Changes made after the draft final rule document was submitted for
review by the Office of Management and Budget pursuant to section
6(a)(3)(E) of Executive Order 12866, “Regulatory Planning and
Review”  

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

14 CFR Part 255

(Docket No. OST-2003-14484)

RIN 2105-AD24

Extension of Computer Reservations Systems (CRS) Regulations 

AGENCY: Office of the Secretary, Department of Transportation

ACTION: Final Rule

SUMMARY:  The Department is amending its rules governing airline
computer reservations systems (CRSs), 14 CFR Part 255, by changing the
rules' expiration date from March 31, 2003, to January 31, 2004.  If the
expiration date were not changed, the rules would terminate on March 31,
2003.  This extension of the current rules will keep them in effect
while we complete our reexamination of the need for CRS regulations. 
Some or all of the rules may no longer be necessary, but the Department
will maintain the current rules until January because they may be
beneficial.  The Department has concluded that most of the current rules
should be maintained on a temporary basis because they may be necessary
for promoting airline competition and protecting consumers, although the
The Department may determine in its reexamination that the need for most
or all of the rules has ended.  The Department has previously extended
the rules from their original December 31, 1997, expiration date, most
recently to March 31, 2003.

DATES:  This rule is effective on March 31, 2003.

FOR FURTHER INFORMATION CONTACT: Thomas Ray, Office of the General
Counsel, 400 Seventh St. S.W., Washington, D.C. 20590, (202) 366-4731.  

ELECTRONIC ACCESS:

You can view and download this document by going to the webpage of the
Department’s Docket Management System (http://dms.dot.gov/).  On that
page, click on “search.”  On the next page, type in the last five
digits of the docket number shown on the first page of this document,
14484.  Then click on “search.”  An electronic copy of this document
also may be downloaded by using a computer, modem, and suitable
communications software from the Government Printing Office’s
Electronic Bulletin Board Service at (202) 512-1661.  Internet users may
reach the Office of the Federal Register’s home page at:
http://www.nara.gov/fedreg and the Government Printing Office’s
database at: http://www.access.gpo.gov/nara/ index.html.

SUPPLEMENTARY INFORMATION:

We adopted rules governing CRS operations, 14 CFR Part 255, because
almost all airlines operating in the United States relied on the CRSs in
marketing their airline services and each system was then controlled by
one or more airlines or airline affiliates.  57 FR 43780 (September 22,
1992).  We found that rules were necessary to ensure that each of the
airlines and airline affiliates that controlled a system did not use the
system to unfairly prejudice the competitive position of other airlines
and to ensure that travel agents and their customers could obtain
accurate and unbiased information from the systems.  Our rules contained
a sunset date to ensure that we would reexamine whether the rules
remained necessary and, if so, whether they were effective.  

As a result of the sunset date provision, we began a proceeding to
reexamine whether the rules were necessary and effective by issuing an
advance notice of proposed rulemaking,  62 FR 47606 (September 10,
1997), followed later by a supplemental advance notice of proposed
rulemaking that asked the parties to update their comments.  65 FR 45551
(July 24, 2000).  

We recently issued a notice of proposed rulemaking in which we
tentatively concluded found that most elements of the rules may remain
necessary, at least in the short term, and that some changes to the
rules may be justified.  67 FR 69366 (November 15, 2002).  We also
proposed, however, to eliminate some rules, primarily the rules barring
systems from charging airlines discriminatory booking fees and requiring
airlines with a significant ownership in one system to participate in
other systems at the same level if the terms for doing so are
commercially reasonable.  We invited comment on whether the public
interest would be served by full and immediate sunset of the rules.  Our
notice includes a detailed discussion of the rulemaking issues and our
tentative findings on the relevant features of the airline distribution
and CRS businesses.  Comments and reply comments on our tentative
findings on the need for CRS regulation and our proposals are due March
16 and May 15, 2003, respectively.  67 FR 72869 (December 9, 2002).  

To maintain the existing rules in effect while we complete our
reexamination of those rules, we proposed to extend the sunset date to
January 31, 2004.  68 FR 7325 (February 13, 2003).  We noted that the
March 31, 2003, sunset date will come only two weeks after the close of
the comment period on the notice of proposed rulemaking for our overall
reexamination of the rules and that the reply comment period will close
seven weeks later.  We clearly cannot complete our rulemaking by the
March 31 sunset date.  We tentatively found that allowing the rules to
sunset during our reexamination of them could be contrary to the public
interest.  We are aware that our final decision in our overall
reexamination of the rules may be that the rules do not actually serve
the public interest in the short term or in the long term. 

Eleven persons commented on the proposal.  US Airways, Sabre, Galileo
International, Amadeus Global Travel Distribution, and the American
Society of Travel Agents (“ASTA”) supported the proposal, Worldspan,
Northwest, United, and LanChile opposed any extension, and American and
Orbitz stated their willingness to accept only a shorter extension.  

We have determined to change the rules’ expiration date to January 31,
2004, as we proposed.  This will allow the rules to remain in effect
while we complete our overall reexamination of the existing CRS rules. 
We recognize the need to complete the major rulemaking as soon as
possible so that the rules reflect current industry conditions and
economic realities.  We intend to make a final decision promptly in that
proceeding.   

	Background: Rulemaking History

Our notice of proposed rulemaking set forth our tentative findings and
analysis on the nature of the airline distribution and CRS businesses
and on whether the CRS rules should be kept or changed.  We recognized
the changes occurring in the airline distribution system, especially the
Internet’s erosion of the airlines’ dependence on the systems, and
the potential that these changes may eliminate the need for many or all
of our rules.  67 FR 69376, 63977.  Nonetheless, we tentatively
concluded that at present  some rules should be maintained to protect
airline competition and consumers.  We have requested comment on whether
the non-discriminatory booking fee and mandatory participation rules
noted above could be eliminated, since airlines may have more bargaining
leverage against the systems than we have found in past rulemakings.  67
FR 69368.  We will also consider comments contending that additional
rules are unnecessary or counterproductive.  We will take these comments
into account in considering whether to retain some or any of the rules,
or whether full and complete sunset may be in the public interest.

We initially established a sixty-day comment period and a thirty-day
reply comment period.  As a result of a petition submitted by nineteen
commenters, we extended the comment period by sixty days and the reply
comment period by thirty days.  67 FR 72869 (December 9, 2002).  

While we have been conducting our reexamination of the rules, we have
changed the sunset date five times to maintain the rules pending our
completion of that reexamination.  Our most recent extension was to
March 31, 2003.  62 FR 66272 (December 18, 1997); 64 FR 15127 (March 30,
1999); 65 FR 16808 (March 30, 2000); 66 FR 17352 (March 30, 2001); and
67 FR 14846 (March 28, 2002).  

	Our Proposed Sunset Date Extension

We again proposed to extend the expiration date for our CRS rules, to
January 31, 2004, in order to maintain the rules while we complete our
reexamination of the need for the rules and their effectiveness.  68 FR
7325 (February 13, 2003).  We explained that we could not issue final
rules by the current sunset date, March 31, 2003.  Changing the sunset
date would enable us to preserve the status quo until we determine which
rules, if any, should be adoptedretained.   We tentatively determined
that doing so would be in the public interest.  In that regard we
referenced our notice of proposed rulemaking for the overall
reexamination of the rules, where we tentatively concluded that elements
of the rules appear tomay be necessary, at least in the near term, to
protect airline competition and consumers against potentially
unreasonable and unfair CRS practices, despite the prospect that rules
may become unnecessary in the longer term.  We further cited our
obligation under 49 U.S.C. 40105(b), formerly section 1102(a) of the
Federal Aviation Act, then codified as 49 U.S.C. 1502(a), to act
consistently with the United States' obligations under bilateral air
services agreements, and concluded that that obligation might justify a
short-term continuation of the rules.  67 FR 69384.   We suggested that
the expiration of the current rules in advance of our final decision in
the overall rulemaking could be disruptive, since systems, airlines, and
travel agencies have been conducting their operations in the expectation
that each system will comply with the rules.  We stated our awareness of
the importance of adopting final rules that reflect current conditions
in the CRS and airline distribution businesses.  

	Comments

 Three of the systems -- Amadeus, Galileo, and Sabre -- supported our
proposal to change the sunset date to January 31, 2004, as did ASTA, the
largest travel agency trade association, and US Airways.  American and
Orbitz, the on-line travel agency owned by American, Continental, Delta,
Northwest, and United, supported a shorter extension of the rules. 
American proposed August 31 as the new sunset date, while Orbitz
proposed September 30.  The other commenters -- Delta, Northwest,
United, and LanChile -- opposed any extension of the rules.  United
particularly opposed any continuation of the non-discriminatory booking
fee and mandatory participation rules.  

Sabre filed a reply challenging several of the factual assertions made
by several airline commenters concerning the systems’ alleged market
power and unreasonable practices.  

	Final Rule

We have determined to adopt our proposal to change the sunset date to
January 31, 2004.  We obviously cannot complete our overall
reexamination of the rules by March 31, and we continue to believe that
we may well need an additional ten months to complete that proceeding. 
The comment period for reply comments will end on May 15, and we must
then analyze the comments, decide what final rules should be adopted,
and draft a final rule.  The final rule must be reviewed by the Office
of Management and Budget (“OMB”).  This entire process may require
ten months for completion, especially given the complex and
controversial issues presented in that rulemaking.  

We will, of course, try to issue a final rule as soon as possible rather
than wait until the new January 31 sunset date.  Adopting a shorter
extension at this time might well require us to conduct an additional
rulemaking to change the date again, which would be an inefficient use
of Government resources and interfere with our intent to focus on
completing the overall reexamination of the rules as promptly as
possible.  A shorter extension might also keep us from thoroughly and
carefully examining the issues before making our final decision on
whether CRS rules remain necessary and, if so, how they should be
changed.  

Maintaining the current rules in effect will provide short-term
stability for the industry.  As Amadeus points out, “The travel
distribution community requires and deserves predictability as to the
‘rules of the road’ in this area.”  Amadeus Comments at 2.  ASTA
similarly states, “The entire air transportation industry, including
airlines, CRS/GDS’s, and travel agencies, has shaped its business with
these rules in mind” and that we “cannot responsibly or lawfully
simply let this overarching legal regime, which has had profound effects
on thousands of businesses, many of them small businesses under federal
law and policy, expire in 30 days.”   

We recognize that the rules may have become unnecessary.  As we continue
our reexamination, we will maintain the rules based on a tentative
finding that some of the rules may serve the public interest.  We are
unwilling to have them expire at this time, however, given our tentative
findings that at least some CRS rules may remain necessary for the near
future.  It may remain true, for example, that the systems have market
power that could be used to prejudice airline competition.  American
thus states, “CRS market and pricing power remain intact . . . .” 
American Comments at 1.  If so, ending the rules would not necessarily
enable airlines to obtain better terms for participation.  United,
however, has pointed out that we proposed to eliminate the
non-discriminatory booking fee and mandatory participation rules because
we tentatively found that they may prevent airlines from obtaining lower
prices.  We cannot adopt United’s suggestion that any extension of the
sunset date exclude those two rules, since that would amount to a change
in the existing rules that we do not wish to adopt until we have had the
opportunity to consider the comments on the issue.  Nor can we agree
now, before the end of the comment period for our proposals on changing
the rules, with the assertions by several other commenters that the
rules preserve and enhance the systems’ market power.  See, e.g.,
Orbitz Comments.  We have found in past rulemakings that rules were
needed to curb the systems’ market power, most recently in the parity
clause rulemaking completed five years ago.  62 FR 59784 (November 5,
1997).  We tentatively concluded in our recent notice of proposed
rulemaking that we see some evidence that the systems may still have
market power.  At issue is whether some or all of the rules affect the
exercise of such market power, to the extent it exists, and whether they
do so in a manner that serves the public interest.   

	Effective Date

We have determined for good cause to make this amendment effective on
March 31, 2003, rather than thirty days after publication as required by
the Administrative Procedure Act except for good cause shown.  5 U.S.C.
553(d).  To keep the current rules in force, we must make this amendment
effective by March 31, 2003.  Since the amendment preserves the status
quo, it will not require the systems, airlines, or travel agencies to
change their operating methods.  Making this amendment effective on less
than thirty days notice accordingly will not impose an undue burden on
anyone. 

REGULATORY PROCESS MATTERS

Regulatory Assessment

This rulemaking is 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.  The proposal is also significant under the
regulatory policies and procedures of the Department of Transportation,
44 FR 11034.

Our notice of proposed rulemaking in this proceeding cited the tentative
findings of the preliminary regulatory assessment in our notice of
proposed rulemaking for the overall reexamination of the rules that the
existing rules do not appear to impose a significant burden on the
systems or their users.  68 FR 7326, citing 67 FR 69418-69423.  We
stated our belief that that regulatory assessment should be applicable
to our proposal to extend the rules’ sunset date and that no new
regulatory impact statement appears to be necessary.  We invited
interested persons to comment on those findings.  No commenter
specifically commented on our regulatory assessment, which we will make
final.  

This rule will not impose unfunded mandates or requirements that would
have any impact on the quality of the human environment.

SMALL BUSINESS IMPACT

Congress enacted the Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et
seq., 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. airlines and smaller
travel agencies.  

This rule sets forth the reasons for our extension of the rules'
expiration date and the objectives and legal basis for that rule.  

Our notice of proposed rulemaking on this extension proposal cited the
tentative regulatory flexibility analysis on the rules’ impact that
was included in our notice of proposed rulemaking for the reexamination
of the rules.  We stated that that analysis appeared to be valid for our
proposed extension of the rules' termination date.  68 FR 7326-7327.  We
stated that we would consider comments on that analysis.  No one filed
such comments, and we will adopt that analysis as our final regulatory
flexibility statement for this proceeding.  

Our 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.  

I certify under section 605(b) of the Regulatory Flexibility Act (5
U.S.C. et seq.) that this regulation will not have a significant
economic impact on a substantial number of small entities.

PAPERWORK REDUCTION ACT

This rule contains no collection-of-information requirements subject to
the Paperwork Reduction Act, Public Law. No. 96-511, 44 U.S.C. Chapter
35.

FEDERALISM ASSESSMENT

We stated that we had reviewed our proposed rule in accordance with the
principles and criteria contained in Executive Order 13132, dated August
4, 1999, and determined that it would not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.  This rule will
not limit the policymaking discretion of the States.  Nothing in this
rule will directly preempt any State law or regulation.  We are adopting
this amendment primarily under the authority granted us by 49 U.S.C.
41712 to prevent unfair methods of competition and unfair and deceptive
practices in the sale of air transportation.  Our notice of proposed
rulemaking stated our belief that the policy set forth in this rule is
consistent with the principles, criteria, and requirements of the
Federalism Executive Order and the Department’s governing statute.  

We invited comments on these conclusions.  68 FR 7327.  No one commented
on our federalism assessment.  We will therefore make it final.  Because
the rule will have no significant effect on State or local governments,
as discussed above, no consultations with State and local governments on
this rule were necessary.  

LIST OF SUBJECTS IN 14 CFR PART 255

Air carriers, Antitrust, Consumer protection, Reporting and
recordkeeping requirements, Travel agents. 

Accordingly, the Department of Transportation amends 14 CFR Part 255 as
follows:

PART 255 -- (AMENDED)

1.	The authority citation for Part 255 continues to read as follows:
Authority: 49 U.S.C. 40101, 40102, 40105, 40113, 41712.

2.	Section 255.12 is revised to read as follows: 

255.12.  Termination.

	The rules in this part terminate on January 31, 2004.

	Issued in Washington, D.C. on March ___, 2003.

Norman Y. Mineta

Secretary of Transportation

 

		MARCH 10 DRAFT			

