Docket OST-96-1705 | May 7, 1997

Agreements Adopted By The Traffic Conferences Of The International Air Transport Association

IATA moves for leave to file this response in opposition to

USTAR's out-of-time comments filed in this docket on April 4,

1997.

The passenger fare construction resolutions contained in the pending IATA agreement 1/ refine and clarify procedures previously approved by DOT in Order 96-5-19 for determining ticket prices for complex itineraries. The pricing method approved in that Order is a "default" methodology devised to handle the small proportion of traffic that moves over complex routings, and it should be noted that in U.S. markets, airlines,

1/ This agreement consists of Memoranda COMP Reso/P 1120, 1121 and 1122. Of the agreement's 21 resolutions, the eleven resolutions contained in Memoranda COMP Reso/P 1121 and 1122 are unrelated to fare construction: 011, 012, 024d, 087aa, 090, 092, 100, 300, 301, 311t and 311g.

acting individually or bilaterally, are free to sell without regard to this methodology. 2/

Contrary to what USTAR has implied, the resolutions in the pending agreement do not introduce a new construction methodology. They also do not introduce the construction rules which USTAR seeks to eliminate: The country-of-unit origin

2/ In Order 96-5-19 DOT described the "pricing-unit" method of fare construction and the reasons for its adoption as follows:

The new rules attempt to reconcile the two different pricing approaches being used by computer reservations systems (CRSs) to calculate normal fares with multiple segments for international journeys. Some CRSs use the traditional "journey" concept which treats the fare for a multiple segment itinerary as a single unit, and applies various fare checks to prevent the constructed through fare from undercutting fares between individual points along the itinerary. Some CRSs use a more innovative "pricing unit" concept, which separates the multi-segment journey into several pricing units, as if selling separate tickets for each, and then adds them together on one ticket to see whether the total produces a lower fare that can be quoted to the customer. Still others use a mixture of the two concepts, depending upon the itinerary involved. These inconsistencies in pricing among the various systems have caused much confusion, with the same itinerary on the same carrier being priced differently by different CRSs . . . . These new rules will then govern all IATA normal and special fare constructions throughout the world, and will become the basis for programming all CRSs. Carriers, however, will still be able to issue their own instructions to CRSs.

minimum check, the country-of-payment minimum check, the common-point minimum check, the one-way normal fare check, the circle-trip minimum check, and the round-the-world minimum check, all of which have been in place for years to accommodate complicated, usually interline, routings. The return subjourney check was introduced in 1996, after approval in Order 96-5-19.

The pending agreement refines and clarifies existing procedures by specifically identifying the application of the one-way subjourney minimum check in Resolution 017d and by changing the mixed-class construction in Resolution 017e and the method of changing an itinerary en route in Resolution 017f. All other changes are of a purely technical nature.

B. USTAR's Comments.

USTAR's comments do not deal substantively with the matters at issue but seek to use IATA's application as a vehicle for alleging deficiencies in existing U.S. Computer Reservations Systems (CRSs) over which IATA has no control. By denigrating the service provided by U.S. CRSs, USTAR seeks to showcase its own competing CRS system now under development. To the extent USTAR's observations about U.S. CRSs have any merit, they should be submitted in a petition for rulemaking to amend 14 CFR 255, DOT's regulations on CRSs, not in this proceeding involving an IATA air carrier agreement.

The real basis for USTAR's untimely comments can be found in a document entitled "An Overview of the Genesis Project," which is available on the USTAR Home Page .3/ There, USTAR argues that U.S. travel agents are being held hostage by the existing U.S. CRS databases and programming. 4/ To free travel agents from this alleged bondage, USTAR is proposing an alternative, agent-owned CRS system which USTAR plans to program and operate to meet agent needs as perceived by USTAR. 5/ USTAR claims that it is in the process of soliciting bids to design and develop its competing CRS system and has been making presentations to travel agents and others to gain support for its proposal, which it calls the "Genesis Project. 6/

As part of USTAR's ongoing effort to attract travel agent interest and support for its project, it clearly serves USTAR's

4/ "The time has come to dismantle the strangle hold (sic) that carriers and their CRS affiliates have over the 36,000 plus travel agents under their thumb. The time has come for us to realize that the CRS companies are building systems, on the backs of travel agents, with billions of dollars of travel agent generated revenues, to steal our customer base away." Attachment A, p. 2.

5/ "The time has come to break free, become technologically independent, and build the systems and processes which will take us into the next century." Id.

6/ "The Genesis Project has, as its core objective, the mandate to develop and implement the structure, processes, and systems to bring control and administration to the travel agency community over business accreditation, CRS services, ticketing and documentation, and supplier settlement." Id. at 3.

interest to point out arguable shortcomings in the existing U.S. CRSs' fares and rules presentations and to imply that travel agents are at risk when relying on such systems .7/ That, in a nutshell, is USTAR's real purpose in submitting its very late comments in this public docket. IATA (which does not own or operate a CRS) has no competitive quarrel with USTAR. But USTAR should not be permitted to use this unrelated proceeding to promote its commercial objectives.

The bulk of USTAR's comments use as a touchstone certain CAB/DOT conditions on IATA Passenger Tariff Coordinating Conference air carrier agreements, the first of which was imposed some twenty years ago. 8/ In essence, these conditions require that IATA Conference-based fares applicable between two or more non-U.S. points must be available to construct combination fares sold in the U.S. These government conditions, which limit restrictions on fare combinability, were imposed on Resolution 001 (Permanent Effectiveness) and apply to subsequent IATA

7/ "Travel agents also advise that they are reluctant to override the auto-pricing algorithms of the CRS companies for fear of becoming responsible for defending the fare and being held liable for substantial penalties in a carrier/CRS dispute." Comments at 2.

8/ Specifically, Orders 78-7-113, 82-2-130, 82-11-84, 853-79, 86-7-67 and 89-7-52. Comments at 2.

Conference-based fares. 9/ USTAR argues that the U.S. CRSs have not been properly programmed to reflect these conditions. 10/

By way of illustration, USTAR provides a hypothetical NYCMAD-TYO pricing example and claims that "[w]ithout any regard to the Department's prohibition on combinability and/or sales and advertising restrictions, all four U.S. CRSs (Apollo, Sabre, System One, and Worldspan) defaulted the MAD-TYO-MAD segments to the normal Y class economy fare.''1l/ USTAR then constructs a lower combination fare to show that the CRSs had not been properly programmed. 12/ Although this allegation is unverified, USTAR's obvious focus is the supposed inadequacies of the existing U.S. CRSs. 13/

USTAR knows that IATA does not own or control any of the U.S. CRS companies about which it complains. USTAR is thus

9/ The conditions do not, of course, apply to non-U.S. point-to-point "creative" fares that foreign air carriers have introduced outside of the IATA Tariff Coordinating Conferences and that are, in consequence, not in "foreign air transportation." Such fares are beyond DOT's jurisdiction.

10/ Comments at 2.

11/ Comments at 3.

12/ Id.

13/ If USTAR's comments are actually intended to relate to the IATA agreements establishing the "pricing-unit" concept, it is clear that they should be barred as a very late petition for reconsideration of final Orders issued many months ago. US TAR has presented no factual or legal basis that would justify an out-of-time collateral attack on DOT final Orders in this proceeding.

arguing for the impossible in contending that IATA has an obligation to see that the existing U.S. CRSs reprogram their systems to provide the allegedly missing fare construction information or default algorithms. 14/ IATA has no commercial power or any legal authority which would permit it to instruct private U.S. CRS companies on the information or software they provide or use. IATA therefore cannot be held responsible for any shortcomings that may exist in those systems. DOT has never suggested that IATA, a private Canadian corporation, has or should have any such authority with respect to private U.S. companies or that DOT, itself, can so empower IATA.

Unlike IATA, however, DOT does have limited statutory authority to regulate CRSs, and has done so in 14 CFR 255. Thus, to the extent that USTAR wishes to challenge the adequacy or completeness of the rules information or fare construction algorithms available to agents using those systems, it should file a petition for rulemaking.

USTAR's commercially-motivated fixation on the shortcomings of its U.S. CRS competitors also obscures the most obvious missing fact in its comments: that competent travel agents are not actually slaves to the construction algorithms of the CRSs.

14/ "[IATA] should take the necessary steps to assure that the very CRSs which have complained about the matter do their utmost to uphold the [pricing-unit] concept and abide by government regulations in the process." Comments at 4.

Rather, they have been trained to search out and construct the lowest combination fares consistent with the governing CAB/DOT conditions by using all available information resources. Such competent agents would obviously be tipped off to the possible need for a little extra work by requests from clients for unusual routings of the type used in USTAR's hypothetical example (a circuitous New York and Tokyo routing via Madrid in both directions by a passenger also able to meet all applicable discount fare conditions).

In order to demonstrate the resources available to competent agents, IATA made "blind" requests to two retail travel agents in the Washington, D.C. area seeking quotes for the lowest prices for USTAR'S NYC-MAD-TYO roundtrip hypothetical. /15 Since there are no IATA Conference-based special through fares between NYC and TYO via the Atlantic, all such fares would have to be constructed. The prices quoted - $2,047.01 and $1,895.00 - use non-IATA Conference fares. (The lowest fare using IATA Conference fares that IATA's staff could construct for this unusual routing in the shoulder season was $2,552.00.) These fares were lower than the $2,749 fare that USTAR developed. 16/

15/ See Attachment B for IATA's "blind" fax request and the agents' responses.

16/ Comments at 3.

Lastly, USTAR has offered no facts to support its general expressions of concern about the scope and continued applicability of the conditions previously imposed by CAB/DOT. 17/ However, USTAR does not demonstrate that the conditions (i) do not remain in effect (they do) or (ii) are not routinely published by IATA in its governing Resolutions Manuals (they are). IATA Passenger Tariff Coordinating Conferences are conducted taking into account DOT's conditions. Where fares and rules are agreed for application in non-U.S. point-to-point markets, it is understood that DOT's conditions apply for sales made in the U.S. The conditions are stated in the government reservations portion of the Resolutions Manual and are reflected in Resolution 017a, Section B. Paragraph (l)(a), and therefore do not need to be restated as part of each fare/rule description or in every individual Resolution. 18/ USTAR's comments therefore lack factual or legal foundation and should be treated accordingly.

17/ Comments at 5, penultimate pare.

18/ It should also be recognized that IATA cannot enforce air carrier compliance with the Passenger Tariff Coordinating Conference resolutions. Conference members remain free to depart from the terms of the resolutions to meet market conditions, including fare construction.

In the second part of its comments and "as a completely separate matter," USTAR wishes to challenge the charges for PTAs (Prepaid Ticket Advices) which are intended to compensate airlines for writing and issuing tickets where the sale of the ticket takes place somewhere other than the origin of the journey at locations outside the U.S. l9/ Like its other comments, USTAR's remarks deal with an issue that has long since been resolved by final DOT Order. See Order 96-9-5, approving Resolution 210 ($35 basic PTA charge) ("we conclude that the agreement . . . will not result in . . . charges that are unlawful or injurious to competition in the markets at issue"). Accordingly, USTAR's out-of-time comments on resolutions not pending in this docket should be rejected.

For the reasons set forth herein, IATA respectfully requests that USTAR's untimely and misdirected comments be rejected. Deferring, or denying, approval of the resolutions pending in this docket will not change the fundamental workings of the fare-construction system. However, it will delay, or defeat,

l9/ Comments at 6. Typically, a PTA is sold to a family member in one country and the ticket is delivered to another family member for travel originating in a second country. The transaction and special handling costs involved in a sale of this type justify the additional charge.

refinements designed to clarify and expand it. IATA requests that DOT act promptly to approve these resolutions.

Respectfully submitted,

David M. O'Connor

Director, External Relations -United States

International Air Transport Association

Attorney-in-fact

May 7, 1997

IATA - 5/7/97