[Federal Register Volume 61, Number 158 (Wednesday, August 14, 1996)]
[Proposed Rules]
[Pages 42208-42217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20736]
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DEPARTMENT OF TRANSPORTATION
14 CFR Part 255
[Docket No. OST-96-1145 [49812]; Notice No. 96-21]
RIN 2105-AC56
Fair Displays of Airline Services in Computer Reservations
Systems (CRSs)
AGENCY: Office of the Secretary, Transportation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department is proposing to adopt two rules to further
ensure that travel agents using computer reservations systems (CRSs)
can better obtain a fair and complete display of airline services. One
proposed rule would require each CRS to offer a display that lists
flights without giving on-line connections any preference over
interline connections. The second proposed rule would require that any
display offered by a system be based on criteria rationally related to
consumer preferences. As an alternative to the latter proposal (or as
an additional rule), the Department is also proposing to bar systems
from creating displays that neither use elapsed time as a significant
factor in selecting flights from the data base nor give single-plane
flights a preference over connecting services in ranking flights. The
Department believes that these rules are necessary to promote airline
competition and ensure that travel agents and consumers can obtain a
reasonable display of airline services. The Department is acting on the
basis of informal complaints made by Frontier Airlines, Alaska
Airlines, and Midwest Express Airlines.
DATES: Comments must be submitted on or before October 15, 1996. Reply
comments must be submitted on or before November 12, 1996.
ADDRESSES: Comments must be filed in Room PL-401, Docket OST-96-1145
(49812), U.S. Department of Transportation, 400 7th St. SW.,
Washington, DC 20590. Late filed comments will be considered to the
extent possible. To facilitate consideration of comments, each
commenter should file twelve copies of its comments.
FOR FURTHER INFORMATION CONTACT: Thomas Ray, Office of the General
Counsel, 400 Seventh St. SW., Washington, DC 20590, (202) 366-4731.
SUPPLEMENTARY INFORMATION: Airline travelers in the United States
usually rely upon travel agents to advise them on airline service
options and to book airline seats. Travel agents in turn largely depend
on CRSs to determine what airline services and fares are available in a
market, to book seats, and to issue tickets for their customers. Travel
agents rely so much on CRSs because they can perform these functions
much more efficiently than any other means currently available. Each of
the CRSs operating in the United States is owned by, or is affiliated
with, one or more airlines, each of which has the incentive to use its
control of a system to prejudice the competitive position of other
airlines. We therefore found it necessary to adopt regulations
governing CRS operations, 14 CFR Part 255, in order to protect
competition in the airline industry and to help ensure that consumers
obtain accurate and complete information on airline services. 14 CFR
Part 255, adopted by 57 FR 43780 (September 22, 1992), after
publication of a notice of proposed rulemaking, 56 FR 12586 (March 26,
1991). Our rules readopted and strengthened the rules originally
adopted by the Civil Aeronautics Board (``the Board'') and published at
49 FR 11644 (March 27, 1984) (the Board was the agency that formerly
administered the economic regulatory provisions of the Federal Aviation
Act, now Subtitle VII of Title 49 of the U.S. Code).
One of our major goals in adopting the rules was to assure that CRS
displays would provide an accurate and complete display of airline
services when a travel agency customer requested airline information.
When the CRSs were unregulated, each system biased its display of
airline services in favor of its airline owner's flights in order to
generate more bookings for its owner. Our rules, like the Board's
rules, accordingly prohibit each CRS from using factors related to
carrier identity in editing and ranking airline services in its
displays. Section 255.4.
While our display rules also impose some other restrictions on CRS
displays in order to reduce the likelihood of bias, our rules generally
do not regulate the criteria used by each system to edit and rank the
airline services shown in its displays. In particular, we have not
prescribed the display algorithm that each system must use (the
algorithm is the set of rules for editing and ranking airline services
in a particular display). In our last CRS rulemaking we declined to
adopt stronger rules on CRS displays, in part because we believed that
the systems' competition for subscribers (the travel agencies using a
CRS) would keep each system from offering irrational displays designed
to gain additional bookings for its owner airlines.
Recent experience suggests that the systems' competition for
subscribers may not adequately check the desire of the airline owners
of each system to create displays that will increase their airline
bookings, even if those displays list airline services in a way that is
contrary to consumer preferences. We are therefore proposing to revise
our rules on CRS displays. One rule would require each CRS to offer a
display that does not give on-line connections a preference over
interline connections. The other rule would require that any display
offered by a system be based on criteria rationally related to consumer
preferences. As an alternative to the latter proposal (or as an
additional rule), we are also asking for comments on a possible rule
prohibiting displays that neither use elapsed time as a significant
factor in selecting flights from the data base nor give single-plane
flights a preference over connecting services in ranking flights.
In considering these issues, we are relying in large part on the
findings made in our 1991-1992 rulemaking, in the Board's rulemaking,
and in our last study of the CRS business, Airline Marketing Practices:
Travel Agencies, Frequent-Flyer Programs, and Computer Reservation
Systems, prepared by the Secretary's Task Force on Competition in the
Domestic Airline Industry (February 1990) (Airline Marketing
Practices). That study and our rulemaking notices present a detailed
analysis of CRS operations and their impact on airline competition and
consumers. We are proposing to impose additional requirements on CRS
displays because our reexamination of CRS issues and further experience
with
[[Page 42209]]
CRS practices have caused us to believe that further regulation is
necessary, despite our finding to the contrary in the previous
rulemaking.
We have also relied on the pleadings filed in Docket 48671 in
connection with Galileo's use of its exemption authority to change the
display of single-plane flights in a way that assertedly benefits the
interests of Galileo's principal owners, United Air Lines and USAir, at
the expense of competing airlines like Alaska Airlines and Midwest
Express Airlines, and denies travel agents using Galileo and their
customers a useful display of airline services.
Background
We have found it necessary to regulate CRSs because of their
predominant role in the marketing of airline services to consumers.
Travel agents sell about 70 percent of all airline tickets sold in the
United States. Travel agencies generally hold themselves out as neutral
sources of travel information rather than as promoters of the services
of one or a few airlines, so travelers rely on them for impartial
advice on airline service options. 57 FR at 43782.
To determine what airline services are available when a customer
requests information, travel agents usually rely on a CRS, because the
CRSs provide information on the services offered by the great majority
of airlines more efficiently than any other source. 56 FR at 12587.
Most travel agency offices, moreover, rely entirely or predominantly on
one CRS rather than use multiple CRSs. 57 FR 43783.
Each of the four CRSs operating in the United States is owned by
one or more airlines or airline affiliates. The parent corporation of
American Airlines owns the largest system, Sabre. Apollo, the second
largest system, is operated by Galileo International Partnership, which
is owned by United Air Lines, USAir, Air Canada, and several European
airlines. Worldspan is owned by Delta Air Lines, Northwest Airlines,
Trans World Airlines, and Abacus, a group of Asian airlines. System One
is controlled by Amadeus, a major European CRS firm, in which
Continental Air Lines has an ownership interest.
The editing and ranking of airline flights in creating CRS displays
are important because a flight's display position affects the number of
bookings made on the flight. No system can display all of the available
airline services in most markets on a single screen, for a CRS can
display only five or six flights on each screen. If a travel agent
wants to see additional service options, the agent must call up
additional screens of information. The CRS therefore must use some
method for ranking flights.
Travel agents are more likely to book a flight when it appears on
the first screen of the display, and the flight most often booked is
the first flight shown on the first screen. The first flights displayed
are booked more frequently in part because those flights are likely to
be the flights that best meet the customer's needs, but, as the
airlines owning the systems have long known, those flights will also be
booked more often merely because of their better display position. 56
FR at 12608.
Given the importance of CRSs to airline marketing, the airlines
owning each system have an incentive to use it to prejudice the
competitive position of rival airlines. Downgrading the display
position of the flights operated by competing airlines would be an
effective method of distorting airline competition if there were no CRS
rules. As the Board found, before CRS displays were regulated, each of
the airline-owned systems biased its displays in favor of the owner
airline. At least one of the systems, Apollo, was attempting to make
its bias both more effective and less visible to travel agents. Systems
sometimes used display bias to prejudice specific airline competitors
as well. For example, Sabre had imposed a substantial display penalty
on all of New York Air's flights in order to force New York Air out of
one important American market. 56 FR at 11656, 12593. Consumers
obviously suffer when a system hides or eliminates information on
potentially attractive service options.
Regulatory Background: The Board's Rulemaking and Subsequent Events
The injuries caused consumers and airline competition by display
bias were among the factors that caused the Board to adopt rules
regulating CRS operations. In adopting its rules the Board relied
primarily on its authority to prevent unfair methods of competition and
unfair and deceptive practices in the marketing of airline
transportation under section 411 of the Federal Aviation Act, codified
then as 49 U.S.C. 1381, since recodified as 49 U.S.C. 41712. 57 FR at
43789-43791. On review the Seventh Circuit affirmed the Board's
prohibition of display bias (and its other CRS rules). United Air Lines
v. CAB, 766 F.2d 1107 (7th Cir. 1985).
The Board's principal rule on CRS displays prohibited each system
from using carrier identity as a factor for editing and ranking airline
services. To reduce the likelihood of bias and incomplete or misleading
displays of airline services, the Board adopted several other rules
related to CRS displays. These rules required each system, among other
things, to use a minimum number of connect points in constructing
displays of connecting services for any market and, on request, to give
participating airlines and subscribers a description of its display
algorithms.
The Board determined that these rules were necessary because travel
agencies and their customers could neither prevent the systems from
offering biased displays nor offset the effect of bias. The airlines
participating in a system--the airlines which paid fees in order to
have their services displayed and available for sale through a CRS--
also did not have the power to keep the systems from biasing their
displays. 49 FR at 32543-32544, 32547-32548.
The Board's rules did not end efforts by the airlines controlling
the CRSs to improve the display position of their own flights at the
expense of the flights operated by competitors. First, the Board's
rules applied only to each system's principal display and did not
regulate other displays offered by a CRS. Some systems created biased
secondary displays in order to regain the benefits of display bias.
This caused the Department to obtain each system's agreement not to
offer biased secondary displays. Marketing Practices at 81-82. We later
amended the rules to extend the prohibition on display bias so that it
barred biased secondary displays. 57 FR at 43802.
Another example of CRS manipulation involved flight times. Since
the systems commonly ranked flights on the basis of elapsed time, some
airlines allegedly began publishing schedules with unrealistically
short elapsed times so that their nonstop flights would be displayed
before the flights of airlines using accurate schedules. To stop this
abuse each system agreed that it would no longer rank nonstop flights
on the basis of elapsed time. Airline Marketing Practices at 83.
Despite the Board's prohibition of carrier-specific display bias
and our later actions on displays, an airline with an ownership
interest in a system could still give its own flights better display
positions by choosing facially-neutral display criteria matching the
predominant characteristics of its airline operations. While other
airlines with similar operational characteristics would also benefit,
those airlines that had chosen different strategies would suffer,
although that result was not inevitably unfair. The Justice Department
thus stated in its initial
[[Page 42210]]
comments in our last reexamination of the CRS rules, Comments of the
Department of Justice on the Advanced Notice of Proposed Rulemaking at
17:
[V]endors continue to manipulate their algorithms to improve
their own flights' display relative to that of other carriers. The
CRS vendors select for their algorithm the particular non-carrier-
specific criteria, such as elapsed time, departure time, circuitry,
and connect time, that due to differences in the route
configurations and schedules of carriers, optimize the position of
their airlines' flights in the display.
While the Board chose not to adopt detailed rules on CRS displays,
European governments took a different approach when they adopted their
own CRS rules. The European Union's rules, which were derived from
guidelines adopted by the European Civil Aviation Conference
(``ECAC''), impose more detailed regulations than did either the Board
in its rulemaking or we when we revised the Board's rules in 1992.
Insofar as displays are concerned, the European Union rules allow each
system to offer only one display, the so-called ECAC display, unless
the travel agency customer's needs require the use of a different
display. The ECAC display lists all nonstop flights first, followed by
single-plane flights (such as one-stop flights), with connecting
services being shown last. The display may not use an on-line
preference.
Regulatory Background: The Department's Rulemaking
Several years ago we held a proceeding to reexamine the Board's CRS
rules. We determined to readopt them with several changes designed to
promote competition in the airline and CRS businesses. 57 FR 43780
(September 22, 1992) and 56 FR 12586 (March 26, 1991). Like the Board,
we adopted the CRS rules under our authority to prevent unfair methods
of competition and unfair and deceptive practices in the marketing of
airline transportation under section 411 of the Federal Aviation Act,
now 49 U.S.C. 41712. 57 FR at 43789-43791.
Among the issues considered in our rulemaking were CRS display
issues. Our notice of proposed rulemaking recognized, as the Department
of Justice pointed out, that vendors could be choosing seemingly
neutral display criteria in order to improve the display position of
their own flights. However, we did not propose a rule prescribing the
ranking and editing criteria that must be used in CRS displays. We
doubted that there was a single best way for displaying airline
services, and we agreed with the Justice Department that it would be
inefficient for us to try creating the best possible display. We also
believed that the vendors' ability to choose their display criteria was
not causing significant competitive harm in the airline industry. 56
FR. at 12609.
While we did not propose a rule banning the use of an on-line
preference, we invited the parties to comment on whether the preference
should be banned. We noted that giving on-line connections a preference
over interline connections was consistent with consumer preferences,
since travellers generally preferred on-line service. 56 FR at 12609.
Nonetheless, we also recognized that the systems' use of the preference
could overstate travellers' usual preference for on-line service. We
further noted that the systems' use of on-line preferences could put
small airlines at a competitive disadvantage, 56 FR at 12610:
The on-line preference may also unduly strengthen the vendor
carriers' competitive position against smaller U.S. carriers, since
the vendors have nationwide route systems with several hubs that
enable them to offer on-line service to points throughout the
nation. Smaller carriers, on the other hand, cannot match that
service since they have few hubs and often operate only in one
region.
In their comments on our notice of proposed rulemaking, some
airlines argued that stricter display rules were essential because the
systems' owners were using ranking and editing criteria that favored
their own services at the expense of competing services.
ECAC and three airlines asked us to prescribe the algorithm that
would be used for all CRS displays. We declined to take such action,
largely on the basis of the reasoning set forth in the notice of
proposed rulemaking. However, we also noted that the systems'
competition for travel agency subscribers appeared to make additional
display regulation unnecessary: ``[S]ubscriber demands seem to be
causing vendors to offer travel agents alternative displays using some
algorithms similar to European standards.'' 57 FR at 43803.
We also decided not to prohibit the use of an on-line preference.
Despite our concern with the preference's potential impact on U.S.
airline competition, no U.S. airline filed comments opposing the
preference, and one smaller airline--Alaska Airlines--filed comments
supporting the preference. 57 FR at 43804.
Finally, we declined to adopt the proposal by the Orient Airlines
Association that we require each system to demonstrate that its ranking
and editing criteria met consumer demands. We thought that that
specific proposal was unwise, since it could require us to review and
second-guess system decisions on display criteria. We also considered
the proposal unnecessary, since it ``would be unlikely to lead to
significant changes in the vendors' display algorithms.'' 57 FR at
43803. But, while we chose not to require vendors to demonstrate that
they were basing their algorithms on consumer preferences, we expressly
stated that the vendors would not have unlimited discretion to select
display criteria. An airline dissatisfied with a vendor's algorithm
could complain to us. 57 FR at 43803.
In addition, we found that our new rule on third-party hardware and
software, Sec. 255.9, would give travel agencies the ability to use
software programs that could improve the quality of airline service
displays. If travel agencies obtained programs that reconfigure the
information provided by a system, they could create displays that might
be more useful for their customers by better reflecting consumer travel
preferences. 57 FR at 43797.
As explained below, recent developments in the CRS business have
caused us to question the validity of our previous finding that no
additional regulation of CRS displays was needed. But before explaining
the basis for our doubts, we will describe the algorithms offered by
each system.
With respect to one provision in the rules, we have allowed three
of the systems to provide a display that differs from the rules'
requirements. We have given several systems exemptions from one
provision of our rules, Sec. 255.4(b)(1), which requires that the
system use the same algorithm for displaying services in all markets.
Orders 90-8-32 (August 14, 1990) and 94-3-44 (March 24, 1994) (Sabre);
Order 93-8-2 (August 13, 1993) (Galileo); Order 91-7-41 (July 26, 1991)
(Worldspan). As a result, as described below, some of the systems use
one algorithm for airline services within North America and a different
algorithm for services not entirely within North America, such as
transatlantic flights.
The Vendors' Current Algorithms
Sabre. Sabre offers two displays, a category display and an
integrated display. Sabre's category display ranks airline services as
follows: nonstop flights are listed first, direct flights (single-plane
flights) are listed second, and connections are listed last. Sabre uses
several factors to rank flights within each category, such as
displacement time (the difference between the flight's departure time
and the traveller's requested departure time). Sabre also uses elapsed
time to a limited extent in ranking airline services other
[[Page 42211]]
than nonstop flights (and in selecting flights from the data base for
the display), although flights whose elapsed time does not exceed the
elapsed time of the fastest service in that category by more than 90
minutes are treated as having the same elapsed time as the fastest
service. Sabre uses this display for both international and domestic
services, and the display has used an on-line preference only for
ranking connecting services within North America. April 20, 1994 letter
of David Schwarte, Associate General Counsel, Docket 49318.
Sabre's other display--the integrated display--is available only if
both the origin and the destination of the traveller's itinerary are
within North America. Like the category display's algorithm, the
algorithm uses factors like displacement time and elapsed time to rank
flights and to determine which flights in the data base are displayed,
but it does not automatically show connecting services after all
nonstop flights and single-plane flights. The algorithm ranks each
service on the basis of the penalty points assigned the flight on the
basis of how well the flight satisfies the ranking criteria; for
example, a flight with a departure time close to the traveller's
requested departure time will receive fewer penalty points than a
flight with a departure time that is farther away from the requested
departure time. When a connecting service has fewer penalty points than
a nonstop flight, the algorithm will display it before the nonstop
flight. The integrated display uses an on-line preference.
Apollo. Apollo also offers travel agents in the United States two
displays, the Basic Display and the U.S. ECAC Display. The Basic
Display ranks flights by category--first nonstop flights, then single-
carrier ``one-stop service'' (Apollo treats as one-stop service both
one-stop flights and single connections between two nonstop flights),
then interline ``one-stop service'', then on-line ``two-stop service'',
then interline ``two-stop service'', then on-line service with three or
more stops, and finally interline service with three or more stops.
Despite its name, Apollo's U.S. ECAC Display does not apply ECAC's
display guidelines. Like the Basic Display, the U.S. ECAC Display
displays flights by category: nonstop flights are listed first, then
one-stop services (that is, one-stop single-plane flights and
connections between two nonstop flights) are displayed, followed by
two-stop services, with services involving three or more stops being
shown last. This display does not use an on-line preference.
The display offered travel agents in Europe using Apollo's
affiliated system, Galileo, complies with the ECAC display guidelines.
Like Apollo's U.S. ECAC display, it lists all nonstop flights first,
but, unlike the U.S. display, it then lists all single-plane flights
before showing any connecting services.
Some airlines and many travel agents believe that both of the
Apollo displays offered U.S. travel agents unreasonably rank airline
services in order to give Apollo's airline owners a competitive
advantage over other airlines. These airlines and travel agents
consider the algorithms unreasonable because they give no preference to
single-plane flights over connecting services and select flights from
the database in a manner which gives a better display position to
flights with less displacement time, as explained below. As a result,
two airlines--Alaska and Midwest Express--and a major travel agency
trade association have complained about the Apollo displays, as
described below.
Worldspan. Worldspan also offers U.S. subscribers two types of
displays, one referred to as an EEC display, the other referred to as a
U.S. display. The so-called EEC display is consistent with the European
CRS rules (and so has no on-line preference). The U.S. display that
comes in two variants. In one variant of the U.S. display (and the only
version available for airline services not entirely within North
America), the display ranks airline services by category but uses an
on-line preference.
In the other variant, which can be used only for services entirely
within North America, the algorithm assigns penalty points to different
services on the basis of such factors as displacement time, elapsed
time (except that all nonstop flights are treated as having the same
elapsed time), numbers of stops, and number of connections required.
The algorithm uses an on-line preference.
System One. System One, like Worldspan, offers an ECAC display that
is consistent with the European CRS rules. System One also offers a
second display, the departure time display, which is also a category
display. The departure time display ranks airline services in the
following order: nonstop flights, then single-plane flights, then two-
segment nonstop on-line connections, then two-segment nonstop interline
connections, and so on.
Problems With Current CRS Displays
As noted, several airlines and a major travel agency trade
association, the American Society of Travel Agents (``ASTA''), have
complained about Apollo's display practices. Although these complaints
only involve Apollo, we believe that a rulemaking is appropriate
because other systems may be considering the adoption of similar
display practices. Apollo's conduct suggests that travel agent and
consumer desires for reasonable displays do not provide as much of a
check on unreasonable CRS displays as we had thought and that systems
may therefore create displays that serve the interests of their airline
owners while possibly denying the system's users a reasonable ranking
and display of airline services.
We will discuss first the on-line preference used by Apollo and
other systems and then the problems caused by Apollo's other display
practices.
The Systems' On-line Preference
Frontier Airlines has complained that Apollo's display algorithm
gives an unreasonable preference to on-line connections and that this
preference is worsened because connections between code-sharing
partners (two airlines using one airline's code for both airlines'
service) are treated as on-line connections. Frontier considered
Apollo's display unfair because it injured Frontier's ability to
compete in North Dakota markets. Frontier was offering jet service from
North Dakota points to Denver in competition with a commuter airline
operating under United's code. Since the commuter airline's flights
were listed in CRSs under United's two-letter code, connections between
the commuter airline and United at Denver, United's hub, were treated
as on-line connections and given preference in Apollo's display over
connections between Frontier and United at Denver. United had provided
most of the nonstop service to points beyond Denver, so the poor
display position given the connections between Frontier and United made
it difficult for Frontier to obtain bookings from consumers who
travelled to or from North Dakota points over Denver. Since Frontier,
unlike the United commuter airline, used jet aircraft to serve the
Denver-North Dakota routes, Frontier considered its service more
attractive to travellers. According to Frontier, travellers nonetheless
often were unaware of Frontier's service because Apollo's penalty for
interline connections gave an unreasonably poor display position to
connections over Denver between Frontier and United or another airline.
While a system's use of an on-line preference is usually consistent
with the preferences of many travellers, an on-line preference also
benefits the airlines with CRS ownership interests, since it reflects
the characteristics of their
[[Page 42212]]
services. Each of those U.S. airlines is one of the largest U.S.
airlines and operates a hub-and-spoke route system, that is, it
operates a large number of flights connecting over a hub and relatively
few point-to-point flights that do not either depart from or arrive at
a hub. An airline operating a hub-and-spoke route system has little
interest in capturing interline traffic, since its route structure and
flight schedules are designed to keep travellers on its own connecting
flights when nonstop and single-plane flights are unavailable. Such an
airline benefits from CRS displays that show on-line connections before
interline connections.
We recognize, as we have stated before, that consumers generally
prefer on-line services over interline services. 56 FR at 12609.
However, a system's use of an on-line preference also promotes the
interests of its airline owners, and a system's preference may
overstate the desirability of on-line service.
We believe that Apollo's treatment of interline connections, in
combination with Apollo's other ranking and editing criteria, may cause
consumer harm. The on-line preference used in the Apollo Basic Display
makes it harder for travel agents to find interline connections, even
though such connections at times may offer the best service for
consumers, since the display shows all on-line connections in a
category (for example, services involving a single connection) before
displaying any interline connections in that category. Since consumers
usually prefer on-line connections, giving on-line connections a
preference in CRS displays will often be rational. In some markets,
however, many consumers may consider an interline connection the best
service. Frontier, for example, was offering service with jet aircraft,
which many travellers prefer to the commuter aircraft operated by
United's code-sharing affiliate (of course, other travellers may prefer
the more frequent flights and on-line service offered by United's code-
sharing partner). In addition, as we discussed in our last rulemaking,
the systems' on-line preferences may well overstate the attractiveness
of on-line connections. On-line connections should normally appear
before interline connections in a display that uses elapsed time as a
principal ranking factor, even without an on-line preference, because
the airline offering on-line connecting service usually coordinates the
flight arrival and departure times to minimize layover time at the
intermediate airport. 56 FR at 12609. Since on-line connections do not
necessarily offer the best service, however, the systems' use of
algorithms that always give on-line connections a preference over
interline connections will at times interfere with a travel agent's
ability to find the best service for the agent's customers.
Apollo's Treatment of Single-Plane Flights
The other complaint involving Apollo's displays originated in the
dissatisfaction of Alaska Airlines, Midwest Express Airlines, and the
American Society of Travel Agents (``ASTA''), the largest travel agent
trade association, with Apollo's treatment of single-plane services. In
essence, Apollo has created displays that give a better display
position to the hub-and-spoke operations of its major U.S. owners,
United and USAir, and a poorer position to the services of carriers
like Alaska Airlines and Midwest Express Airlines that do not operate a
hub-and-spoke route system.
Apollo's algorithms often give an unreasonably low display position
to single-plane flights that are more convenient for the traveller than
connecting services given a better display position. This results from
the undue importance given displacement time (the time difference
between the traveller's requested departure time and the departure time
of the flight being displayed) in ranking flights.
Although the complaint involves only Apollo's displays, the
material submitted by vendors and airlines in our current CRS study
suggests that another vendor may be considering creating a similar
display, a factor that makes it appropriate to address this issue (and
the issue informally raised by Frontier) through a rulemaking
proceeding.
Apollo offers U.S. travel agents two different displays, the Basic
Display and the U.S. ECAC Display. The algorithms for both displays
build displays in groups (work areas or ``playpens'') of sixteen flight
items (a flight item is a nonstop flight, a single-plane flight, or one
of two or more connecting flights). In creating the group of sixteen
flight items, Apollo proceeds first by category. Thus all nonstop
flights are displayed before any other services. The next category
includes both one-stop flights and single connections. Within each
category the system uses only displacement time (the time difference
between the traveller's requested departure time and the flight's
departure time) in selecting flights from the database for each work
area. In ranking the flight items within each work area, Apollo uses
both displacement time and elapsed time in the Basic Display and only
elapsed time in the U.S. ECAC Display.
The current Apollo algorithms replace algorithms that placed
nonstop flights and single-plane flights in the top category and
connecting services in a lower category. Since Apollo now puts single-
plane flights in the same category as connecting services and uses a
method for selecting flights from the database for each playpen that
gives heavy weight to displacement time, Apollo's current displays give
a relatively high display position to connecting services leaving close
to the traveller's requested departure time and a low position to
single-plane flights involving a greater displacement time, even if the
latter involve less elapsed time.
When Apollo downgraded the position of single-plane flights, two
airlines that operate a relatively large number of single-plane flights
and do not have large hub-and-spoke systems, Alaska Airlines and
Midwest Express Airlines, urged us to compel Apollo to restore its
earlier placement of single-plane flights in the same category as
nonstop flights. ASTA supported their request. They alleged that
Galileo changed the displays in order to benefit its U.S. airline
owners, United and USAir. Those two airlines rely on hub-and-spoke
systems. In the markets they serve, some of their flights will
inevitably have departure times close to any traveller's requested
departure time and thus will gain a high display position solely
because of the undue weight given displacement time when flights are
selected from the database. Alaska and Midwest Express, on the other
hand, operate a smaller number of single-plane flights that may not
depart as close to a traveller's requested departure time but which
would still be preferred by most travellers if their arrival times are
comparable to those of the competing connecting services. Travellers
tend to prefer the single-plane flights because they typically require
less travel time than connecting services and because they avoid the
inconveniences and risks of missed connections and lost baggage that
can arise when travellers use connecting services. Alaska estimated
that it may lose $15 million in potential revenues each year as a
result of the new Apollo displays, while Midwest Express estimated that
its annual revenue losses would equal several million dollars. See
Order 94-8-5 (August 3, 1994) at 17.
As a result of the initial complaints made by Alaska and Midwest
Express, we partially revoked the exemption that Galileo had obtained
in order to make the Basic Display usable only for
[[Page 42213]]
services within North America, Order 94-8-5 (August 3, 1994). When
Apollo responded to that order with display changes that generated
further complaints from Alaska, Midwest Express, and ASTA, we required
Galileo to provide information on its justification for changing the
treatment of single-plane flights and on related issues. Order 94-11-9
(November 15, 1994).
We have tentatively determined that Galileo's ability and
willingness to create seemingly unreasonable and unfair displays
requires us to propose an additional rule on CRS displays. Our
proposal, as explained below, would require CRSs to use editing and
ranking criteria in their displays that reasonably reflect consumer
preferences. Before discussing our proposal we will explain why
Apollo's displays appear to be so troublesome.
First, the information submitted by the parties in Docket 48671
included the following four examples where Galileo's algorithm for the
Apollo Basic Display produced an unreasonable display of airline
services.
Seattle to Burbank. Alaska operated two one-stop flights that
each had an elapsed time of about 3\1/4\ hours and left Seattle at
1:40 p.m. and 4:15 p.m. However, if a travel agent requested a
display of services in that market with a departure time of 3 p.m.,
the Alaska flights appeared only on the third screen after the
display of seven on-line connections. The first screen showed three
connections, one operated by Alaska and two by United. One of the
two United connecting services left Seattle almost two hours before
Alaska's 4:15 flight and arrived at Burbank sixteen minutes after
the Alaska flight. Another United connection given a higher display
position left Seattle more than one hour before the 4:15 Alaska
flight and arrived at Burbank almost one hour later than the Alaska
flight. October 5, 1994 Letter of Marshall Sinick.
San Francisco to New Orleans. A travel agent using the Apollo
Basic Display with a requested departure time of 8 a.m. would not
see an 8:40 one-stop Delta flight until the sixth screen; the
earlier screens listed nineteen on-line connections, 18 of which had
a longer elapsed time than the Delta flight. One of the connecting
services listed on the third screen was an 8 a.m. connection over
O'Hare that arrived at New Orleans more than one hour after the
Delta flight. January 12, 1995 Letter of Marshall Sinick.
Milwaukee to Los Angeles. If a travel agent requested a display
of service departing at 8 a.m., the first screen offered by the
Apollo Basic Display showed two United connections that arrived at
11:52 a.m. and 12:49 p.m. and had elapsed times of 5:42 and 6:39,
respectively. Midwest Express operated a single-plane flight in the
market that arrived at 11:45 a.m., earlier than either United
connection, and had a shorter elapsed time, 5:05. That flight,
however, did not appear until Galileo's fourth screen, three screens
after the less convenient connections. Midwest Express Comments
(December 5, 1994) at 5.
Orange County to Seattle. Alaska operated a one-stop flight that
departed at 1:59 p.m. and arrived at 5:42 p.m., while Reno Air
operated a one-stop flight that departed at 2:10 p.m. and arrived at
6 p.m. An agent using the Apollo Basic Display to see what service
was available with a 1 p.m. departure time would not see either of
those flights until the fifth screen, after the display of over
three screens of connecting services. The first connecting service
listed consisted of a 1:30 p.m. United flight to Los Angeles
connecting with a second United flight arriving at Seattle at 6:01
p.m. Among the other connecting services given preference over the
two one-stop flights were connections over Salt Lake City and
Phoenix, each of which departed from Orange County about one hour
before either one-stop flight and arrived at Seattle at least 55
minutes after Reno's flight. Galileo Response to Order 94-11-9
(November 23, 1994).
In cases like these examples, the Apollo displays harm competition
by favoring the services offered by the carriers that rely on hub-and-
spoke networks, which are usually the largest carriers, and disfavoring
the flights offered by airlines that do not rely so much on hub-and-
spoke networks. When the better single-plane service is displayed after
less convenient connecting services, airlines will have more difficulty
competing for passengers on the basis of the merits of their service.
The displays also harm consumers and travel agents by making it
difficult for agents to find single-plane flights that are likely to be
more attractive for consumers than the connecting services given a
better display position. ASTA, a major spokesman for travel agents,
states that Galileo's displays ``make it harder for travel agents to
find flights meeting the priority goals of air travel consumers.'' ASTA
continues, ``We have never heard or seen an argument that would
overcome the consumer benefits of one-stop single-plane service over
on-line connections and * * * only a compelling reason (which is
difficult to imagine) would warrant displacing such superior services
in favor of on-line connections of longer elapsed time.'' According to
ASTA, ``[t]ravel agents should not have to search through five screens
of information to find a one-stop single plane service with superior
elapsed times to intervening connections,'' and ``[t]his waste of time
is a disservice to agents and their clients with no apparent offsetting
benefit.'' Furthermore, when single-plane flights receive the poor
display position cited in Alaska's examples, ``the existence of the
one-stop flight may not become known to the agent at all.'' ASTA Reply
(December 19, 1994) at 2-3, Docket 48671.
We directed Galileo to support its claims that it changed the
Apollo displays in order to benefit travel agents and their customers.
Order 94-1-9 (November 15, 1994) at 5. Galileo primarily claims that
travel agents would be disadvantaged if all single-plane flights were
listed before all connecting services, because an agent must then
scroll through the complete listing of single-plane flights before
seeing any connecting services, even though few, if any, of the single-
plane flights leave at the time desired by the agency customer. Galileo
Response to Order 94-11-19 at 8-9. Galileo, however, provided no
evidence that travel agents complained when its displays listed all
single-plane flights before displaying any connections. Moreover, as we
noted earlier in that proceeding, few markets have many single-plane
flights, according to the statistics provided by Galileo itself.
Airlines operate an average of only 1.5 single-plane flights each day
in each of the hundred largest domestic city-pair markets. Order 94-8-5
at 16. Since so few single-plane flights are offered in most markets, a
travel agent wishing to see connecting flights instead of single-plane
flights could easily get to the connecting service listings. Thus the
earlier inclusion of single-plane flights in the same display category
as nonstop flights could have caused little, if any, inconvenience for
travel agents. While Galileo cites three markets--Washington, D.C.-San
Francisco, Phoenix-Washington, D.C., and Boston-Greensboro--as examples
of how its new displays are easier for travel agents to use, we believe
these examples are unrepresentative and cannot show that the new
displays' treatment of single-plane flights provides better displays in
general.
Our Proposed Revisions to the CRS Display Rules
Given the apparent unreasonableness of Apollo's current displays,
the possibility that other systems may adopt similar displays, and the
likelihood that every system has created an algorithm designed in part
to benefit the services of airline owners, we have decided to consider
changes to the CRS display rules that should give non-vendor airlines
(and travel agents) a greater assurance that they can obtain a fair and
adequate display of airline services. At the same time, however, we do
not want to limit each system's ability to offer different displays to
travel agents, since travel agents are likely to disagree on
[[Page 42214]]
the factors that should be emphasized in editing and ranking airline
services. Travel agents, moreover, must respond to the preferences of
their customers, and different customers will consider different
factors important in judging the quality of airline services. As
explained, we also do not intend to tightly regulate CRS algorithms.
Nonetheless, even though travellers and their travel agents will
disagree on which factors are the most important in choosing airline
flights, we think that any display made available to travel agents
should be based on rational criteria and that at least one display
should rank airline services in a manner which does not favor the
service characteristics of the biggest airlines, which happen to be the
owners of each of the U.S. systems.
We propose to revise our current display rules in two respects.
First, we propose to require each system to offer a display that does
not use an on-line preference in ranking and editing connecting
services. This display must be at least as easy to use as any other
display offered by the system. We are proposing to make this display an
alternative to the other displays offered by a system, not the primary
or default display. Secondly, we propose to require that the criteria
used by a system for editing and ranking airline services in any
integrated display be rationally related to consumer preferences (under
section 255.4(a), every integrated display offered by a CRS must comply
with our display rules). As noted, however, we also request comments on
a possible alternative (or addition) to this rule, which would prohibit
systems from creating displays that neither use elapsed time as a
significant factor in selecting flights from the data base nor give
single-plane flights a preference over connecting services in ranking
flights.
Our proposal to require each system to offer a display without an
on-line preference will eliminate the ability of one of the large
airlines owning a CRS to force the system to use an on-line preference
in all displays of domestic airline services. That will benefit
airlines like Frontier that depend more on obtaining interline
passengers. As indicated, Apollo--the target of Frontier's complaints--
already offers a display without an on-line preference, the U.S. ECAC
Display. However, that display's seemingly unreasonable treatment of
single-plane flights and its heavy reliance on displacement time as the
basis for pulling services out of the data base make the display
difficult to use. The rule will also require Sabre to create a new
display without an on-line preference, if, as has been the case,
Sabre's displays for services within North America all use an on-line
preference.
The second rule--the requirement that a system's display criteria
be rationally related to consumer preferences--should keep systems from
offering unjustifiable displays. Although we are proposing to require
the criteria used by a system in constructing an algorithm to be
rationally related to consumer preferences, we do not intend to embark
on an extensive review of CRS editing and ranking criteria. We would
expect to take enforcement action under the rule only in cases where a
system was using an algorithm that was likely to mislead a significant
number of consumers by causing services that would meet the consumers'
travel needs significantly better than other services to be displayed
after the inferior services, if those criteria appear designed to
improve the display position of the services of the system's airline
owners.
This proposal should benefit smaller airlines like Alaska and
Midwest Express that do not own a CRS and cannot cause a system to
adopt algorithms using ranking criteria consistent with the nature of
their own airline operations and inconsistent with the nature of
competitors' airline operations. More importantly, the rule should
benefit travel agents and their customers by barring systems from using
algorithms that make it unreasonably difficult for travel agents to
find the best service for their customers. That rule, if adopted,
should force Apollo to change its algorithms, for we do not see in
light of our current knowledge how that system's current displays could
satisfy the rule's requirements.
We do not intend to use our proposed rule requiring displays to be
based on rational criteria to second-guess all algorithm criteria that
airlines find objectionable. We would likely find that a system had
violated the rule only if the algorithm's unreasonable ranking of
airline flights was likely to cause a number of travellers in a number
of markets to choose flights that normal travellers (and travel agents)
would consider significantly inferior to flights given a lower display
position and if the display seemed designed to benefit the competitive
position of the system's airline owners. The comments filed by U.S. and
foreign airlines in our last major CRS rulemaking demonstrate that
airlines often disagree over which characteristics of airline services
should be emphasized in editing and ranking airline services. We
probably would not consider complaints that an algorithm's ranking and
editing criteria violate this proposed rule if the system using the
criteria can make a showing that the challenged criteria are consistent
with the preferences of a substantial portion of travellers. For
example, we would not investigate complaints that an on-line preference
violated the rule, since, as shown, an on-line preference is often (but
not always) consistent with consumer preferences. Similarly, we would
be unlikely to investigate a complaint that an algorithm was
unreasonable where the displays did not seem to provide any competitive
advantage for the airlines controlling the system. And on some issues
any algorithm's choice is likely to be arbitrary--one possible example
is the choice of a default time for use as the departure time when the
travel agent does not specify a departure time in submitting a
customer's request for flight information. Because no algorithm can
result in a perfect display of airline services for every market, we
would be satisfied if there is a rough correlation between consumer
travel preferences and an algorithm's editing and ranking criteria. A
system could use such evidence as travel agent and traveller surveys or
the results of focus groups to demonstrate that the algorithm's
criteria reflect consumer preferences, although we assume that less
evidence would often be needed to show that the display was reasonable.
While we find it necessary to consider stricter rules for CRS
displays, we believe it would be unwise for us to attempt to regulate
CRS displays more closely. Each of the vendors currently offers
different displays to its subscribers, and we are unwilling to reduce
the choices currently available to travel agents. Moreover, as we
stated in our last rulemaking, we doubt that we could create a display
that would be the best possible display for all markets. 56 FR at
12609.
Our proposal to require that the editing and ranking criteria used
by each algorithm be rationally related to consumer preferences
reverses our decision in our last rulemaking on a similar proposal made
by the Orient Airlines Association. Our experience with Apollo's
displays has convinced us, however, that neither the vendors'
competition for subscribers nor other factors may be strong enough to
keep systems from creating unfair displays in order to increase their
airline owners' airline revenues. We also doubt that our proposal, if
adopted, would substantially increase our workload or our oversight of
CRS operations.
[[Page 42215]]
As an alternative to, or in addition to, the proposal that editing
and ranking criteria be based on consumer preferences, we are also
considering the addition to the CRS rule of a specific prohibition
against the kinds of unfair displays created by Apollo's algorithm.
Under this alternative, the CRS rules would prohibit an algorithm that
neither uses elapsed time as a significant factor in selecting service
options from the database nor gives single-plane flights a preference
over connections in ranking services in displays. Other CRS editing and
ranking abuses, if not covered by the rule, could be pursued in an
enforcement context under the general prohibition against unfair and
deceptive practices and unfair methods of competition in 49 U.S.C.
41712.
Since, to date, the Apollo editing and ranking criteria are the
only ones on which we have received specific complaints that they
result in unfair displays, it may be wise to limit our proscription to
the immediate and more clear-cut problem. This proposal would require
Apollo to change its displays, since its current displays do not use
elapsed time as a factor in selecting flights from the database yet
give single-plane flights no preference over connecting services. If
Apollo used elapsed time as a significant factor in selecting flights
from the database, single-plane flights would receive a better display
position since such flights generally require less travel time than
connecting services. This proposal accordingly would no longer cause
significantly inferior connecting services to be given a better display
position than single-plane flights requiring substantially less travel
time.
Comments on the merits and drawbacks of the combined requirements
or each alternative, including the language of the specific prohibition
against an algorithm that does not use elapsed time as a significant
factor in selecting flights from the database and does not give single-
plane flights a preference over connecting services, are invited.
Since each system provides a display without an on-line preference,
at least for flights not entirely within North America, we doubt that
requiring a display without an on-line preference would impose
significant programming costs on the U.S. systems. Only Sabre
apparently offers no display of North American services without an on-
line preference. We also do not expect the proposed requirement that
displays be reasonably related to consumer preferences to increase
system costs significantly. Only Apollo currently offers displays that
would seem to violate such a requirement, and Apollo's own willingness
to change displays in recent years suggests that reprogramming would
not be costly.
Alternatives to Rulemaking
As discussed above, we believe that vendors can use--and apparently
have used--their discretion to create displays that injure consumers
and airline competition. If consumers, travel agencies, and
participating airlines could easily avoid the harm caused by these
displays, we would not propose new rules on CRS displays. We
tentatively find, however, that CRS users cannot readily do so.
Travel agents could overcome Apollo's unreasonable ranking of
airline services by carefully searching through several screens for
each market before recommending a flight to their customer (or by
requesting a display of single-plane flights). Travel agents are often
pressed for time, however, and do not believe they can afford to spend
a lot of time looking for the best service when doing so involves
looking at several screens or taking extra steps. Cf. Airline Marketing
Practices at 69-70. And Apollo's treatment of single-plane flights at
times causes one-stop flights to receive such a poor display position
that even a diligent agent is unlikely to search long enough to find
the flight, especially since the agent may not know that the single-
plane flight even exists. ASTA Reply at 2-3.
Travel agents could also avoid the problem if they requested a
display of direct flights only or asked for display with different
departure times. Taking these steps, however, involves additional work
that the agent prefers to avoid. Apollo's owners benefit from the
displays precisely because they know that travel agents often will not
undertake the additional work needed to offset the unreasonable ranking
of flights offered by Apollo.
Travel agents also cannot avoid one system's poor displays by
switching to another system that provides a more reasonable ranking of
airline services. First, the CRS firms' contracts with travel agencies
make it difficult for an agency to switch systems or to use an
additional system. The contracts typically last for five years, and an
agency terminating the contract before the end of the five-year term
must pay substantial damages to the system. The systems' contracts use
pricing formulas which give travel agencies lower prices for the CRS
but discourage them from using additional systems. In addition, travel
agencies often consider it necessary to use the system of the major
airline in the agency's area, even if another system offers lower CRS
prices or better service. Airline Marketing Practices at 24-26.
When we reexamined CRS regulation in our last rulemaking, we
adopted a rule, section 255.9, which allows travel agencies to use
third-party software and hardware in conjunction with CRS services,
subject to certain conditions to protect the integrity of the system.
This rule enables travel agencies to use programs that can reconfigure
the system's information on airline services. Travel agencies
dissatisfied with a system's display algorithms accordingly can
purchase software that would create a more satisfactory display. 56 FR
at 12605-12606. However, we have no evidence that many travel agencies
have chosen to use programs that will create displays more useful for
consumers.
More importantly, a system's use of an unreasonable and unfair
display harms two other groups--participating airlines and consumers--
who have no ability to offset the harm caused by unreasonable CRS
displays. Travel agency customers rely on the travel agent to tell them
what services are available, and other airlines have little control
over the recommendations made by an agent. As we have found in our
earlier examinations of the CRS business, most airlines find it
essential to participate in each system and therefore have no ability
to bargain for reasonable participation terms.
Legal Authority for Adopting the Proposed Rules
Our governing statute authorizes us to investigate and determine
whether any air carrier or ticket agent has been or is engaged in
unfair methods of competition or unfair or deceptive practices in the
sale of air transportation. 49 U.S.C. 41712, formerly section 411 of
the Federal Aviation Act (and codified then as 49 U.S.C. 1381). Our
authority, modelled on the Federal Trade Commission's comparable powers
under section 5 of the Federal Trade Commission Act, 15 U.S.C. 45,
allows us to define practices that do not violate the antitrust laws as
unfair methods of competition, if they violate the spirit of the
antitrust laws. The same statutory provision gives us broad authority
to prohibit deceptive practices in the sale of air transportation. In
adopting the original CRS rules, the Board relied upon both its
authority to prohibit deceptive practices and its authority to prohibit
unfair methods of competition. The Seventh Circuit affirmed the Board's
adoption of those rules under what was then section 411 of the Federal
Aviation Act. United Air Lines, 766 F.2d 1107
[[Page 42216]]
(7th Cir. 1985). As a result, we may clearly regulate CRS display
practices that create a risk that consumers will be deceived. 57 FR at
43791.
We are proposing these rules in order to prevent travel agency
customers from being deceived and to keep the airlines controlling the
systems from using their control over CRS displays to unreasonably
prejudice the competitive position of other airlines. The proposed
rules would promote airline competition by ensuring that CRS displays
provide a reasonable and fair ranking of airline services. When a CRS
offers a display that irrationally ranks airline services for the
benefit of its airline owners, the CRS makes it more difficult for
airlines to compete on the basis of price and service with the airlines
controlling the system. The revenue loss estimates provided by Alaska
and Midwest Express with respect to Apollo's changed displays, if
accurate, additionally suggest that an unreasonable and unfair display
can cause substantial damage to competing airlines.
When consumers book airline flights on the basis of information
provided by an irrational display of airline services, they are likely
to book inferior airline services because the display has hidden
superior services. Our statute gives us the authority to prohibit
conduct which has the potential to cause this kind of consumer
deception.
We believe our tentative findings in this notice are sufficient to
support our adoption of our proposed rules on CRS displays.
Regulatory Assessment
This rule may be a significant regulatory action under section 3(f)
of Executive Order 12866 and has been reviewed by the Office of
Management and Budget under that order. Executive Order 12866 requires
each executive agency to prepare an assessment of costs and benefits
under section 6(a)(3) of that order. The proposal is also significant
under the regulatory policies and procedures of the Department of
Transportation, 44 FR 11034.
The proposed rule should benefit airline competition and consumers.
It will provide airlines a greater opportunity to obtain passengers on
the basis of the quality of their service and their fares by reducing
the possibility that unreasonable CRS display positions will determine
the number of bookings received by an airline. In addition, by giving
travel agents a better ability to obtain useful displays rationally
related to traveller preferences, the rule would make travel agency
operations more efficient. The rule would benefit consumers by making
it more likely that travel agencies will recommend more convenient
airline service. By promoting airline competition, the rule would
produce additional savings and other benefits for consumers.
The Department does not have adequate information to enable it to
quantify the potential benefits of the proposed rule. However, giving
travel agents and their customers a better ability to find the best
available airline service can result in substantial consumer savings,
as the Justice Department noted in its comments in our last CRS
rulemaking. 56 FR 12606. Moreover, Alaska and Midwest Express have
estimated that Apollo's display reduces their revenues by millions of
dollars each year. If their estimates are valid, the revised Apollo
display is also causing many travellers to take connecting services
instead of one-stop flights that may be more convenient.
While the Department expects the rule to provide significant
benefits, it does not expect the rule to increase CRS costs
significantly. The Department does not have sufficient information to
estimate the systems' programming expenses for complying with the
proposed rules. However, a rule requiring each system to offer a
display without an on-line preference should not impose significant
programming expenses on the systems, since each system currently has a
display, at least for international services, that does not have such a
preference.
A rule requiring systems to use rational criteria for editing and
ranking flights would only impose significant costs on a system if an
airline or travel agency subscriber submitted a justified complaint
about its displays. If the complaint were invalid, it would likely be
dismissed without a hearing. Only in cases where the display appeared
to be unreasonable would the system be exposed to an enforcement
proceeding, which could include a formal hearing, and to potential
liability.
The other proposal, which would bar systems from using displays
that neither use elapsed time as a significant factor in selecting
flights from the data base nor give single-plane flights a preference
over connecting services in ranking flights, should impose no costs on
any system, except the cost of reprogramming displays that do not
comply with the proposal. At this time Apollo appears to be the only
system that would incur such costs. We doubt that the reprogramming
costs would be significant.
The Department does not believe that there are any alternatives to
this proposed rule which would accomplish the goal of giving each
participating carrier a greater opportunity to have its services fairly
displayed in CRSs.
The Department asks interested persons to provide information on
the costs and benefits.
Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et seq., was
enacted by Congress to ensure that small entities are not unnecessarily
and disproportionately burdened by government regulations. The act
requires agencies to review proposed regulations that may have a
significant economic impact on a substantial number of small entities.
For purposes of this rule, small entities include smaller U.S. and
foreign airlines and smaller travel agencies. Our notice of proposed
rulemaking sets forth the reasons for our proposal of additional CRS
display rules and the objectives and legal basis for our proposed rule.
The proposed rule would, as explained above, give smaller airlines
a better opportunity to obtain a fair display position in CRSs, all of
which are currently owned or affiliated with one or more large U.S. and
foreign airlines. Smaller airlines would then be likely to obtain more
bookings and therefore compete more successfully with larger airlines.
The proposed rule would also benefit smaller travel agencies by
making it easier for them to serve their customers more efficiently and
to give them better advice on airline service options.
Our proposed rule contains no direct reporting, record-keeping, or
other compliance requirements that would affect small entities. There
are no other federal rules that duplicate, overlap, or conflict with
our proposed rules.
Interested persons may address our tentative conclusions under the
Regulatory Flexibility Act in their comments submitted in response to
this notice of proposed rulemaking.
The Department certifies under section 605(b) of the Regulatory
Flexibility Act (5 U.S.C. et seq.) that this regulation would not have
a significant economic impact on a substantial number of small
entities.
Paperwork Reduction Act
This proposal contains no collection-of-information requirements
subject to the Paperwork Reduction Act, Pub.L. 96-511, 44 U.S.C.
Chapter 35.
Federalism Implications
The rule proposed by this notice would have no substantial direct
effects on the States, on the relationship between the national
government and
[[Page 42217]]
the States, or on the distribution of power and responsibilities among
the various levels of government. Therefore, in accordance with
Executive Order 12812, we have determined that the proposed rule does
not have sufficient federalism implications to warrant preparation of a
Federalism Assessment.
List of Subjects in 14 CFR Part 255
Air carriers, Antitrust, Reporting and recordkeeping requirements.
Accordingly, the Department of Transportation proposes to amend 14
CFR Part 255, Carrier-owned Computer Reservations Systems as follows:
PART 255--[AMENDED]
1. The authority citation for part 255 continues to read as
follows:
Authority: 49 U.S.C. 1302, 1324, 1381, 1502.
2. Section 255.4(a) is revised to read as follows:
Sec. 255.4 Display of information.
[Alternative 1]
(a) All systems shall provide at least one integrated display that
includes the schedules, fares, rules and availability of all
participating carriers in accordance with the provisions of this
section. This display shall be at least as useful for subscribers, in
terms of functions or enhancements offered and the ease with which such
functions or enhancements can be performed or implemented, as any other
displays maintained by the system vendor. No system shall make
available to subscribers any integrated display unless that display
complies with the requirements of this section.
(1) Each system must offer an integrated display that uses the same
editing and ranking criteria for both on-line and interline connections
and does not give on-line connections a system-imposed preference over
interline connections. This display shall be at least as useful for
subscribers, in terms of functions or enhancements offered and the ease
with which such functions or enhancements can be performed or
implemented, as any other display maintained by the system vendor.
(2) The criteria used by a system for editing and ranking airline
services in any integrated display must be rationally related to
consumer preferences. In considering whether an algorithm violates this
provision, the Department shall consider, among other things, whether
the editing and ranking criteria are likely to mislead a significant
number of consumers by causing services that would meet the consumers'
travel needs significantly better than other services to be displayed
after the inferior services and whether those criteria seem designed
systematically to improve the display position of the system owners'
airline services at the expense of the services offered by other
airlines.
* * * * *
[Alternative 2]
(a) All systems shall provide at least one integrated display that
includes the schedules, fares, rules and availability of all
participating carriers in accordance with the provisions of this
section. This display shall be at least as useful for subscribers, in
terms of functions or enhancements offered and the ease with which such
functions or enhancements can be performed or implemented, as any other
displays maintained by the system vendor. No system shall make
available to subscribers any integrated display unless that display
complies with the requirements of this section.
(1) Each system must offer an integrated display that uses the same
editing and ranking criteria for both on-line and interline connections
and does not give on-line connections a system-imposed preference over
interline connections. This display shall be at least as useful for
subscribers, in terms of functions or enhancements offered and the ease
with which such functions or enhancements can be performed or
implemented, as any other display maintained by the system vendor.
(2) A system may not offer an integrated display that neither uses
elapsed time as a significant factor in selecting service options from
the database nor gives single-plane flights a preference over
connecting services in ranking services in displays.
* * * * *
Issued in Washington, DC, on August 8, 1996.
Federico F. Pena,
Secretary of Transportation.
[FR Doc. 96-20736 Filed 8-13-96; 8:45 am]
BILLING CODE 4910-62-P