSs  would  have  led  to  the  discovery  of  any  deficiencies  in  the 
technical  safeguards  in  place  to  meet  the  requirements  of  Articles  4a  and  6(3).  With  the 
exception of  the second case cited  above,  which has  now been corrected,  no preferential  access 
to  confidential  passenger  data  and  no  operational  advantages  accrue  to  parent  carriers  of  die 
CRSs present in the EU. 

The reports on the  1995 audits have not identified  any material  issues which require  intervention 
by the Commission. 

In  line  with  an  undertaking  given  to  CRSs  when  the  guidelines  were  first  adopted,  the 
Commission  has  reviewed  the audit  guidelines  in  the  light of  the experience  gained  in  the  first 
year of their use. A revised version of the guidelines was issued  in September  1996. 

II.4 

Requests for  guidance 

Over  the period  since the adoption  of  die amended  code,  the Commission's  services  have given 
guidance on the application of a particular  provision  of  the code on three points  - advertising  in 
the  principal  display,  display  of  code  share  flights  and  the  treatment  of  passive  bookings.  The 

background  to  the  request  for  clarification  and  the Commission's  services  response  is  set  out 
below. 

The Commission's services gave their guidance on interpretation without prejudice to any other 
future positions of  the Commission;  it is for the Court of Justice to give binding  interpretations 
of Community law pursuant to Article  177 of the Treaty^ 

II.4.a 

Advertising  in die principal display 

As  part of  the development  of  their commercial  activities,  CRSs  wanted  to  offer  carriers and 
others the possibility to place advertisements  in the displays provided to subscribers.  A number 
of  CRSs sought to persuade the Commission that its concerns over  the possible  discriminatory 
effects  of  advertising  in the principal  display  were not justified.  In particular,  they  underlined 
the  fact  that  their  proposals  envisaged  the  clear  separation  of  the  advertisement  from  the 
information  contained  in the principal  display  itself.  In addition,  they  would  ensure  that the 
content  of  the  advertisements  displayed  would  be  subject  to  the  appropriate  safeguards  to 
prevent the neutrality and transparency of the display from being  influenced. 

It was accepted  that CRSs could  include advertising  in the principal  display  on condition that 
they  would  apply  strict  guidelines  on  the  content  of  the  advertisements  and  the  number  of 
advertising  slots  that any  carrier  can take.  The  latter  restriction  is  required  to prevent  a  large 
carrier  buying  up  all  available  advertising  slots.  Tlie  CRSs  also  have  to  ensure  that  any 
advertising  is  separated  in a  clear  manner  from  the  principal  display.  Finally,  the  advertising 
should not be used as a functionality through which bookings could be made. 

II.4.b  Display of code share flights 

Paragraphs  9 and  10 of  the Annex  to the code  require system vendors  to ensure  that  no  flight 
option  shall  be  displayed  more  than once  unless  there  is  a joint  venture  or  other  contractual 
arrangement  (such  as  a  code  share)  requiring  two  or  more  carriers  to  assume  separate 
responsibility  for the offer  and sale of air transport products,  in which case each carrier,  up to a 
maximum of  two can have a separate display.  From  a technical  standpoint,  the selection  of  the 
two flights  to be displayed  is complex,  and cannot be carried out by the CRS  in isolation.  In the 
absence  of  an  agreement  amongst  carriers  for  an  industry  wide  standard  to  be  used  for 
communicating  the  necessary  information  to  enable  the  CRS  to  carry  out  the  selection 
procedure,  CRSs were continuing to display more than two flight options. 

The  Commission's  services  have  indicated  that  a  proposed  set  of  procedures  providing  a 
solution to this problem drawn up jointly  by  die Association of  European  Airlines  and  the Reed 
Travel  Group,  were  in  conformity  with  the  code.  Any  air  carrier  following  these  procedures 
would  therefore  have  discharged  its  obligations  under  die  code  by  providing  sufficient  data. 
Conversely,  any  code-sharing  air  carrier  not  following  the  AEA/Reed  procedure  will  have  to 
provide  the required  data  in anodier  way.  However,  if a  CRS  is  not  using  these  procedures,  it 
will  have  to  indicate  which  data  code-sharing  air  carriers  will  have  to  provide.  At  the  same 
time,  the Commission's  services  indicated  dieir  willingness  to consider  alternative  solutions  to 
this problem. 

II.4.C 

Passive bookings 

Meetings  were  held  widi  system  vendors  and  carriers  in early  1994  to  find  a  mechanism  for 
implementing  the provisions  of  Article  10.1  concerning  the  notification  of,  and the  possibility 
for a carrier to reject,  a passive booking.  As a result of  the meetings,  a coding structure for the 
notification  and  cancellation  of  passive  bookings  has  been  agreed  and  has  now  been 
implemented  industry wide. 

10 

III. Need for  an amendment  to the code of conduct 

An  analysis  of  die  complaints  submitted  under  the  existing  code  of  conduct 
1. 
demonstrates  that  the present  code  is  generally  able  to provide  a  satisfactory  mechanism  for 
resolving the majority  of die problems  identified  by carriers,  CRSs and subscribers,  and hence 
makes  a  major  contribution  to  securing  fair  competition  in  the  CRS  and  related  markets. 
However, there are a number of specific areas where the provisions of die code may need to be 
adapted  to address issues diat have been identified  since the present code was adopted  and,  in 
particular,  as  a  result  of  discussions  that  have  taken place during  the  course  of  the  charging 
principles  review.  In  addition,  important  developments  are  taking  place  in  the  airline 
distribution  sector and their effects,  although they may not be significant  today, will have to be 
taken into account in the code review in order that the code remains relevant for  the  foreseeable 
future. 

2. 
In  the following  section  the  Commission  has  set  out  the  motivation  for  a  number  of 
suggested amendments to the code. The amendments reflect  discussions held  with the industry 
partners and national experts. 

a) 

Subscriber obligations 

3. 
Air transport user organisations have indicated their concern to the Commission about a 
possible  shortcoming  of  the  present  code  which  is  the  absence  of  any  direct  obligation  on 
subscribers concerning the use of a CRS similar to those placed on carriers and system vendors. 
The rules placed  on system vendors  concerning  the provision  of  accurate  and  comprehensive 
information  in their CRS displays are rendered  ineffective  if the same information  is not passed 
on to the customer.  Tliis should not be seen as implying that the subscriber deliberately seeks to 
mislead  a  customer  or  to  misuse  the  system.  Rather  that  in  the  face  of  large  volumes  of 
information  contained  in  the  displays,  the  subscriber  must  be  selective  in  the  information  it 
passes  on  to  the  customer.  In  order  to  ensure  that  all  stages  in  the  process  of  distributing 
information  on air transport services are subject to a consistent level of safeguards  to guarantee 
the  integrity  of  the  final  product,  it  is proposed  that  the  missing  link  in  that  chain,  i.e.  the 
subscriber,  is brought within the scope of the code. 

4. 
At the present time, die only manner in which a subscriber is subject to any constraint in 
the use of a CRS is found  in Article 9.5,  which states that  "A system vendor shall provide in 
each subscriber contract for (a) the principal display, conforming to Article 5, to be accessed for 
each  individual  transaction,  except  where  a  consumer  requests  information  for  only  one  air 
carrier or where the consumer requests information  for bundled air transport products alone; (b) 
the subscriber  not  to manipulate  material  supplied  by CRSs  in a manner  which  would  lead to 
inaccurate, misleading or discriminatory presentation of information  to consumers."  During the 
charging  principles  review,  system  vendors  expressed  their  difficulty  in  ensuring  that  their 
subscribers fully  respected these provisions. By bringing subscribers directly within the scope of 
the code,  any  complaint  concerning  a  subscriber's  behaviour  can  be  investigated  in  a  more 
objective and transparent manner. 

11 

The first objective of the amendment is to ensure certain  minimum levels of  confidence 

5. 
in the non-discriminatory nature of the information provided to the customer. 

6. 
To meet the first objective,  it is proposed that in the absence of a specific request  from 
a customer,  a subscriber  will be required  to use a  neutral display.  Furthermore,  the subscriber 
should  not  manipulate  the  information  provided  by  a  CRS  in  a  manner  that  would  lead  to 
inaccurate,  misleading  or  discriminatory  presentation  of  information  to  the  customer.  This 
provision  will  also  apply  to  the  use  of  diird  party  software  that  subscribers  may  use  as  an 
interface between die CRS and diemselves. 

7. 
In addition, die consumer should also be provided with full  information  on a number of 
key  features  of  die  flight,  including  any  en-route  changes  of  equipment,  the  number  of 
scheduled en-route stops, die identity of the air carrier actually operating  the flight,  and of any 
changes  of  airport  required  in  any  itinerary  provided,  to  the  extent  that  this  information  is 
shown by die CRS. Finally,  to assist  consumers in their choice of flight,  they shall be entided 
at any time on request to be provided  with  a print out of the CRS display or  with access  to a 
parallel CRS display reflecting  the same image being viewed  by the subscriber.  Commercially 
sensitive data, such as "net fares", would be excluded from this provision. 

The  second  objective  of  die  amendment  is  to  protect  the  carrier  from  the  effects  of 
8. 
abusive  bookings  that  lead  to  unnecessary  booking  fees  and  reduced  reliability  of  inventory 
control systems. 

9. 
In respect of the second objective,  the code must also ensure that the subscriber uses the 
CRS  in  manner  which  is  in  die  best  interests  of  all  the  parties  involved  in  a  transaction. 
Therefore,  it  is necessary  that the subscriber  is required  to use the system only  to make valid 
transactions and hence avoid die risk that a carrier is billed for unnecessary bookings. Subject to 
any derogation from tliis principle granted to the subscriber by the carrier concerned. 

To  meet this objective,  die subscriber  will  be required  to  make reservations  and  issue 
10. 
tickets  in  conformity  with  the  information  contained  in  the  CRS  used,  and,  where  possible, 
carry  out reservation  and  ticketing  operations  in the same CRS.  A subscriber  shall  not  make 
reservations  for  the  same  passenger  which  are  physically  impossible  to  carry  out,  such  as 
duplicate bookings on a number of flights to guarantee a customer a seat on a flight  at whatever 
time he may eventually arrive at the airport. 

(Reference: proposed Article 9. a and Annex II ) 

b) 

Extension of scope of code to include rail options 

11.  With  the rapid expansion of  the high speed  rail  network  in the EU,  the consumer  now 
has  a competitive alternative to air transport for journeys between 300 and 800 kms.  However, 
in order to take full advantage of this new choice of transport modes, or combination of modes, 
the prospective passenger needs to be able to compare the different  characteristics of the services 

12 

on offer,  and to be provided  with a continuity  of  information  in die case of a combination of 
modes.  At  the  present  time,  rail  and  air  services  are,  for  the  most  part,  distributed  through 
separate channels  which  renders  the comparison  of options  by  the potential  traveller  difficult. 
There  are  isolated  examples  where  rail  services  are  currendy  integrated  into  an  air  transport 
CRS display; for the most part they are identified by air carrier designator codes. 

12. 
The Commission  is aware of the importance of distribution arrangements  in the overall 
objective of encouraging interoperability.  It is also aware of the possible benefits  in terms of the 
improved quality of information  available to the consumer and of the reduced distribution costs 
arising  from  the  elimination  of  wasteful  duplication  of  reservation  systems.  It  is  therefore 
proposing to introduce, under certain circumstances, the possibility for  rail to be integrated into 
the CRS display of air transport services. 

13. 
It would appear that die most satisfactory  method of fixing the conditions under which a 
rail  transport  operator  could  distribute  its services  alongside  those of  air  carriers  would  be  to 
apply  the same obligations  on  the rail  operator  as  those  applicable  to  a  participating  carrier. 
Therefore,  in order to avoid discrimination,  it is proposed that a rail transport operator would be 
considered as an air carrier  for  the purposes of the code and could distribute  its services  in an 
integrated display if it meets die obligations placed on a participating carrier as set out in Article 
4 of the code. 

The question has been raised as to whether a rail operator,  who also provides computer 
14. 
reservation services (for  rail transport) should also be treated as a system vendor/parent  carrier 
and thus be required to respect the obligations contained  in Articles 3, 3a, 4, 4a,  5,  6,  7,  8,  9, 
10 and  21a  of  the  code.  It  would  appear,  however,  that  since  such  reservation  systems  are 
designed to cater primarily for the rail operator's own services and that the participation of other 
rail operators is very limited indeed, then the rail operator's system should not be considered as 
a CRS for code purposes. 

15. 
The basis on which rail services will be integrated into the principal display are complex 
and must be subject  to careful  consideration.  In particular,  the possible screen padding  effects 
that may be caused by the display of all rail services. It should be considered which rail services 
should be included e.g.  High speed, Inter City, etc but excluding local services.  However,  it is 
not proposed at this stage to fix different  criteria for the inclusion of rail services  in die display 
algorithm.  More  general  technical  problems  may  arise  from  the  substantial  increase  in  the 
number of IATA location  identifier  codes required to cover all the railway stations likely to be 
included  in CRS displays.  It is not clear whether the existing stock of three digit codes will be 
inadequate to meet the likely demand for new codes. 

(Reference: proposed Articles 2(r), 2(s), 2(t) and 21.b ) 

c) 

Charging policy 

16.  An  extensive  debate  has  taken  place  between 
the  Commission,  CRSs,  carriers  and 
subscribers concerning the basis on which CRSs calculate the level of fees to be charged  for  the 
services they provide. Several carriers have complained  to the Commission that CRSs have not 

13 

respected  the requirement  under  Article  10.1 that  "Any fee charged by a system vendor  shall  be 
non-discriminatory,  reasonably  structured  and  reasonably  related  to  the  cost  of  the  service 
provided and used and shall,  in particular,  be the same for  the same level of service".  They  base 
their  complaints  on the  fact  that  subscribers  using  a  CRS  receive  discounts  or  incentives  based 
on  usage  (productivity  pricing  or  incentive  schemes).  They  claim  that  a  consequence  of  such 
schemes  is  that  the  part  of  the  cost  burden  no  longer  borne  by  the  subscriber  is  therefore 
transferred  to  the  fee  charged  to  the  carrier.  They  suggest  that  as  a  result  of  the  incentive 
payments, many large subscribers are effectively  paid  for  the use of the CRS  facilities. 

17.  With the help of external consultants, the Commission carried out a detailed  examination 
of  CRSs'  charging  policies.  However,  the results  of  this examination  were  inconclusive  on  the 
issue  of  incentive  payments  to  subscribers.  The  report  suggested  that  the  present  trend  in 
incentive schemes  was  leading  to a competing  spiral  between  CRSs  in their  bids  for  subscriber 
business which did not result  in any added value for  the carrier  who has to foot  the bill  through 
increased booking  fees. 

18. 
On  the other hand,  it was also recognised  that the present system of  incentive  payments 
to subscribers  is an  important  marketing  tool  for  the CRSs  in gaining  access  to new  markets  or 
of  increasing  market  share  in  their  existing  markets.  The  CRSs  consider  that  their  charging 
policy  with  respect  to  subscribers  is  composed  of  two  distinct  elements,  firsdy  a  fee  for  the 
provision of  equipment  and  other  services,  and secondly  a  fee  payable  to the subscriber  for  the 
provision  of  distribution  services  to the  CRS.  The  level  of  the distribution  fee  varies  according 
to the competition  in the market  for  such services. The consultant's report demonstrated  that the 
higher the degree of competition,  the higher  the level of the distribution fee.  Where  competition 
is the most  intense,  the result can be that the CRS  is required  to pay  a higher  fee  to  subscribers 
for  the  distribution  of  its  services  than  the  fee  it  charges  the  same  subscribers  for  the  rental  of 
equipment and other services. 

19. 
The  Commission  accepts  that  it  is  not  in  the  CRSs'  interest  for  the  fees  payable  to 
subscribers  for  the distribution  service to continue to increase,  and that therefore  CRSs have  not 
deliberately  set  about  increasing  payments  to  subscribers  in  order  to  raise  booking  fee  levels. 
Given  the  close  correlation  between  the  level  of  incentive  payments  and  the  extent  of 
competition  between  CRS  in  a  particular  market,  the  Commission  is  persuaded  by  the  CRSs' 
assertion  that  incentives  awarded  to  subscribers  are  distribution  costs.  As  such  they  can  be 
included  in the booking  fee calculation. 

The  Commission  does  not  seek  to  prevent  competition  between  CRSs  by  imposing 
20. 
restrictions  on  a  CRSs  ability  to  attract  new  business.  Therefore,  the  obligation  of  a  system 
vendor with respect to its charging  policy  to subscribers  needs to be clarified.  Accordingly,  it is 
proposed  that the existing Article  10.1 (renumbered  as Article  10. La) should apply  only  to  fees 
charged  to  participating  carriers,  and  a  new  Article  10. Lb  would  be  introduced  requiring  that 
fees  charged  to  a  subscriber  for  equipment,  etc,  should  be  non-discriminatory,  reasonably 
structured  and  reasonably  related  to  the  cost  of  the  service  provided  and  used  and  shall,  in 
particular,  be  the  same  for  the  same  level  of  service.  The  level  of  distribution  fees  payable  to 

14 

subscribers,  which,  for  the reasons set out above,  are considered  as distribution  costs  for  the 
system vendor, and would be dealt with as described in paragraph 19. 

Article 3.a. 1 .(b) of the code sets down the cost to be charged to a parent carrier when it 

21. 
is required to accept a booking  in accordance with Article 3.a.l.(a).  However,  the present text 
is ambiguous and could lead to CRSs charging excessive fees for such bookings. To ensure that 
the provision defines  more precisely  the charge  to be paid,  it  is suggested  a parent carrier,  in 
respect of another CRS, should  not be obliged  to pay more than the same CRS charges for  the 
nearest equivalent transaction. 

(Reference: Articles 3.a and 10.1) 

d) 

Display of code-share flights 

22. 
In the amendment  to the code adopted  in  1993,  participating  carriers  with  code-share 
type  arrangements  were  each  allowed,  up  to a  maximum  of  two,  to  have  a  separate  display 
using  their  own  carrier  designator  codes.  The  reasons  motivating  the  Council's  decision 
concerning  code-share  flights  remain  valid  today.  Essentially,  they  are  that  code-sharing  can 
provide  benefits  to  die  consumer  through,  for  example,  improved  connecting  flights, 
streamlined check-in procedures, special fare deals, and joint frequent flyer programmes. 

23. 
However,  it lias been suggested diat die limit of two on die number of flight  options to 
be displayed  is both arbitrary,  and,  more importantly,  difficult  to implement.  So far,  only one 
CRS has put in place a satisfactory  procedure to enable carriers to comply  with this  provision 
("the AEA/Reeds solution").  The other three CRSs operating  in the EU have announced  their 
intention to implement die rule, but have identified  a number of practical problems. They stem 
for the most part from  the absence of sufficient  information from the carriers to enable the CRS 
to identify  the two options to be displayed. 

24. 
In these circumstances,  consideration  must be given to whether  the present rule should 
be amended. If the rule is to be amended, diere appear to be only two possible alternatives. The 
first  alternative  is that all code-share flights  (both operational and marketing)  can be  shown in 
the CRS display. Tlie second alternative is that only the operational flight itself can be shown. 

25. 
There is a convincing argument that the possibility to include all flight options in a CRS 
display  results  in an  unacceptable  level  of  "screen  padding"  (the  CRS  display  shows  several 
flights which appear to be operating on a route but which are all,  in fact,  marketing versions of 
a single operational flight). The consequence is that "genuine" operating flights are relegated to 
the second or diird display screens and stand little chance of being selected by the subscriber. As 
the  majority  of  all  bookings  are  made  from  the  first  screen,  the  practice  can  have  severe 
discriminatory effects  in favour of carriers having code-sharing arrangements. The result is also 
very confusing  for the consumer. 

26. 
In  these  circumstances,  the  Commission  considers  diat  the  balance  of  the  arguments 
tends to suggest that the distortive effects  of  the display of  multiple  flight  options  of  the same 
flight outweighs the benefits  to the consumer of code-share arrangements described above. 

15 

27. 
The proposal contained  in the second alternative to the existing arrangements - only the 
operating flight to be displayed - has met with a generally negative reaction from all sides of the 
industry.  The  recognised  benefits  of  the  code-share  arrangements  would  be  undermined  if 
carriers were unable to market die flights of their code-share partners in their own names. 

28. 
In the light of the above,  it is proposed  that the present arrangements  be maintained in 
force,  but  clarified  so  diat  a  CRS,  in  the absence  of  adequate  information  to  apply  the  two 
option rule, will be allowed to select, on a non-discriminatory basis, the options to be displayed. 

(Reference:  Annex, paragraph 10) 

e) 

Scope of audit 

29. 
The present  text of  Article 21a concerning  the audit of  the  technical  compliance  of  a 
CRS requires clarification  as to the period covered by the audit,  the activities of the CRS that 
are subject to audit, and the deadline for the submission of the audit report. 

30. 
Currendy a system vendor is required to ensure that the technical compliance of its CRS 
is monitored by an independent auditor. The code does not specify  whether monitoring is to be 
continuous throughout the year or limited to a specific point in time (e.g. the date on which the 
auditor carried out the audit). 

In order to guarantee that die controls required by the code are in place at all times, it is 
31. 
necessary  for  the  monitoring  to  refer  to  the  entire  year.  However,  this  does  not  necessarily 
require that the auditor is present 24 hours per day. He may rely on internal controls applied by 
management to achieve die objectives required by the code. 

32. 
The technical compliance of the CRS subject  to monitoring by the independent auditor 
includes not only the software and hardware of die system but also the internal controls applied 
by management referred to in die previous paragraph. 

Finally,  in  the  interests  of  the  efficient  organisation  of  the  monitoring  process,  it  is 
33. 
proposed that the audit report should cover a calendar year and be submitted within four months 
after the end of the year in question. 

(Reference: Article 2La) 

Ticketing arrangements for flights carrying the same flight number operated by the same 

f) 
carrier 

34. 
The text of die provision concerning ticketing arrangements for flights carrying the same 
flight  number  operated  by  the  same  carrier  (paragraph  9 of  the  annex  to  the  code)  requires 
clarification  to  ensure  diat  the  objectives  intended  by  the  Council  are  fully  met.  The  code 
currently states diat "Neverdieless, only one reservation shall be necessary where the flights are 

16 

operated by the same air carrier, with the same flight number, and where the air carrier requires 
only one flight coupon. " It has been observed that the requirement of the air carrier to have only 
one  flight  coupon  does  not  impose a  corresponding  obligation  on  the CRSs  to  issue  such  a 
coupon. 

35. 
It is therefore proposed to amend the text of the provision to read  "Nevertheless, where 
the flights  are operated  by  the same carrier  with the same flight number  and where a carrier 
only requires only one flight coupon and one reservation, a CRS should only issue one coupon 
and charge for one reservation ". 

(Reference: Annex, paragraph 9) 

g) 

Security package 

36.  Article 6.4 of die code requires a system vendor to make available, within three months 
of  the  entry  into  force  of  the  regulation,  a  description  of  the  technical  and  administrative 
measures  ("security  package")  which  it has adopted  to conform  with the security  of  personal 
and  marketing  data  requirements  of  the  code  (Articles  6.1  and  6.2).  The  Commission  is 
required to decide on the adequacy of these measures to provide the safeguards  required (Article 
6.5). 

37. 
Given  that  the  Commission  has  recendy  completed  this  assessment  of  the  security 
packages  in respect of all CRSs operating  in the EU, and that the audit foreseen  under Article 
21a requires the security provisions  of  Articles 6.1 and  6.2  to be  monitored  in any case,  the 
requirement  to  submit  a  description  of  the  measures  taken,  and  for  their  review  by  the 
Commission,  is no longer required. Therefore,  in order mat the eventual consolidated version of 
the three code regulations properly reflects the obligations on system vendors, it is proposed that 
Articles 6.4 and 6.5 are deleted. 

38. 
The deletion of  Article  6.5  requires  that the text of  Article  3.a.2  should  be  reviewed. 
Article 3.a.2  states that  " The obligation  imposed by the Article shall not apply  in favour  of a 
competing CRS when, in accordance with the procedures of Article 6(5) or Article 7 (3) or (4), 
it has been decided that the CRS is in breach of Article 4a or that a system vendor cannot give 
sufficient  guarantees  that obligations  under  Article 6 concerning  unauthorised  access of  parent 
carriers to information  are complied with." Since it is proposed that Article 6.5 be deleted, and 
since Articles 7(3) and 7(4) (die reciprocity provisions) already provide through  Article 7.2  for 
the withdrawal of the obligation on parent carriers under Article 3.a directly,  then Article 3.a.2 
should be linked to the general enforcement powers of Article  11. 

(Reference: Articles 3.a and 6) 

h) 

Right of a defendant  to be heard 

Under the enforcement powers given to the Commission by the Council  in Article  11 of 
39. 
the code,  it is empowered  to initiate procedures  to terminate  infringements  of the provisions of 

17 

the  code.  In  die  case  that  the  Commission  intends  to  impose  a  fine  on  an  undertaking  or 
association  of  undertakings,  it  must  give  the  parties  concerned  the  right  to  be  heard  on  the 
matters  to  which  die  Commission  takes  objection  (Article  19).  It  is  possible  however  that  the 
Commission  could  take  a  decision  which,  without  involving  the  imposition  of  a  fine,  could 
nevertheless  have  important  commercial  consequences  for  the undertaking  concerned  (e.g.  the 
Commission  may  require  a  system  vendor  to  remove  what  it  considers  are  unfair  terms  in  a 
participating  carrier agreement). The absence of die possibility  for  the defendant  to be heard  in 
such circumstances  may  infringe  his rights of defence.  It is therefore  proposed  that the right to a 
hearing  should  be  expressly  granted  to  all  defendants  in  cases  where  die  Commission  intends 
taking a decision. 

(Reference:  Article  19) 

i) 

Inclusion of  information  systems within the scope of the code 

40. 
At the present time  it is difficult  to assess  with  any  accuracy  the developments  that  will 
take place  in the  methods  of  electronic distribution  of  air  transport  products.  Already  bookings 
can be made through the Internet on several airlines and CRSs. The question is frequently asked 
whether  such  systems  fall  widiin  the  scope  of  the  code  of  conduct.  The  definition  of  a  CRS 
according  to  die  present  code  states  that  a  "computerised  reservation  system  means  a 
computerised  system  containing  information  about,  inter  alia,  schedules,  availability,  fares  and 
related  services,  widi  or  widiout  facilities  through  which  reservations  can  be  made  or  tickets 
may  be  issued,  to  die  extent  diat  some  or  all  of  these  services  are  made  available  to 
subscribers". 

4L 
However,  as  the  Internet  or  similar  systems  only  act  as  sophisticated  communications 
links  between  information  providers  (e.g.  an  airline  or  CRS)  and  their  subscribers  and  do  not 
contain  any  information  on  air  transport  services  per  se,  they  do  not  appear  to  fall  within  the 
definition  of  a  system  vendor  or  CRS.  Such  systems  are  considered  analogous 
to 
communication  networks  which do  not  fall  directly  within the scope of  die code  (e.g.  the SITA 
network),  but should  come under  the responsibility  of  a system  vendor  to ensure  that  any  third 
party providing services on its behalf  respects the relevant code provisions. 

42. 
In these circumstances,  for  services distributed dirough systems such as Internet,  it is the 
information  provider  (i.e.  CRS  or  carrier)  that  must  ensure  compliance  with  the  code 
provisions.  Special  attention  should  be paid  in this respect to die fact tiiat the code definition  of 
a  CRS  refers  to  air  carriers  in  the  plural,  therefore  a  carrier  using  the  Internet  or  a  similar 
service to display  information  about  its own  services  alone would  not be considered  as a  CRS. 
However,  as  soon  as  it  chose  to  display  odier  carriers'  services, 
then  it  may  risk  being 
considered  as a CRS, and expected  to comply with die code accordingly. 

43. 
Article  21  of  the  code  presently  exempts  a  CRS  used  by  an  air  carrier  or  group  of  air 
carriers  in its/their  own offices  from  the rules concerning  die neutrality  of  the principal  display. 
The consumer  would  not  reasonably  expect  to receive unbiased  information  from  the offices  or 
sales  counters  of  an  air  carrier.  The  application  of  the  same  principle  to  services  provided 
through systems such as the Internet should permit a group of carriers - those with code share or 

18 

other similar agreements but not simply interline agreements (since this could severely limit the 
number  of  CRSs  falling  within  the  scope  of  the  code)  -  to  offer  information  on  their  air 
transport products without being subject  to the provisions of Article 5 and 9(5). It is proposed 
that Article 21 also be amended to ensure consistency. 

44. 
To ensure that CRS services that are provided in an electronic means directly to the user 
are also covered  by die code,  it  is proposed  that the definition  of a subscriber  be amended to 
refer to the "user of a CRS" by deleting reference  to the distribution facilities.  This would also 
have the effect of clarifying  that information systems are covered by the code. 

(Reference: Article 2.1 and proposed Articles 21 and 21.c) 

j) 

Obligations of diird parties 

45. 
In order  to clarify  the manner  in which  information  systems,  as  with  any  other  third 
party providing services on behalf of a system vendor,  fall  within the scope of the code,  it is 
proposed that an obligation be placed on a system vendor to specifically  ensure in its relations 
with third parties the duty to respect the relevant code provisions. 

(Reference: Article 4.a) 

k) 

Ranking of  flights 

46.  With  die  increase  in  the  use  of  hub  and  spoke  arrangements  by  carriers,  the  service 
provided  by  indirect flights can  now be of  an equivalent  level  to diat offered  on  other  direct 
flights  involving stops at intermediate points. 

The  ranking  criteria  contained  in  paragraph  1 of  the  Annex  to  die  code  should  be 
47. 
amended such diat die ordering of the display of flights  is firsdy all non stop flights between the 
city pair concerned, and secondly all other  flights. 

(Reference: Annex, paragraph 1) 

1) 

Billing information on magnetic media 

48.  Amongst  other  matters,  Article  10.1 of  die code requires  diat a  system  vendor  offers 
billing information on magnetic media. This provision recognises die fact that the audit of CRS 
bills  can  only  be  satisfactorily  carried  out  by electronic  means.  Tlie volume  of  booking  data 
involved is so great that alternative billing media such as microfiche or paper are inadequate. 

19 

49. 
System  vendors  normally  charge  a  fee  for  providing  billing  information  on  magnetic 
media (BIDT - billing  information data tapes) but not for the provision of  information on other 
media.  The  fee  is  considerably  higher  than  the  cost  of  the  tape  itself.  To  ensure  that  the 
objective  of  the  provision  is  not  impaired  by  the  charge  made  for  the  BIDT  by  the  system 
vendor,  it  is  proposed  diat  the  fee  to  be  charged  for  billing  information  on  magnetic  media 
should not exceed the cost of the media itself together with transportation costs  thereof. 

(Reference: Article  10.1) 

m) 

Other 

Article 23.2 of Reg 2299/89 has ceased to be required following  the passage of time and 

50. 
can therefore be deleted. 

(Article 23.2 of Reg 2299/89) 

20 

Proposal  for a 

Council  Regulation (EC) 

amending Council  Regulation (EEC) No 2299/89 

on a Code of Conduct for computer reservation systems (CRSs) 

THE COUNCIL OF THE EUROPEAN UNION 

Having regard to the Treaty establishing the European Community, and in particular Articles 75 
and 84(2) thereof, 

Having regard to the proposal from the Commission  , 

Having regard to the opinion of the Economic and Social Committee 

Acting  in  accordance  with  the  procedure  referred  to  in  Article  189c  of  the  Treaty  in  co-
operation with the European Parliament  , 

Whereas Council  Regulation  No 2299/894 as amended by Regulation  No 3089/935 has  made a 
major  contribution  to  ensuring  fair  and  unbiased  conditions  for  air  carriers  in  computer 
reservation systems, thereby protecting the interests of consumers; 

Whereas  it  is  necessary  to  extend  the  scope  of  Regulation  No  2299/89  and  to  clarify  its 
provisions  and  it  is appropriate  to  take these  measures  at  Community  level  to ensure  that  the 
objectives of the Regulation are met in all Member States; 

Whereas  this  Regulation  is  without  prejudice  to  the  application  of  Articles  85  and  86  of  the 
Treaty; 

Whereas  this  Regulation  is  without  prejudice  to  the application  of  the  Directive  95/46/EC 
of  the  European  Parliament  and  the  Council  of  24  October  1995  on  the  protection  of 
individuals with regard to the processing of personal data and of  the free  movement of such 
data; 

Whereas Commission  Regulation  (EEC) No 3652/93  as amended by the Act of  Accession of 
Austria,  Finland  and  Sweden,  exempts  from  the  provisions  of  Article  85(1)  of  the  Treaty 
agreements  for  the  common  purchase,  development  and  operation  of  computer  reservation 
systems; 

l 

2 

3 

4 

6 

O J N o L 2 2 0,  29.7.1989,  pi 

O J N o L 2 7 8,  11.11.1993,  pi 

O J N o L 3 3 3,  31.12.1993,  p37 

21 

Whereas  systems providing  information  direcdy  to the consumer  by electronic  means  through 
public telecommunications networks should be brought within the scope of the code; 

Whereas  it  is  desirable  to  clarify  the  basis  on  which  parent  carriers  should  be  charged  for 
bookings they are required to accept from competing CRSs; 

Whereas it is necessary to clarify  the basis on which CRSs charge for the services they provide 
to participating carriers and subscribers to improve transparency; 

Whereas it is necessary to ensure that third parties carrying out services on behalf of a CRS are 
subject to the same obligations die code imposes on that CRS; 

Whereas the effectiveness  of  the code's  CRS audit requirements has rendered  unnecessary  the 
separate assessment by the Commission of a CRS's data security arrangements ; 

Whereas it is necessary to include subscribers direcdy within the scope of  the code so that the 
reservation  services  tiiey  provide  to  their  customers  are  not  inaccurate,  misleading  or 
discriminatory; 

Whereas  the  right  of  a  defendant  to  be  heard  on  matters  to  which  the  Commission  takes 
objection need to be expressly foreseen! 

Whereas  the  integration  of  rail  services  into  the  CRS  display  of  air  transport  services  can 
improve the quality of information available to consumers and eliminate the wasteful  duplication 
of distribution services; 

Whereas  rail  operators  distributing  services  through  integrated  air  and  rail  CRSs  should  be 
subject to the same conditions as air carriers! 

Whereas  information  or distribution  facilities  offered  by carriers having joint venture or  other 
contractual arrangements should not be subject to the code provisions; 

Whereas the ranking criteria  for  the display  of flights should provide consumers  with the best 
options for their air travel arrangements, 

HAS ADOPTED THIS REGULATION: 

Regulation No 2299/89 is hereby amended as follows: 

Article 1 

22 

Article  1  is replaced by the following: 

1. 
"Article 1 
This  Regulation  shall  apply  to  computerised  reservation  systems  to  the  extent  that  they 
contain  air  transport  products,  with  or  without  the  incorporation  of  rail  transport  products, 
when offered  for  use and/or  used  in the territory  of the Community,  irrespective  of: 

the status or nationality of the system  vendor, 
the  source  of  the  information  used  or  the  location  of  the  relevant  central  data 
processing unit, 
the geographical  location of the airports  between  which air carriage takes place.  " 

2. 
Article 2 is amended as follows: 
a) Paragraph (1) is replaced by the following: 

"(1) 

"subscriber"  means  a  person,  other  than  a  consumer,  or  an  undertaking,  other  than  a 
participating  carrier,  using a  CRS under contract or other  financial  arrangement with a system 
vendor; " 

b) Paragraph (m) is replaced by the following: 

"(m) 

"consumer"  means any person seeking information  about and/or  intending  to purchase an 
air transport product;  where a system vendor has a financial  arrangement  with a consumer, 
the principles  of neutrality of this Regulation shall apply; 

c) Paragraph (q) is added: 

"  (q) 

"rail  transport operator"  means any private or public undertaking  whose main business  is to 
provide rail transport services to passengers." 

d) Paragraphs (r), (s) and (t) are added 

"(r) 

(s) 

"unbundled  rail  transport  product"  means  the  carriage  by  rail  of  a  passenger 
between  two stations,  including any related  ancillary  services and additional  benefits 
offered  for  sale and/or  sold as an integral part of that product; 

"bundled  rail  transport  product"  means a pre-arranged  combination  of  an  unbundled 
rail  transport  product  with  other  services  not  ancillary  to  rail  transport,  offered  for 
sale and/or  sold at an  inclusive price; 

(t) 

"rail  transport product"  means both  unbundled  and bundled  rail  transport products;" 

23 

3.  Article 3a.  is amended as  follows: 

a) Subparagraph  l.(b)  is replaced by the  following: 

"(b) 

The parent  carrier  shall  not be obliged  to accept  any  costs  in  this connection  except  for 
reproduction  of  the  information  to be provided  and  for  accepted  bookings.  The  booking 
fee  payable  to  a  CRS  for  an  accepted  booking  made  in  accordance  with  this  Article 
should  not  exceed  the  fee  charged  by  the  same  CRS  for  the  nearest  equivalent 
transaction.  " 

b)  Paragraph  2  is replaced  by the  following: 

"2 

"4 

The obligation  imposed by the Article shall  not apply  in favour  of a competing  CRS 
when,  in accordance with the procedures of Article  11,  it has been decided  that the 
CRS  is in breach of Article 4a or Article 6 concerning unauthorised  access of parent 
carriers  to information. " 

Article 4a.4 is added: 

The system vendor shall ensure that any third parties providing  in whole or  in part 
CRS services on its behalf  respect the relevant provisions of this regulation. " 

Articles 6.4  and 6.5  are deleted 

The following  Article 9.a  is inserted: 

"Article 9a 

(a) As regards  information  provided  by a CRS, a subscriber  shall use a neutral  display  in 
conformity  with  Article 5.2.(a)  and (b) unless another display  is required  to meet a 
preference  indicated  by a consumer. 

(b) A subscriber  shall  not manipulate  information  provided  by a CRS  in a manner  that 
will  lead to inaccurate,  misleading or discriminatory  presentation  of such  information  to 
the consumer. 

(c) A subscriber  shall  make reservations and  issue tickets  in conformity  with  the 
information  contained  in the CRS used or as authorised  by the carrier  concerned. 

24 

(d) A subscriber  shall  inform  the consumer  of any en-route changes of equipment,  the 
number  of scheduled  en-route stops,  the  identity of  the air carrier  actually  operating  the 
flight,  and of any changes of airport  required  in any  itinerary provided,  to the 
extent that this information  is present  in the CRS. 

(e) A consumer  shall be entitled at any time to have a print out of the CRS display  or 
be provided  with access  to a parallel  CRS display reflecting  the same  image being 
displayed  to the  subscriber. 

A subscriber  shall  use the distribution  facilities  of a CRS as described  in Annex  II of  this 
code" 

7. 

Article  10.1 is replaced  by the  following: 

"l.(a) 

Any fee charged  to a participating  carrier by a system vendor  shall be non 

discriminatory,  reasonably  structured  and reasonably  related to the cost of the service 
provided  and used and  shall,  in particular,  be the same for  the same level of service. 

The billing  for  the services of a CRS shall be sufficiently  detailed  to allow the 
participating  carriers  to see exactly  which services have been used and the fees 
therefor;  as a minimum,  booking  fee bills must  include the following  information  for 
each  segment: 

type of  CRS booking, 
passenger  name, 
country, 
I AT A/ARC agency  identification  code, 
city-code, 
city pair of  segment, 
booking  date (transaction date), 
flight date, 
flight number, 
status code (booking status), 
service type (class of service), 
PNR record  locator, 
booking/cancellation  indicator. 

The billing  information  shall be offered  on magnetic  media.  The fee  to be charged  for 
the billing  information  provided on  magnetic media shall  not exceed  the cost of  the 
media  itself  together  with  transportation costs thereof. 

A participating  air carrier  shall be offered  the facility  of being  informed  at the time  that 
any booking/transaction  is made for  which a booking  fee  will  be charged.  Where a 
carrier  elects to be so  informed,  it shall be offered  the option  to disallow such 
booking/transaction,  unless the latter  has already  been accepted. 

25 

Any fee for equipment rental or other service charged to a subscriber by a 

(b) 
system vendor shall be non-discriminatory, reasonably structured and reasonably 
related to the cost of the service provided and used and shall, in particular, be the 
same for die same level of service. Productivity based benefits awarded to subscribers 
by system vendors in die form of discounts on rental charges or commission payments, 
are considered as distribution costs of the system vendor. 

The billing for die services of a CRS shall be sufficiendy  detailed to allow 
to see exactly which services have been used and the fees therefor; " 

subscribers 

8. 

Article 19.1 is replaced by the following: 

Before taking decisions pursuant to Articles  11  or  16, the Commission shall give the 
undertakings or associations of undertakings concerned the opportunity of being heard 
on the matters to which die Commission takes, or has taken, objection. " 

9 

Article 21 is replaced by die following: 

"Article 21 

The provisions  in Article 5, Article 9(5) and the Annex to this Regulation shall not 
apply to a CRS used by an air carrier or a group of air carriers, which have a 
joint venture or odier contractual arrangement, but excluding interline agreement,  in its 
(their) own office(s)  and sales counters clearly  identified  as such. 

10.  Article 21a. 1  is replaced by the following: 

The system vendor shall ensure that the technical compliance of its CRS with Articles 
4a and 6 is monitored by an independent auditor on a calendar year basis.  For this 
purpose, die auditor shall be granted access at any time to any programs, procedures, 
operations and safeguards used on the computers or computer systems through which 
the system vendor is providing its distribution facilities.  Each system vendor shall 
submit its auditor's report on his inspection and findings to die Commission  within 
four  months of the end of the calendar year under review.  This report shall be 
examined by the Commission with a view to any necessary action in accordance with 
Article  11  (1)." 

26 

11. 

The following  Articles 21b and 21c are added: 

"Article 21b 

A rail transport operator will be considered as a participating carrier  for  the purposes of 
the code on condition that it has an agreement with a system vendor  for  the distribution 
of  its products  through  a  CRS.  Its services  shall  be treated  in  the same  manner  as air 
transport products and be incorporated  into the principal  display  in accordance with the 
criteria  set  out  in  Annex  I.  to  the code.  All  references  to  "flights"  in  this  Regulation 
shall be deemed also to include references to "rail travel". 

Article 21c 

Where two or more carriers  have a joint venture or other contractual  arrangement,  but 
excluding  interline  agreement,  to  provide  information  and/or  distribution  facilities 
accessible  through  a  public  telecommunications  network,  clearly  identifying  the 
arrangement  as  such,  the  information/distribution  facilities  will  not  be  subject  to  the 
provisions of the code. " 

12.  Article 22.1 is replaced by the following: 

"Article 22.1 

This Regulation shall be without prejudice  to national legislation on security, public 
order and data protection measures taken  in application of Directive 95/46/CE.  ". 

13. 

Article 23 is replaced by the following: 

"Article 23 

The Council shall decide on the revision of this Regulation by 31 December 2002 at 
the latest, on the basis of a Commission proposal to be submitted by 31 March 2002, 
accompanied by a report on the application of this Regulation." 

14. 

The Annex is replaced by Annex I and Annex II set out in the Annex. 

Article 2 

This  Regulation  shall  enter  into force  on  the  30th  day  following  its publication  in the  Official 
Journal of the European  Communities. 

This regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

27 

"ANNEX I 

ANNEX 

Principal display ranking criteria for flights offering  unbundled air transport products. 

1. 
Ranking of flight options  in a principal display,  for  the day or days requested, 
shall be in die following order unless requested in a different  way by a consumer for an 
individual transaction: 

(i) 
(ii) 

all non-stop direct flights between the city-pairs concerned, 
all odier  flights. 

A consumer  shall  at  least be afforded  the possibility  of  having,  on  request,  a 

2. 
principal  display  ranked  by  departure  or  arrival  time  and/or  elapsed  journey  time. 
Unless  otherwise  requested  by  a  consumer,  a  principal  display  shall  be  ranked  by 
departure time for group (i) and elapsed journey time for group (ii). 

3. 
Where  a  system  vendor  chooses  to  display  information  for  any  city-pair  in 
relation  to die schedules  or  fares  of  non-participating  carriers,  but  not  necessarily  all 
such carriers,  such  information  shall  be displayed  in an  accurate,  non-misleading  and 
non-discriminatory manner between carriers displayed. 

If,  to  the  system  vendor's  knowledge,  information  on  the  number  of  direct 
is  not 

4. 
scheduled  air  services  and  the  identity  of  the  air  carriers  concerned 
comprehensive, diis shall be clearly stated on the relevant display. 

5. 

6. 

Flights odier than scheduled air services shall be clearly identified. 

Flights involving stops en route shall be clearly identified. 

Where flights are operated by an air carrier which is not the air carrier  identified 
7. 
by the carrier designator code, the actual operator of the flight shall be clearly  identified. 
This requirement shall apply in all cases, except for short-term ad hoc arrangements. 

8. 
A system vendor shall not use the screen space in a principal display in a manner 
which  gives  excessive  exposure  to  one  particular  travel  option  or  which  displays 
unrealistic travel options. 

9. 

Except as provided for in paragraph  10, the following shall apply: 
(a) 
principal display; 

for  direct  services,  no  flights  shall  be  featured  more  than  once  in  a 

for  multi-sector  services  involving a change of aircraft,  no combination 

(b) 
of flights shall be featured  more than once in a principal display; 

28 

flights 

(c) 
connecting flights, widi one line per aircraft segment. 

involving  a  change  of  aircraft  shall  be  treated  and  displayed  as 

Nevertheless, where the flights are operated by the same carrier with the same  flight 
number and where a carrier only requires only one flight coupon and one reservation, 
a CRS should only issue one coupon and charge for one reservation 

1. Where participating carriers have joint venture or other contractual 
10. 
arrangements requiring two or more of them to assume separate responsibility for the 
offer  and sale of air transport products on a flight or combination of flights, the terms 
'flight'  (for direct services) and 'combination of flights' (for multi-sector services) in 
paragraph 9 shall be interpreted as allowing each of the carriers concerned - up to a 
maximum of two - to have a separate display using its individual carrier designator 
code. 

2.  Where more than two carriers are  involved,  designation  of  the two carriers 
entided to avail tiiemselves of the exception provided  for  in subparagraph  1 shall be a 
matter  for  the  carrier  actually  operating  the  flight.  In  the  absence  of  sufficient 
information  from  the operating  carrier  to  identify  the two carriers  to be designated,  a 
system vendor may designate the carriers on a non-discriminatory basis. 

11.  A  principal  display  shall,  wherever  practicable,  include  connecting  flights  on 
scheduled  services  which are operated  by participating  carriers  and  are constructed  by 
using a  minimum  number of  nine connecting  points.  A system vendor  shall  accept a 
request by a participating carrier, to include an indirect service, unless the routing  is in 
excess of  130% of die great circle distance between the two airports or except where this 
would lead to the exclusion of services with a shorter elapsed journey time.  Connecting 
points widi routings in excess of  130% need not be used. 

Annex II 

Use of distribution facilities by subscribers 

1. 
A  subscriber  shall  keep  accurate  records  covering  all  CRS  reservation  transactions. 
These shall  include flight  numbers,  reservations  booking designators,  date of  travel,  departure 
and arrival times, status of segments, names and initials of passengers with their contact address 
and/or telephone number and ticketing status. When booking or cancelling space, the subscriber 
must  ensure  that  the  reservation  designator  being  used  corresponds  to  the  fare  paid  by  the 
passenger. 

2. 
A  subscriber  shall  not  make  duplicate  reservations  for  the  same  passenger.  In  cases 
where  confirmed  space  is  not  available  on  the  customer's  choice,  die  passenger  may  be 
waitlisted on that flight (if wait-list is available) and confirmed on an alternate flight. 

29 

Whenever  a  passenger  cancels  a  reservation,  the  subscriber  must  immediately  release 

3. 
such space. 

When a  passenger  changes  an  itinerary,  die  subscriber  shall  ensure  that  all  space  and 

4. 
supplementary services are cancelled at the time the new reservations are made. 

A  subscriber shall,  where practicable,  request or process  all  reservations  for  a  specific 

5. 
itinerary, and all subsequent changes, through one CRS. 

A  subscriber  shall  only  request  or  sell  airline  space  when  requested  to  do  so  by  a 

6. 
consumer. 

7. 
A subscriber shall ensure that a ticket is issued in accordance with the reservation status 
of each segment and in accordance with the applicable time limit.  A subscriber shall not issue a 
ticket  indicating  a  definite  reservation  and  a  particular  flight  unless  confirmation  of  such 
reservation has been received. " 

30 

Impact Assessment  Form 

The Impact  of the Proposal  on Business 
with special  reference  to small and medium sized  enterprises 

Proposal  for an amendment of the Code of Conduct for  Computerised  Reservation  Systems 
(Council Regulation 2299/89 as amended by Regulation 3089/93). 

The proposal 

1.  Why  is Community  legislation  necessary  in this area  and what are  its main aims? 

The  proposal  contains  a  number  of  amendments  to  an  existing  Regulation  to  reflect 
developments  in  the  sector  since  1993.  The  Community  has  competence  to  regulate  the 
activities  of CRSs. 

The Impact on business 

2. 

Who will be affected  by  the proposal? 

The principal businesses affected  by the proposal are the CRS companies, of which there are 
five (Amadeus, Galileo, Gets, SABRE and Worldspan) operating in the EU. They do not fall 
into the definition  of SMEs. 

Part  of  the  amendment  proposes  that  subscribers  (mainly  travel  agents)  must  use  the 
computerised  reservation  systems  (CRSs)  in a neutral  and  non-discriminatory  manner  and 
provide  customers  with  adequate  information  on the  principal  characteristics  of  the  flight 
selected.  However,  this proposal  already  applies to the majority  of travel  agents in the EU, 
who are  I ATA agents,  since  it already  exists  as the I ATA Code of  Reservation  Ethics. 

3. 

What will businesses  have to do to comply  with the proposal? 

Generally,  the  amendments  to  the code  require  system  owners  and  subscribers  to  use  the 
CRSs  in a non-discriminatory  manner. 

4. 

What economic effects  is the proposal  likely to have? 

Part  of  the  amendment  proposes  that  rail  operators  should  be  allowed  to  distribute  their 
services  through the CRSs in an  integrated  display  with air  transport  services.  This  should 
lead to a greater  demand  for  rail  services  and facilitate  the development  of  interoperability 
between rail  and air services. 

Does the proposal contain measure to take account of the specific situation of SMEs? 

5. 
No. 

2>A 

Consultation 

6. 

List the organisations consulted. 

Association of European Airlines (AEA) 
Orient Airlines  Association (OAA) 
European Communities Travel Agents Association (ECTAA) 
Guild of Business  Travel  Agents (GEBTA) 
CRSs  (Amadeus,  Galileo,  Gets,  SABRE and Worldspan) 
CER (Community of European Railways) 
IATA 
European  Regional Airlines Association (ERA) 
Air Transport  Users Council (AUC) 

3a 

ISSN 0254-1475 

COM(97) 246 final 

DOCUMENTS 

EN 

07  15 

Catalogue  number  :  CB-C0-97-237-EN-C 

ISBN 92-78-20131-6 

Office  for  Official  Publications of the European  Communities 

L-2985  Luxembourg 

Z3