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OST-2006-25307 - IATA - Tariff Conference Proceeding
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International Air Transport Association Tariff Conference Proceeding Issued and Served July 5, 2006 Order to Show Cause - Bookmarked | As Published in Federal Register July 11, 2006 We have now determined that we should reexamine our approval and grant of antitrust immunity for the IATA by-laws insofar as they establish tariff conferences that discuss fares and rates between the United States and Europe and Australia. Developments in the airline business have eliminated much of the need for tariff conferences to establish interlineable fares, assuming that the availability of interlining in international markets ever depended on such fares. In addition, the European Union and the Commonwealth of Australia have tentatively determined to reduce or terminate the IATA agreement's immunity from their own competition laws, as described below. The European Union has already eliminated the immunity held by the IATA tariff conference agreement for cargo rates for markets within the European Union. We are therefore proposing to withdraw our approval for the IATA tariff conference agreement insofar as the agreement authorizes passenger and cargo fare and rate discussions and agreements for the transatlantic and U.S.-Australia markets. We are tentatively reaffirming our earlier findings that the IATA tariff conference regime substantially reduces competition. We tentatively find that foreign policy concerns no longer require the continuation of antitrust immunity for tariff conference proceedings in those markets and, more importantly, that the agreement does not provide public benefits that are otherwise unobtainable by means that are materially less anti-competitive. The IATA by-laws' tariff conference provisions allow airline competitors to discuss and agree upon fares and rates, which reduces competition. If we disapprove the agreement under section 41309, that would automatically terminate its antitrust immunity under section 41308. We are giving interested persons forty-five days to file comments on this order and thirty days to file replies to the comments submitted by others. After we review the comments, we will decide whether to finalize our tentative findings. We currently plan to complete this proceeding by the end of this year, if possible. This order focuses on the IATA passenger tariff conferences, but the arrangements established by the IATA by‑laws for tariff conferences on cargo rates are substantially the same as the arrangements for tariff conferences on passenger fares. We believe that there are no significant differences between the passenger and cargo tariff conference provisions for purposes of our section 41309 analysis. Our tentative findings therefore are the same for both the passenger fare and cargo rate arrangements. By: Michael Reynolds
Provisions for the Conduct of the IATA Traffic Conferences - IATA Rules and Regulations - Bookmarked
April 3, 2006 United States Comments on Draft Commission Regulation Concerning Passenger Tariff Coordination We continue to believe, as explained in our May 23, 2005 comments on the earlier DG-COMP discussion paper, that the US-EU market is clearly distinguishable from most other EU-third country markets with regard to the significance of interline travel, market characteristics, and the nature of bilateral arrangements. We therefore recommend that the Commission set a December 31, 2006 termination date for the block exemption for US-EU markets, as the Commission is proposing for routes within the European Union. By: US Mission to the European Union
May 24, 2005 United States Comments on DG-Comp IATA Discussion Paper The description does not accurately reflect the character of most US-EU member state air services agreements and markets. The United States has open-skies agreements with 15 of the 25 member states which provide the carriers of each party open market access, capacity and pricing, and comprehensive codesharing opportunities as well as other provisions designed to foster competition. Of the remaining 10 US-EU member state markets, five are governed by bilateral air services agreements with a range of restrictions, and five are governed by comity and reciprocity. While the de jure limitations on market access and capacity have varying de facto effects, carriers are generally free to set prices based on management discretion, independent of the IATA mechanism. By: US Mission to the European Union
August 2, 2006 Motion for Extension of Time, Severance and Deferral - Bookmarked The International Air Transport Association respectfully requests the Department of Transportation to modify Ordering Paragraph 2 of Order 2006-7-3 to: (1) Extend the time available for IATA's initial response until November 30, 2006; (2) Sever consideration of the approval and immunity now accorded to IATA's Cargo Tariff Coordinating Conferences from consideration of the approval and immunity now accorded to IATA's Passenger Tariff Coordinating Conferences; and (3) Defer consideration of the approval and immunity now accorded to IATA's Cargo Tariff Coordinating Conferences until completion of proceedings addressing IATA's Passenger Tariff Coordinating Conferences. Counsel: Wiley Rein, Bert Rein, 202-719-7080
August 14, 2006 Answer of United and Motion for Leave to File United Air Lines, Inc. submits the following answer to the Motion of IATA for Extension of Time, Severance and Deferral, dated August 2, 2006, in the captioned docket. United urges the Department to grant IATA's motion to extend the date for IATA's response to Order 2006-7-3 to November 30, 2006. IATA has explained the basis for this request in its Motion, and United concurs that an extension of time for response to the Show Cause Order is appropriate in the circumstances stated in order to assure an orderly transition period. United takes no position on other requests raised in IATA's Motion. United requests leave to file this answer one day late. Due to conflicts in vacation schedules, United was unable to communicate its decision on this matter to counsel until after COB on the due date of August 11, 2006. Acceptance of United's answer will not unduly prejudice any party nor will it unnecessarily delay this proceeding. Counsel: Wilmer Hale, Jeffrey Manley, 202-663-6670, jeffrey.manley@wilmerhale.com
Order 2006-8-14 Issued August 16, 2006 | Served August 17, 2006 We began this proceeding by issuing an order to show cause why we should not end our approval under 49 U.S.C. 41309 of the International Air Transport Association agreement that establishes tariff conferences at which IATA member airlines discuss and agree upon international fares and rates for scheduled passenger and cargo transportation. We proposed to end the agreement’s approval only for tariff conference discussions and agreements on fares and rates for the U.S.-European Union and U.S.-Australia markets. We did not propose to disapprove tariff conference discussions and agreements for fares and rates in other geographical markets. If we determine to disapprove the agreement, it will no longer have antitrust immunity under 49 U.S.C. 41308. Order 2006-7-3 (July 5, 2006). Comments on our order and replies to comments submitted by other persons were due, respectively, on August 21 and September 20, 2007. IATA is asking us to extend the due dates for comments and replies and to sever the cargo rate issues from this proceeding. We are granting IATA’s motion in part by giving parties an additional sixty days for filing their comments on the show-cause order. We will grant IATA’s motion in part. We will extend the due date for comments from August 21 to October 20, 2006, to give IATA an additional two months to prepare its response. IATA will now have three and one-half months to draft its comments on our show-cause order. We do not believe a longer extension is necessary. By: Michael Reynolds
September 18, 2006 DOT Letter to European Commission We have been following your proceeding concerning IATA tariff coordination with great interest, from its initiation to publication of a draft block exemption regulation in the February 18 edition of the Official Journal. The United States filed comments on the draft regulation, as well as comments on the Commission's earlier discussion paper. We understand that the Commission plans to adopt a final regulation in September. The draft regulation already published would terminate IATA's block exemption for tariff coordination on routes within the Community and between the Community and Iceland/Liechtenstein/Norway/Switzerland effective January 1, 2007, and would grant a block exemption for tariff coordination on all other routes, including between the Community and the United States and Australia, and between the Community and other third countries through June 30, 2008. We have also been following a similar proceeding by the Australian Competition & Consumer Commission, which we understand will be completed by this autumn. On our side, as you know, the Department issued a show-cause order on July 5. The show-cause order directs interested persons to show cause why we should not disapprove IATA's Provisions for the Conduct of the IATA Traffic Conferences insofar as that agreement authorizes U.S. and foreign carriers to discuss and agree upon passenger fares, cargo rates and associated conditions of service between the United States and the European Union (together with Iceland, Norway, Switzerland, and Liechtenstein) and between the United States and Australia, either directly through tariff conferences or indirectly through related means of information sharing. We hope to complete the proceeding and issue a final order before the end of this year. The Department will make its final decision on the issues only after considering the responses to its show-cause order. We expect IATA to file objections and to suggest, among other things, that the effective date for the final order should be June 2008. If the Commission and the Department both conclude that it is in the public interest to modify our grants of antitrust immunity, we believe it would be in the best interests of the US., the EU and our various stakeholders to adopt a convergent transition period. We understand that the Commission is considering a final regulation that would modify its draft for third-country routes to grant a block exemption for tariff coordination on routes between the United States/Australia and the Community only through June 30, 2007, and would grant a block exemption for tariff coordination on other third-country routes through a later date. If the Commission indeed adopts such a regulation, and if the Department determines after reviewing the responses to its order that it should make its own tentative decision final and there is no basis for choosing a different effective date, then the Department would seek to make its final order effective on the same day. By: Michael Reynolds
September 18, 2006 European Commission Letter to DOT I have read closely the show-cause order That was issued by the Department of Transportation on 5 July in this matter. I understand that this order directs interested persons to show cause why the Department should not disapprove lATA's Provisions for the Conduct of the IATA Traffic Conferences insofar as that agreement authorizes U.S. and foreign carriers to discuss and agree upon passenger fines, cargo rates and associated conditions of service between United States and the European Community (together with Iceland, Norway, Switzerland and Liechtenstein) and between the United States and Australia, either directly through tariff conferences or indirectly through related means of information sharing. The Department hopes to issue a final order by the end of 2006. I discussed with Mrs Neelie Kroes, European Commissioner in charge of Competition, the possibility that the Block Exemption for tariff coordination on routes between the United States and the European Community be granted until 30 June 2007, instead of 30 June 2008. She agrees that regulatory convergence would be beneficial for the European Community and its Member Slates, the United Stares and the interested stakeholders. She decided to consult Member States in the Advisory Committee on bringing forward the expiration date of the Block Exemption for tariff coordination on routes between the United States and the European Community to 30 June 2007. On 20 July, the Advisory Committee was convened and a large majority of Member States supported this proposal of the Commission. I note that, if the Commission adopts the above Regulation and if the Department of Transportation determines after reviewing the responses to its older that it should make its own tentative decision final and there is no basis for choosing a different effective date, then the Department would seek to make its final order effective on the same day as the expiration date of the block exemption Regulation for EU-US routes. In title light of the opinion of the Advisory Committee, Mrs Kroes intends to propose shortly, the above draft Regulation to the College of Commissioners in view of the adoption of the new Mock Exemption Regulation. By: Philip Lowe
October 20, 2006 Comments of American Airlines on Show Cause Order 2006-7-3 Withdrawing antitrust immunity from the IATA tariff conferences makes sense to the extent they have been rendered obsolete by the rise of global alliances. However, it is only the fareand rate‑setting function that has grown unnecessary - the standard-setting functions of the IATA composite conferences remain important. Thus, while American has no objection to withdrawing antitrust immunity from the traffic conferences, we urge the Department to retain that immunity for the composite conferences. Alternatively, the Department should declare in its final order that the composite conferences are not anticompetitive, arid do not require antitrust immunity to continue their important function. Finally, the Department should sever consideration of cargo traffic conferences given the need for a more orderly withdrawal of antitrust immunity. Counsel: American, Carl Nelson, 202-496-5647
October 20, 2006 Comments of The Practical Nomad As a traveller, consumer advocate for travellers, travel agent, and expert in interline airfares with 15 years of experience and specialization in multistop international airfares, including IATA industry fares, I urge you to reconsider your proposal. The main use of interline ticketing agreements -- particularly between airlines that aren't members of the same marketing alliance or a code-sharing agreement -- is to accommodate each other's passengers in the event of flight cancellations, delays, missed connections, overbooking, and the like. Airline alliances utilize their antitrust exemptions (which would be retained under the current DOT proposal to eliminate the IATA exemption) to coordinate schedules, typically beginning with the elimination of duplicate flights. If one member of an immunized alliance has to cancel a flight, or a late inbound connection causes a passenger to miss it, it is especially unlikely -- as a direct result of the alliance antitrust exemption -- that there will be an available alternate flight or set of connections not too much later on another alliance member airline. So minimizing the delays and inconvenience to passengers who have to be rebooked or rerouted is especially likely to depend on the existence of the widest possible array (as has traditionally existed, but as is now being cut back rapidly) of non-alliance interline agreements. By: Edward Hasbrouck, 415-824-0214, edward@hasbrouck.org
October 20, 2006 Initial Comments of the International Air Transport Association - Bookmarked IATA's Initial Response directly addresses the tentative legal conclusions set forth in Order 2006-7-3. As more fully set forth below and in the factual affidavits attached to these comments, IATA submits that these conclusions are based on: outdated premises with respect to the conduct of passenger tariff coordination; a record inadequate to support their transportation benefits analysis, particularly with respect to so-called "conditions of service;" a misunderstanding of the admitted foreign relations need to harmonize the application of competition laws at both ends of the routes in question; and an unwarranted "me too" approach to the very different competitive role and benefits of IATA cargo tariff coordination. Thus, IATA believes that the proceeding initiated by Order 2006-7-3 can be brought to a litigated conclusion only through separate, unbiased formal hearing proceedings addressing passenger and cargo tariff coordination. While IATA is prepared to participate in such further proceedings, it would much prefer, as noted above, to resolve the Department's concerns by a negotiated and internationally harmonized revision to and restriction of the approvals and immunities now granted to IATA tariff coordination. Counsel: Wiley Rein, Bert Rein, 202-719-7080
OST-2006-26404
November 20, 2006 Motion of IATA to Consolidate Proceedings IATA hereby moves for an order consolidating IATA's request for approval and immunity for an amendment to the Provisions for the Conduct of the TATA Traffic Conferences, filed in Docket OST-2006-26404, into the show cause proceeding that is considering continued approval and immunity for the Provisions for the Conduct of the IATA Traffic Conferences, in Docket OST-2006-25307. Consolidation would permit Docket OST-2006-25307, which is a forward looking proceeding, to be resolved on a realistic basis and would avoid the necessity of formulating conditions that would address the issues dealt with in the proposed amendment. No party will be prejudiced by the consolidation of these proceedings. Counsel: Wiley Rein, Bert Rein, 202-719-7080
November 20, 2006 Reply Comments of Delta Air Lines Because the industry standard-setting functions of the composite conference do provide significant public benefits, the Department should exercise caution. Any actions affecting the composite conference should be harmonized with those being taken in Europe and Australia, as IATA urges. Until such time as an orderly successor to the current tariff conference structure is in place which does not require antitrust immunity for its operation, the Department should retain immunity for the composite conferences. Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com
November 17, 2006 Comments of NASSTRAC, Inc. and the Health & Personal Care Logistics Conference | Word NASSTRAC, Inc. and The Health & Personal Care Logistics Conference, Inc. take no position on the issues raised insofar as they relate to IATA’s procedures and continued antitrust immunity with respect to passenger fares. However, the Shipper Associations support the positions of DOT in certain respects as to IATA action on or affecting air cargo. IATA antitrust immunity should be curtailed to the extent necessary to prevent IATA action that directly or indirectly raises air cargo rates. Counsel: McCarthy Sweeney, John Cutler, 202-775-5560
November 20, 2006 Reply Comments Northwest Airlines Northwest does not support the open-ended continuation of antitrust immunity for all traditional IATA traffic conference activities. Instead, Northwest supports IATA’s call for rational negotiated settlement of these issues so as to minimize unnecessary adverse impact to carriers and the traveling and shipping public. Counsel: Northwest, Alexander Van der Bellen, 202-842-4184, sascha.vanderbellen@nwa.com
November 20, 2006 Answer of Scandinavian Airlines Systems Unlike the geographic price coordination conferences, the Composite Conference does not set prices, but as noted deals only with the common terms and conditions that make interlining possible. It brings value to consumers as well as carriers in terms of common definitions, mileage principles, fare construction rules, and common currency applications. For these reasons, SAS urges that the full immunity conferred by the Department on the Composite Conference and its activities should be preserved and not withdrawn as proposed by Order 2006-7-3. Counsel: Silverberg Goldman, Michael Goldman, 202-944-3305, mgoldman@sgbdc.com
November 20, 2006 Reply Comments of The International Air Transport Association - Bookmarked The comments of others and the developments occurring subsequent to the October 20, 2006 closing date for opening comments further strengthen IATA's initial demonstration that the Department's tentative findings and conclusions may not properly be finalized on the basis of the present record. Rather, the proper course is either to withdraw the show cause proposal or to select among the alternatives for future DOT action on passenger tariff of coordination detailed in IATA's Initial Comments. IATA sees no record basis for continuing a challenge to the Composite meetings or dealing with cargo tariff coordination in this proceeding. Counsel: IATA and Wiley Rein, Bert Rein, 202-719-7080
November 20, 2006 Reply Comments of Japan Airlines International JAL supports the general thrust of IATA's comments, which call for a more deliberate and thorough approach by the Department in considering whether to withdraw antitrust immunity from IATA Passenger and Cargo Tariff Conferences and suggest that the Department may not recognize the full impact that such action would have on airlines. Japanese airlines do not have the advantage of developing interlineability alternatives within the context of alliances that have been granted immunity from the antitrust laws. Their only protection flowing from antitrust immunity stems from their membership and participation in IATA. As such, JAL has an interest in any action by the Department that would erode, or lead to the erosion of, the admittedly changing IATA interlineability system. JAL recognizes that the Show Cause Order, on its face, would apply only to discussion and agreement on fares, rates and conditions of service applicable between the U.S., Europe and Australia. Nonetheless, JAL believes the Department's proposed action could have consequences beyond U.S.-Europe and U.S.-Australia. Counsel: Steptoe & Johnson, William Karas, 202-429-6223, wkaras@steptoe.com
November 22, 2006 Motion for Leave to File and Answer of British Airways British Airways comments are limited to the proposal to withdraw antitrust immunity from all IATA Composite Conference activity. The record in this proceeding demonstrates that the Composite Conferences provide significant benefits to the traveling public. The record provides no support for the position that the Composite Conferences are anticompetitive. Nonetheless, and especially given the threat of private antitrust litigation, many carriers would hesitate risking any collective activities, no matter how worthwhile, absent continued immunity. Under those circumstances, the Department should reconsider its tentative decision to withdraw immunity from the Composite Conferences. Counsel: Garofalo Goerlich, Don Hainbach, 202-776-3970, dhainbach@ggh-airlaw.com
December 4, 2006 National Industrial Transportation League Motion for Leave to File Out of Time and Comments - Bookmarked NITL agrees with the Department's conclusions in the Order to Show Cause that the International Air Transport Association tariff conference agreement which authorizes collective discussion and establishment of rates for the international transportation by air carriers of cargo substantially reduces competition and is not necessary to meet a serious transportation need or to achieve important public benefits. We further agree that it is entirely appropriate for DOT to initiate a review of the IATA tariff conference agreement at this time, based on changes that have occurred in the airline business and the recent actions undertaken by the European Union and Australia to review and eliminate or reduce antitrust immunity for air cargo rates established by IATA members. Accordingly, NITL urges the Department to formally adopt its tentative findings set forth in the OSC and to withdraw the antitrust immunity granted for the IATA tariff conference agreement with respect to the international air transportation of cargo in the transatlantic and U.S.-Australia markets. Counsel: Thompson Hine, Karyn Booth, 202-263-4108, karyn.booth@thompsonhine.com
December 12, 2006 Answer of IATA to National Industrial Transportation League's Motion for Leave to File Out of Time The International Air Transport Association hereby opposes the motion of the National Industrial Transportation League for leave to file out of time Comments in this proceeding. NITL's motion fails to establish any "good cause" for NITL's delay in filing what should have been initial comments, due October 20. Moreover, there is nothing of substance in NITL's Comments that would justify a departure from the Department's Rules of Practice. NITL's motion effectively confuses this adjudicatory proceeding - which must be decided on evidence of record - with a legislative rulemaking process in which the statement of position that NITL is seeking to file might be given some consideration. Counsel: Wiley Rein, Bert Rein, 202-719-7080
February 13, 2007 IATA contemplates that future Composite Meetings of Passenger Tariff Coordinating Conferences will focus their agendas on standard-setting that relates to interline passenger transportation as well as to general airline operations and general airline-passenger communications and a consequential cleanup of existing Composite Resolutions. Standard setting will focus on five areas: (1) common industry definitions, (2) mileage principles, (3) fare construction principles, (4) common currency application and (5) interline baggage acceptance rules. The Composite Meetings will not seek to set prices or establish rules that significantly restrain carrier pricing discretion. The five areas of contemplated standards emphasis are described further below. In each area, future Composite Meetings would amend or supplement current Resolutions as may prove necessary or beneficial in light of changing technology and market conditions. Counsel: IATA and Wiley Rein, Bert Rein, 202-719-7080
February 23, 2007 Answer of American Airlines to IATA's Motion and Supplemental Statement American Airlines, Inc. hereby answers IATA's Motion for Leave to File and Supplemental Statement of the Future Role of Passenger Tariff Conference Composite Meetings. As American has stated previously in this docket, we have no objection to the withdrawal of antitrust immunity from the IATA tariff fare conferences, but would urge the Department to preserve IATA's ability to perform standard-setting functions that among other things facilitate interline settlement of passenger fares and cargo rates. As IATA has demonstrated in its Supplemental Statement, the Composite Meetings are an important forum for such standard-setting functions and should continue to exist. American requests that the Department grant IATA's motion and that the Composite Meetings and Resolutions continue to receive antitrust immunity. Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com
March 20, 2007 IATA Motion for Leave to File and Update on IATA Action with Respect to Composite Passenger Resolutions - Bookmaked The International Air Transport Association makes the present submission to update the factual record to reflect actions taken recently to narrow the focus of Composite meetings of the Passenger Tariff Coordinating Conferences and to make related changes in the now-approved Composite Resolutions and their future administration. These steps implement IATA's commitment to have future Composite meetings address only standard-setting agreements. Counsel: Wiley Rein, Bert Rein, 202-719-7080
Order 2007-3-23 Issued and Served March 30, 2007 Final Order - Bookmarked | On File at Federal Register April 4, 2007 We have decided to make our partial withdrawal of approval for the by-laws effective on June 30, 2007, the effective date for the DG-Competition decision ending IATA's exemption for tariff conferences for transatlantic fares. In his exchange of letters with DG-Competition, Mr. Reynolds stated that, if we determined to make our show-cause order final, we would presumably choose the June 30, 2007, effective date chosen by DG-Competition because it would be in the best interests of the governments and the affected private parties if our order became effective at the same time. Our show-cause order had stated that we intended to complete this proceeding by the end of 2006 but did not propose an effective date for our final decision, if we made our tentative findings and conclusions final. Order 2006-7‑3. Neither IATA nor any of the other parties suggested a different effective date if we determine to make the show-cause order final without further procedures. We have determined that our partial withdrawal of approval for the by-laws will become effective on June 30, 2007. Our decision will then become effective on the same day as the European Union order, and it will give IATA's members time to adjust to this order (and the simultaneous end of the European Union's exemption for tariff conferences in U.S-Europe markets). IATA has had notice since last fall that, if we made the show-cause order final, we tentatively planned to make the withdrawal of approval effective on June 30, 2007. We think that the advance notice given IATA should be adequate to enable IATA and tariff conference participants to adjust. By: Andrew Steinberg
June 18, 2007 Motion for Partial Temporary Stay of Final Order The International Air Transport Association hereby moves for a partial temporary stay of the 30 June 2007 effective date of the Final Order in this proceeding to permit completion of three types of IATA transitional activities described below. Order 2007-3-23 disapproved IATA's Provisions for the Conduct of the IATA Traffic Conferences "insofar as that agreement authorizes 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 U.S.-Europe (including EU-members' overseas territories) and U.S.-Australia routes. The Order will take effect on 30 June 2007. IATA has acquiesced in Order 2007-3-23 and taken steps to reorganize future Tariff Conference activities to be consistent with the narrowed scope of Department approval and immunity. In that process, three groups of problems have emerged that prompt this limited stay motion. In all other respects, IATA is prepared for its Tariff Conference activities to be fully compliant with Order 2007-3-23's terms beginning 30 June. Counsel: IATA and Wiley Rein, Bert Rein, 202-719-7080
February 28, 2008 Re: Motion for Partial Temporary Stay of Final Order - Update This letter concerns lATA's Motion for Partial Temporary Stay of Final Order, filed in the above docket on 18 June 2007, which motion is now pending. This letter serves to update that motion. The Motion, at pp. 8-10, specifies dates (separately for four groups of activities) until which lATA requests a stay. Due to the passage of time since the Motion was filed, lATA has found it necessary to reschedule some of the activities contemplated by the Motion. Reflecting this rescheduling, lATA now requests that the 30 June 2007 effective date of ordering paragraph 1 of Order 2007-3-23 be stayed for the following limited times and purposes: Counsel: Wiley Rein, Bert Rein
Order 2008-7-4 Issued July 1, 2008 | Served July 7, 2008 Order - Bookmarked Our final order disapproving IATA's Provisions addressed IATA's longstanding tariff conference procedures, which provide for airline discussions and agreements on interlineable fares at meetings, by mail votes, and in conference calls. The Flex Fares system, by contrast, is a mechanistic, computer-driven process that involves no direct contact between carriers. It will produce IATA 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 contacts 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 IATA 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. However, we are not prepared to approve and immunize the Flex Fares agreements. IATA argues at great length that the Flex Fares system is competitively benign, and we are not convinced by its contradictory assertion that approval and immunity are warranted in order to remove the specter of private antitrust suits that would allegedly frighten carriers away from participating in Flex Fares. The proposed Flex Fares system does not appear to present the type of conduct we prohibited in our final order, and if the new system is indeed competitively benign there is no reason it should not be able to operate fully subject to U.S. antitrust laws. The agreements we are exempting would implement Flex Fares in all U.S.-Europe and U.S.-Southwest Pacific markets. Our final order in the IATA Tariff Conference Proceeding disapproved the IATA Provisions insofar as they applied to pricing in the U.S.-ECAA and U.S.-Australia markets, but left them in place in other U.S.-Europe and U.S.-Southwest Pacific markets. Thus, while traditional tariff coordination is prohibited on U.S.-ECAA and U.S.-Australia routes, the terms of our order do not bar it on the other routes, and absent further Department action it would be theoretically possible for lATA to conduct both traditional and Flex Fares coordination on them. While we do not believe it is IATA's intention to operate a dual system, to remove any ambiguity we will condition our exemption on non-application of the Provisions to the remaining U.S.-Europe and U.S.-Southwest Pacific markets. By: Michael Reynolds |
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